Government Debt & Deficit Spending - US national debt has surpassed $38 trillion [1] - Republicans are proposing to add another $2 trillion in deficit spending [1] - Democrats are proposing to add another $3 trillion in deficit spending [1] Budget & Fiscal Policy - There is no progress towards balancing the budget [1]

Core Insights - U.S. inflation has consistently remained above the 2% target for several years and has recently diverged further from this target [1] - The Federal Reserve is planning to implement monetary policy easing through interest rate cuts despite the ongoing inflation [1] Inflation Trends - Inflation in the U.S. has been above the 2% target for years, indicating persistent inflationary pressures [1] - In the last three months, inflation has moved even further away from the target, suggesting a worsening situation [1] Federal Reserve Actions - The Federal Reserve is considering easing monetary policy, which may include rate cuts, in response to the current economic conditions [1] - This approach indicates a shift in strategy despite the high inflation rates, reflecting a focus on stimulating economic growth [1]

US Fiscal Policy & Budget - CBO projects President's tax and spending law will add $34 trillion to US deficits over the next decade, reflecting a $45 trillion drop in revenues and $11 trillion decline in spending through 2034 [6] - Nearly two-thirds of Americans disapprove of the President's handling of inflation, with half saying Trump's policies have left them financially worse off [7] - White House and Congressional Republicans disagree with CBO's estimates, undermining its role as the gold standard for congressional bill estimates [9] - The White House claims the President is fiscally responsible and that the tax cut is the largest for working families and middle-class Americans [10] - CBO's analysis calculates the new legislation would add $34 trillion to the deficit over the next decade [65] - Senate Republicans requested a CBO score including dynamic scoring and the current policy baseline, which would reduce deficits by $366 billion over a decade [73] - The bill will dramatically increase the deficit, impacting future generations [75] Federal Reserve & Monetary Policy - A Republican member of Congress made a criminal referral against Fed Chair Jay Powell [4] - The White House reiterates it has no plans to fire Jerome Powell [4][17] - The Federal Reserve, under the Federal Reserve Act, is responsible for acquiring and maintaining its own buildings, paying for them out of its own revenues [20] - The President is trying to put pressure on Jay Powell, but firing him doesn't make sense as Powell would likely go to court [21][22] - The President's actions may set off market reactions he won't like [23] - The President is playing with fire and risking inflationary expectations by compromising the Federal Reserve's independence [28] - The right approach for the Fed is to wait and see, as the trade war is creating uncertainty [29][31] Trade & Tariffs - EU officials are set to meet to discuss how to respond to a possible no-deal trade scenario with the US [5] - The administration teases the potential for more trade letters as the August 2 deadline approaches [5][13] - Many trade deals have been unbalanced, with countries agreeing to pay no tariffs or, in the case of China, 10% tariffs, while the US puts much higher tariffs on them [12] - The EU has announced plans to retaliate if tariffs go into effect [13] - The trade war is making it harder for the President to lower prices [31] - Tariffs are beginning to show up in the economy [30] - Tariffs are accomplishing the opposite of what they want to accomplish, hurting domestic sectors and making it more expensive to produce [34][35] US Politics & Redistricting - Texas lawmakers are poised to redraw the state's congressional maps in a bid to create five new winnable seats for the Republican Party next year [5] - Republicans are planning to redraw congressional maps in Texas, hoping to secure more seats in the House during the midterms [42] - President Trump endorsed the move as a step to bolster his House majority by ensuring more Republican seats [43] - There is no technical ban on mid-decade redistricting in Texas [47] - Republicans believe they can pick up as many as five seats in Texas [48] - Democrats may consider congressional redistricting if Texas goes through with its plan [85]

Inflation and Tariffs - The White House Council of Economic Advisers found no evidence that tariffs are leading to significant price pressures for imported goods; instead, they observed the opposite trend in inflation data [2][3] - Since December, overall goods prices in the PCE data have increased by approximately 0.4%, while imported goods prices have decreased by about 0.1% [2] - Domestically produced goods have experienced more inflation than imported goods, further supporting the absence of tariff-driven inflation [4][6] - Despite concerns about future inflationary effects from tariffs, high-frequency data and academic research have not shown any sustained pattern of tariff-driven price pressures [7] - Volatility in inflation data is possible, but the long-run expectation is that foreign countries being tariffed will bear the burden [9][10] Economic Policy and Deficit - The administration's policies, including tax cuts, deregulation, and energy abundance, are projected to increase GDP by about 1% per year over 10 years, generating approximately $4 trillion in revenue [29] - Additional revenue is expected from tariffs ($3 trillion) and spending reductions ($1.5 trillion), contributing to an estimated $8.5 trillion to $11 trillion reduction in deficits over a 10-year period [29][30] - Reduced borrowing due to these savings is projected to lower interest expenses by about $1.5 trillion [30][31] - The "one big beautiful bill" aims to incentivize investment through full expensing on new factories, equipment, and R&D, allowing firms to choose investments based on market knowledge [24] - Government intervention in predicting consumer preferences and directing industrial policy is viewed as less effective than allowing market-driven investment decisions [22][23][24]

Fiscal Policy & Debt - The industry expresses concern about the rise of Modern Monetary Theory, which suggests debt doesn't need to be repaid if a country can print money, particularly with the US as the reserve currency [1] - The industry believes that mounting levels of debt and deficit spending are unsustainable [1] - The industry suggests the US government needs to be able to sustain itself, especially as the cost of interest for the Treasury is increasing [2] Bond Market & Risk - The industry anticipates significant issues among bond buyers due to accumulating debt and rising interest costs [2] - The industry observes that the term premium has increased, reflecting a sense of more risk associated with the US due to increased spending [2] - The industry advocates for fiscal conservatism to address these concerns [2]

Fiscal Overview - The US government's fiscal year 2023 reveals a significant deficit, with $6.16 trillion in spending against $4.47 trillion in revenue [1] - The annual deficit reaches $1.69 trillion, indicating substantial overspending [1] Revenue Composition - Individual income taxes and payroll taxes constitute the primary sources of government revenue [2] - Corporate taxes contribute a comparatively smaller portion to the overall revenue [2] Expenditure Allocation - Social Security, defense, and Medicare represent the largest categories of government spending [2] - Interest payments on existing debt consume hundreds of billions of dollars annually [1]

Bond Market Dynamics - The bond market is experiencing uncertainty due to government borrowing, trade wars, and tax cuts [2] - Long bonds, particularly those maturing in 30 years or more, are at the center of concerns [4] - Volatility in the bond market has increased, with yields on long bonds spiking above 5%, nearing the highest since 2007 [6] - Investor demand for long bonds has disappeared, resembling the volatility of meme stocks or crypto [13] Fiscal Policy and Debt - The US is projected to incur another $22 trillion deficit over the next 10 years [3] - Concerns about fiscal spending are driving long-term interest rates up, requiring higher yields to compensate for risk [14] - Government fiscal deficit problems are a ticking time bomb, leading to higher, longer-term yields [22][23] Global Implications - A global movement of rates higher has been observed [18] - Volatility in long-term bonds poses a problem for governments, as investors demand higher yields [20] - Higher yields will affect housing affordability, auto loans, student loans, and credit card rates [21] - The selloff in longer term bonds shows investors that major governments have a huge fiscal deficit problem [22] Long Bond Specifics - Long bonds were popular when investors sought decent yields due to near-zero or negative interest rates in Europe and Japan [8] - Austria Century Bonds, maturing in 2120, have seen their price fall about 75% from their peak in 2021 [12] - Rising long-end yields have increased by some 50 basis points, signaling potential financial stress [7]