Bond investors took Treasury Secretary Scott Bessent up on his dare. On Sept. 8, Bessent told an audience at Southern Methodist University, “I am the house now,” warning anyone betting against the Treasury’s defense of the long end of the market. Over the next three weeks, the 30-year Treasury yield rose from about 5.25% to as high as 5.69%, touching levels not seen since 2002.
There are, of course, many reasons for the selloff, including oil prices, inflation worries, Fed policy expectations and heavy corporate debt issuance. But the one cause Congress controls is fiscal credibility. When deficits and the debt-to-GDP ratio reach unsustainable highs, bond buyers conclude that the government’s current policies are not credible and must change. Either taxes, inflation, or both, must increase. Faced with these prospects and the uncertainty that surrounds them, both domestic and foreign bond buyers demand a higher yield to hold so-called risk-free government bonds.
Total federal debt has passed the $40 trillion milestone. That is only the visible part. Using the latest Social Security and Medicare Trustees Reports and Congressional Budget Office projections, we estimate that total federal liabilities and unfunded obligations reached at least $147 trillion as of September 30, 2026. That is about $11 trillion more in one year, and $127 trillion more than in 2000.
Congress has failed to pass all appropriations bills by the beginning of the fiscal year, for the thirtieth year in a row. Congress has only completed its one express annual Constitutional duty four times since World War II. This clearly amounts to a case of Constitutional and fiscal malpractice.
Our growing fiscal imbalance and mounting debt burden, combined with the exhaustion of the Social Security (Old-Age and Survivors Insurance) and Medicare Part A (Hospital Insurance) Trust Funds in the fourth quarter of 2032 and 2033, should push Congress to act. Yet it has not.
We support the bipartisan Fiscal Commission Act (H.R. 3289) introduced in May 2025 by Reps. Bill Huizenga (R-Mich.) and Scott Peters (D-Calif.). This statutory commission would educate the public and prepare Congress to act. Two amendments would improve its chances of passing and producing reform. They should be considered during the planned mark-up in the Lame Duck session.
First, the Commission should make two separate sets of recommendations. One set should focus solely on the solvency and sustainability of Social Security. The other set should be designed to reduce debt held by the public as a percentage of GDP to a sustainable level within 10-15 years.
Second, the non-Congressional experts who are members of the Commission should be able to vote. These experts should also lead citizen education and engagement efforts.
Uncle Sam is at a crossroads. Remember Dornbusch’s law, after the late MIT professor Rüdiger Dornbusch: “Crises take longer to arrive than you can possibly imagine, but when they do come, they happen faster than you can possibly imagine.” Passing the amended Fiscal Commission Act in the lame-duck session would not close the deficit by itself, but it would tell bond buyers that Washington is finally serious. Congress should act now.
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