Robert Reich: The Rubbish You’re Hearing About Long-Term Interest Rates – OpEd


Maybe being bedridden for a few days has made me grouchier than usual, but I’m royally pissed off. I’ve spent decades fighting right-wing economists. Yet, like zombies, they and their ideas keep coming back from the dead. 

Here’s the latest example. 

A surge in long-term interest rates is causing tremors on Wall Street. The yield on the 10-year Treasury note has risen to its highest level since the subprime mortgage crisis began in August 2007. 

What’s going on? The mainstream media is blaming rising budget deficits and national debt. The Wall Street Journal points to “concern that huge federal deficits are pressuring investors’ capacity to absorb so much debt.” The New York Times highlights “new fears of soaring debt.” And so on.


You’ve heard this story before — large deficits supposedly “crowd out” government borrowing, forcing the government to pay lenders higher interest. 

But there’s not a shred of evidence that long-term interest rates rise and fall with the size of the budget deficit or the nation’s debt. No current economic data point to budget deficits as the cause of the higher long-term rates we’re now seeing. 

When the mainstream media fall for this narrative, they give credence to the views of right-wingers who want to slash federal spending — which, as a practical matter, means Social Security, Medicare, and Medicaid. Some of these people are the Republican extremists who nearly caused a government shutdown (on which, more in a moment).

The truth is that long-term interest rates rise when uncertainty about the future rises. 

And the biggest uncertainty right now is not found in economic data. The biggest uncertainty is political — not just about what will happen in global hotspots like Ukraine and now Israel, but more directly, about whether America is still capable of governing itself. 

This uncertainty has been caused by those same Republican extremists who didn’t want to raise the debt ceiling, and then refused to fund the federal government, and have abdicated political leadership of the House for the first time in the history of the nation. 

Include the increasingly wild ravings of their party leader, Donald Trump (along with the hair-raising possibility that he could be president again) and you have reason to be frightfully uncertain about the future. 

Which has a direct bearing on long-term interest rates, because if you’re lending money for the longer term, you want to build in some margin for safety against the crazies. 

Bond markets are demanding higher long-term rates because there seems to be no way out of this Republican black hole — not between now and November 17, when the Continuing Resolution runs out, and not even November 5 next year, when Americans will have an opportunity to send Republicans packing. 

It’s finally occurred to the bond markets that America faces two deeply entrenched structural problems: the Republican Party and Donald Trump.

And behind these two problems are tens of millions of Americans who have drunk Trump’s Kool-Aid and believe the 2020 election was stolen from him, that Democrats are now persecuting him, and that he should be back in charge, even at the cost of American democracy. 

This is not only a problem for the Street, I should emphasize. It’s a gigantic problem for America. 

But the fact that the Republicans’ looniness is finally hitting financial markets should be cause for sober thinking about what must be done politically, rather than another excuse for right-wing economists and their allies in the media to bash budget deficits and fan baseless fears about the national debt.

This article was published at Robert Reich’s Substack

Robert Reich

Robert B. Reich is Chancellor's Professor of Public Policy at the University of California at Berkeley and Senior Fellow at the Blum Center for Developing Economies, and writes at Reich served as Secretary of Labor in the Clinton administration, for which Time Magazine named him one of the ten most effective cabinet secretaries of the twentieth century. He has written fifteen books, including the best sellers "Aftershock", "The Work of Nations," and"Beyond Outrage," and, his most recent, "The Common Good," which is available in bookstores now. He is also a founding editor of the American Prospect magazine, chairman of Common Cause, a member of the American Academy of Arts and Sciences, and co-creator of the award-winning documentary, "Inequality For All." He's co-creator of the Netflix original documentary "Saving Capitalism," which is streaming now.

3 thoughts on “Robert Reich: The Rubbish You’re Hearing About Long-Term Interest Rates – OpEd

  • October 11, 2023 at 6:47 pm

    Yet the excessive govt spending can increase debt, deficit and the money supply leading to higher inflation, so the Fed increases short term rates which put upward pressure on long term rates.

  • October 11, 2023 at 8:02 pm


    “ The truth is that long-term interest rates rise when uncertainty about the future rises. ”

    So wrong. Basic economics.. deficits=higher debt load= higher rates all else bring equal.

  • October 11, 2023 at 9:05 pm

    Mr Reich
    Your analysis is vapid, and solely represents ideology. Intellectual honest and rigor in a clearly not your forte.


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