Bond markets grow weary of tired deficit playbook

Bessent has promised a deficit reduction plan. Yet it will essentially continue what the White House is already doing: increased tariff revenue, combating fraud in social welfare programs and, of course, growth. This doesn't pass the smell test. If renewed trade levies even survive legal challenges, duties of up to 12.5% slapped on 60 countries will only barely lower the projected path of national debt, the Committee for a Responsible Federal Budget reckons.

Meanwhile, total fraud and improper payments in social benefit programs probably doesn't add up to much more than $200 billion, according to government estimates.

Help will thus have to come from elsewhere. It won’t be Congress, at least not in the near term: deficit reduction is not on the table before the November midterms. So only the Federal Reserve is left. Though Federal Reserve Chair Kevin Warsh has no say over budgets, he can cool the economy by further tightening financial conditions. Markets are now expecting a September rate hike. It won’t erase the August mess, but it’s a start.