Why Trump’s 2027 budget could be the document that triggers a debt crisis

America’s long-term budget outlook just got a lot scarier. If the bond vigilantes are already circling, and if they’re looking for more reasons to dump U.S. bonds and push Treasury yields to crisis levels, they need do nothing more than read the newly issued Budget of the U.S. Government for Fiscal Year 2027 (starting Oct. 1, 2026). The document, compiled by the White House’s Office of Management and Budget (OMB), calls for big spending increases, chiefly for defense, and promises to finance the added outlays via revenues swelled by fantasy rates of economic growth and phantom savings. The document’s requests make an already dangerous outlook significantly riskier. The reason: If the expenditures blowout happens, and the rosy assumptions needed to offset the new outlays fail to materialize, America will edge even closer to a fiscal cataclysm prompted by a ruinous rise in interest expense.

Almost all of these yearly reports take a comprehensive view of the important budget categories. Every administration appeals for new funding and proposes savings in different categories, and makes economic projections. But the OMB also offers forecasts and perspective on the trends in mandatory as well as discretionary spending, interest costs, debt, and deficits, and warns of perils ahead if the U.S. is veering into the fiscal danger zone. This edition, however, has nothing to say about Medicare and Medicaid, and in its 92 pages, never refers to federal debt or deficits. Instead, it’s highly unusual, adopting an extremely narrow focus. The report takes aim at only two major areas. The first is discretionary spending, where Trump requests big increases for the Department of War while advocating reductions in nondefense discretionary (NDD) categories. The second: projections for key metrics such as GDP and interest rates that are crucial drivers on the revenue and expense sides.

Its failure to........

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