President Donald Trump achieved a major legislative victory with the passage of his One Big Beautiful Bill Act. Treasury Secretary Scott Bessent asserts that the law will provide the foundation for the economy to grow GDP at a sustainable 3% rate. If the economy can expand at a 3% plus growth rate, then the debt-to-GDP ratio of the U.S. economy can be stabilized. Today, the ratio is roughly 100% of GDP, an ominous level because a 1% change in Treasury yields over a year can either increase or decrease the federal deficit by 1% of GDP.

The federal deficit is currently about 6.7% of GDP on an annual basis. A 1% increase in Treasury yields would raise the deficit to 7.7% of GDP. The direction of interest rates is important for the health of the economy.