Here's a thought experiment that never quite makes it into campaign ads: when the government spends a dollar, whose dollar is it?

Rep. Thomas Massie (R-Ky.) has an answer, and he shared it Tuesday on X. Some people, he said, are missing investor Peter Schiff's point that "all government spending is paid for by citizens" — through taxes, inflation, interest, and deferred taxes in the form of debt.

Massie, one of the legislation's most persistent Republican critics, said the Big Beautiful Bill raised spending by hundreds of billions of dollars over the next few years, "so it increased what YOU MUST PAY."

Schiff had argued that the bill made the federal government "bigger and more expensive than ever" and that the burden on the public "will more than offset those fake tax cuts."

That's the uncomfortable arithmetic of deficit spending. You can cut taxes and raise spending at the same time, but the bill still arrives eventually — just not in the form of a line item on your tax return. It shows up as higher inflation, higher interest rates, or a bigger debt load passed to the next generation. Or, realistically, all three.

The Deficit Is Heading in One Direction

According to projections shared by The Kobeissi Letter, the U.S. federal deficit is projected to reach 6.1% of GDP in 2027. That would be the highest level since 2012, excluding the pandemic years of 2020 and 2021.

It would also be the biggest deficit as a share of GDP among the U.S., the U.K., Germany, France, and Japan. Not exactly the podium you want to stand on.

The Treasury Department's Fiscal Data put the federal deficit at about $1.97 trillion so far this fiscal year, while the national debt stands at about $40.28 trillion.

"Deficit spending is only accelerating," the commentator added.

The Bond Market Is Already Voting

If you want to know what investors think about all this, look at yields. The 10-year Treasury yield touched 5.36% last week, and the 30-year reached 5.73%, both the highest since 2002.

That's the market's way of saying it wants more compensation to lend money to a government running trillion-dollar deficits. And it's not just a bond story. The Federal Reserve raised the federal funds rate by 25 basis points last month, and officials' median projection in the September dot plot points to one more quarter-point hike later this year.

The September consumer price index is due Wednesday, with economists expecting headline inflation to rise to about 3.7% from 3.4% in August, with core CPI near 2.4%.

Corporate America is paying attention too. Wells Fargo & Co. (NYSE: WFC) CEO Charlie Scharf listed persistent fiscal deficits among the sources of uncertainty on the bank's earnings call on Tuesday. When the head of one of the biggest banks in the country puts government borrowing on the risk list, that's worth noting.

Price Action

The iShares 7-10 Year Treasury Bond ETF (NASDAQ: IEF) closed 0.12% higher on Tuesday at $89.54 and climbed 0.12% in early premarket trading on Wednesday. Meanwhile, the iShares 20+ Year Treasury Bond ETF (NASDAQ: TLT) closed 0.41% higher on Tuesday at $78.37 and climbed 0.24% in premarket.

MarketDash edge rankings indicate the iShares 7-10 Year Treasury Bond ETF has a Momentum score in the 28th percentile.

Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by MarketDash editors.