More Reasons Not To Take The Candidates' Budget Proposals Too Seriously

Several weeks ago I said in a post on the Bush midsession review of the budget that, given where the deficit was going, we probably shouldn't take the candidates spending and taxing plans too seriously.  My thinking was that, given where the deficit was heading, neither a President McCain or Obama would have much of a chance to do what what they were saying they wanted to do.

An article this morning by Matt Benjamin at Bloomberg now shows that's indeed possible.  The bond market "vigilantes" -- the same people who forced the Clinton administration to propose and push for deficit reduction -- are starting to say that the moon, stars, and planets may line up again in 2009 to force the next president to do the same thing.

Here's the money quote:

Economists and traders say the prospects for increased government borrowing needed for either McCain or Obama to enact their proposals will again lead investors to shun Treasuries and push up interest rates. Ten-year yields are forecast to reach 4.63 percent by the end of 2009, according to a Bloomberg survey of 68 economists...The demand from the Treasury is just going to be huge,'' says Coats, 62, who is now the co-head of fixed income at Keefe, Bruyette & Woods Inc. in New York.