I’ve been wondering lately whether the Great Bond Selloff of 2026 might force rich people to make Sophie’s Choice between low taxes and a stable bond market.
The 10-year Treasury bill’s de-stabilizing climb to a 5 percent yield is driven in large part by President Donald Trump’s tax cuts, which are projected to reduce revenues collected from the richest one percent by a trillion dollars over the next decade, according to the nonprofit Institute on Taxation and Economic Policy. As a percentage of gross domestic product, the national debt exceeds 100 percent and is fast approaching the post–World War II high of 106 percent. In 1946, the national debt was bigger than GDP because the United States had spent the previous five years fighting a world war against Germany and Japan. In 2026, the national debt is bigger than GDP because rich Americans don’t feel like paying taxes. (Gross debt, which adds in funds the federal government owes itself, already exceeds the 1946 level.)
Treasury Secretary Scott Bessent, whose recent bond-buyback scheme to lower Treasury yields is failing, now says “the only way for us to get out of this is to grow our way out of this.” Translation: “I don’t have a clue how to get out of this.” Nobody believes we can grow our way out. According to a July 2026 paper by Harvard’s Karen Dynan and Douglas Elmendorf and Louise Sheiner of the Brookings Institution, faster productivity growth attributable to artificial intelligence would only “slightly reduce the burden of existing debt” and “raise revenue a bit relative to GDP.” One reason is that the labor of the workers AI will lay off is taxed at a higher rate than the capital gains AI will generate. Render human labor extinct and you have no alternative but to raise taxes on capital, assuming you want to have any government at all.
Nobody believes we can cut our way out either. Elon Musk tried and failed spectacularly. His Department of Government Efficiency’s website claims it saved taxpayers $215 billion, which, even if that were true, would be less than half what Trump’s 2025 tax cut cost the Treasury this year alone. And as it happens, it isn’t true. The GAO last month called bullshit on DOGE’s claimed $110 billion in savings from contracts, grants, and leases. Even if you overlook that, the Yale Budget Lab estimates that DOGE’s personnel cuts to the Internal Revenue Service will cost taxpayers $350 billion over the next decade. and the nonprofit Partnership for Public Service estimates that the cost of firing, re-hiring, and putting federal workers on paid leave, combined with productivity losses, cost taxpayers another $135 billion. Even using DOGE’s own highly questionable savings calculation, then, DOGE turns out to have increased the budget deficit by $270 billion.
The Committee for a Responsible Federal Budget, a nonprofit that cares more than anyone else about eliminating the budget deficit, calculated in 2023 that if you tried to balance the budget through spending cuts alone you’d have to cut all federal spending by 27 percent. If you wanted to exempt spending on defense and veterans, you’d have to cut all spending by 33 percent. If you wanted also to exempt Medicare and Social Security, as Trump has promised to do, you’d have to cut all spending by 78 percent. These are lowball estimates, because since 2023 the budget deficit has increased by about $0.3 trillion. None of the Committee for a Responsible Federal Budget’s scenarios is remotely plausible, if only because federal spending cuts that even approached this magnitude would wreck the economy.
If you’re a rich person, you probably know all this, and until now you probably haven’t cared because the national debt hasn’t affected your net worth. Since 1981, when the government-debt binge got underway, interest rates have mostly gone down Even after President George W. Bush pissed away President Bill Clinton’s balanced budget interest rates remained historically low. Now the national debt, combined with inflation worries and an AI-driven surge in corporate debt, is driving bond yields up. There’s not much rich people can do to extract the United States from its inflationary war with Iran or to end the AI-driven debt binge. But if they really want to rescue the bond market, they can consent to paying higher taxes. Will they?
To answer that, we need to understand how much rich people actually care about the bond market.
My initial impression was that they cared a lot, but then I had a couple of conversations that raised some doubts. It turns out there’s still some truth to the old saw that the rich are society’s creditors rather than its debtors, and as such will benefit from higher interest rates. In a 1981 Washington Monthly article (“The Self Interest in High Interest”) Gregg Easterbrook observed that “since the prime rate hit warp speed in late 1979, interest income for individuals and institutions has increased 42 percent.” More recently, the economics blogger Blair Fix observed, “interest rates are a tool for waging class war.”
In America, you don’t get rich by owning bonds; you get rich by owning stocks. When Forbes daily recalculates the net worth of the richest Americans, it does so by tracking stock holdings. To the super-rich, bonds seem a tad petit bourgeois. “If you had to choose between buying long-term bonds or equities [i.e., stocks], Warren Buffett told CNBC in 2018, “I would choose equities in a minute.” Bonds become more appealing as you get older to protect yourself from market fluctuations, but only for relatively normal people. For the 0.01 percent, who measure their wealth in hundreds of millions or billions, it’s quite different. Their financial holdings are sufficiently large that quality of life won’t be altered by anything less than a full-on global economic collapse (and maybe not even that). Thus it scarcely mattered that Buffett, when he dissed bonds to CNBC, was 87.
So do rich people figure the bond selloff will create financial losses for them? After further consideration, I’m inclined to conclude no, which means they’re not about to consider paying more in taxes to reduce the budget deficit and thereby quiet the bond market.
Others, I should note, may disagree, including the computer on which I wrote this article. This morning I decided to overcome my fear of large language models and download Anthropic’s Claude. (Until now I’d confined myself to posing the odd question to Google AI, which frequently gave me information that failed to match the cited source.)
Hey Claude, I asked. Do rich people have any reason to care about the bond selloff?
“Yes, quite a lot,” Claude answered. For one thing, stock prices are sensitive to bond yields:
Most billionaire wealth isn’t cash — it’s overwhelmingly concentrated in equity stakes, often in the companies they founded or control (think Musk and Tesla, Bezos and Amazon). When bond yields rise, the discount rate used to value future cash flows goes up too, which mechanically lowers the present value of future earnings. This hits high-growth, high-multiple stocks hardest, since more of their valuation depends on profits far in the future. A lot of billionaire net worth is paper wealth tied directly to these stock prices, so a rate-driven selloff can shrink it fast.
Also, said Claude, borrowing costs matter to super-rich people because rather than sell stock and pay tax they borrow against their stock. (I’m paraphrasing because, at least as of September 2026, I’m a better writer than Claude.) If bond yields are high, then interest rates are going to be high, too. Higher interest rates can also be a problem for private equity because leveraged buyouts become more difficult, and of course the real estate industry hates high interest rates more than anybody. (That partly explains, let me interject here, why the former real estate guy Donald Trump always wants the Fed to lower rates.)
Claude granted that T-bills and money market funds pay more when interest rates are high, just as Easterbrook observed 45 years ago. But Claude concluded: “Because so much billionaire wealth is illiquid and valued off future cash flows or leverage, a sharp, sustained rise in yields is generally a real financial concern for them, not just an abstract macro story.”
What’s your source on this? I asked Claude.
“That response was economic reasoning,” Claude replied, “and general knowledge, not something I pulled from specific sources or searched for. The mechanisms I described (valuation sensitivity to discount rates, securities-backed lending, cap rates) are standard finance concepts, not sourced claims.”
Oh.
Claude agreed with me, however, that billionaires are unlikely to let any worries about the bond market alter their opposition to paying higher tax: “Standard rational self-interest predicts free-riding here, not eager self-sacrifice.” I think maybe Claude missed the point here; a tax increase is collective, not some “Tragedy of the Commons” pointless exercise in individual sacrifice.
But Claude also pointed out that “actual political behavior diverges quite a bit from what ‘rising yields hurt my portfolio’ self-interest alone would predict.” I agree. So don’t hold your breath for the oligarchs to turn responsible. Despite whatever worries bond-market disruptions occur, they will continue to do what rich people always do, which is gripe that they pay too much in taxes.
