How Wall Street Could Wreck The GOP’s Tax Cut Plans

The need for a debt limit hike of trillions and signs of growing bond market concerns could trim Republican economic plans sharply.

Republicans’ plan to extend and expand the massive tax cuts for the wealthy and corporations they originally passed in 2017 are at the heart of President-elect Donald Trump’s domestic agenda.

But one of the sleepiest corners of Wall Street is flashing warning signs about the GOP’s plans: the bond market.

The Federal Reserve has been cutting the interest rates it controls, which usually results in lower market rates for loans, mortgages and credit cards. But investors holding U.S. debt have demanded increasingly higher returns on their investments, which has kept the Fed’s actions from having much effect and mortgage and credit card rates stubbornly high.

“The bond market is sending a message that investors are worried about the economic policies dead ahead,” Mark Zandi, chief economist at Moody’s Analytics, told HuffPost.

The rate for a 10-year U.S. bond, the benchmark many interest rates are based on, has drifted upward significantly since Nov. 5, when Donald Trump was elected to his second term, from around 4.29% to 4.76%.