U.S. Government Debt Soars, Yet Bassett Does a U-Turn on Yellen: The 'Policy Isn't So Bad After All' Effect?

2025/07/30

A dramatic political economy case study is unfolding in the latest policy shift by the U.S. Treasury. Current Treasury Secretary Scott Bassett, a Republican who once fiercely criticized his predecessor Janet Yellen's short-term debt strategies, now finds himself—under the dual pressures of high interest rates and massive financing needs—compelled to continue the very policies he once opposed.

Last year, Bassett stood firmly in the critics' camp.

But today, he faces dilemmas strikingly similar to Yellen's. Wednesday's Treasury refunding announcement revealed the government will maintain stable issuance of medium- and long-term bonds while dramatically increasing short-term T-bill sales. This decision means the Treasury plans to raise roughly $1 trillion this quarter through debt instruments maturing between one week and one year to keep the government operational.

This policy continuity has sparked intense Wall Street debate.

Expectations diverged sharply: Wells Fargo anticipated unchanged language, JPMorgan speculated about removing "at least" as a qualifier, while Santander US Capital Markets' Stephen Stanley even predicted complete guidance withdrawal. Ultimately, the Treasury retained the original wording—a decision highlighting how real-world pressures enforce policy consistency.

The irony runs deeper. Behind this strategic pivot lies the fundamental dilemma of U.

S. fiscal policy. Monday's quarterly borrowing estimates showed July-September needs surging from April's $554 billion projection to $1.01 trillion, primarily to replenish funds after the debt ceiling hike. Over two decades, ever-expanding debt issuance has become the norm for financing tax cuts and spending programs.