This 'fourth branch of the government' could be what dooms Trump's bill: analysis

19 May

President Donald Trump on February 28, 2025 (Image: Shutterstock)

President Donald Trump's hopes of passing the bulk of his agenda in one "big, beautiful bill" may be in the hands of not House or Senate Republicans, but a specific group of investors.

That's according to financial journalist and former McKinsey analyst Brett Arends, who wrote in MarketWatch on Monday that there is a "fourth branch of government" Trump hasn't yet considered. Arends opined that the bond market could end up deciding whether the Trump administration and Republicans in Congress will pass the major budget bill currently being negotiated in the House of Representatives, or if it dies on the vine.

Arends said that "bond vigilantes" — or investors that put their money in U.S. Treasury securities – have inordinate power over government policy, given that the Treasury market has inordinate power over U.S. government policy given that it's viewed as a foundational pillar of the economy. He noted that most of Trump's early April tariffs were abruptly called off after bond vigilantes rebelled.

"It hasn’t even been two months since the markets — especially the bond market — effectively vetoed Trump’s “liberation day” tariff bonanza, forcing the president into an effective retreat within just three trading days," Arends wrote.

As Arends mentioned, Japanese investors in the Treasury market were considering dumping an estimated $1.26 trillion in U.S. Treasury securities, viewing the United States as "not a great place to do business" due to the administration's trade policy. Fox Business correspondent Charles Gasparino said that Japan had effectively "forced [the administration's] hands" with the move.

According to the MarketWatch columnist, U.S. Treasury investors want a budget bill that will meaningfully reduce the federal deficit, arguing that deficits have spiraled out of control since former President George W. Bush passed tax cuts into law in 2001 (that were overwhelmingly tilted toward the rich). He also reminded readers that Moody's recently downgraded the United States' credit rating from AAA to AA1, which is the first such downgrade from Moody's in history.

"Those who want to shrug their shoulders about the bond market should first do the math. According to the Congressional Budget Office, the U.S. government will need to borrow another $22 trillion from creditors over the next 10 years, raising the national debt by another 70%," Arends wrote. "That’s before counting any of these proposed tax cuts, which could cost up to $5 trillion more. The U.S. government has to listen to the bond market because the U.S. government needs its money. It’s that simple.

Click here to read Arends' full column in MarketWatch.

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