What Real Rates Say About Deficits & Growth

America's fiscal stance has loosened a bit in the past few months. Tax changes passed at the end of last year plus a recent budget deal to remove earlier caps on spending will combine to increase the federal deficit by about 1.6 percentage points of gross domestic product in the next few years. By 2027, the federal government's net borrowing could amount to as much as 7.3 per cent of GDP. Some people think this is a problem. Traders, however, do not.