US Has a "Complete Lack of Fiscal Discipline" and Borrowing Costs Will Not Fall Until the Deficit Is Fixed, per Oaktree's Howard Marks
One of Wall Street's most respected credit investors is warning that Washington's borrowing problem cannot be engineered away.
The United States displays a "total lack of fiscal discipline," Oaktree Capital Management co-founder Howard Marks wrote in his latest memo.
Marks argued that efforts to push down long-term borrowing costs, including Treasury buybacks of longer-dated debt, are unlikely to work unless the government addresses the country's mounting deficit.
An Ice Pack on a Fever
Treasury Secretary Scott Bessent's expanded buyback program may temporarily push bond prices higher and yields lower, per Marks, but it will not address the forces that drove borrowing costs higher in the first place.
"Forcing rates down by buying bonds is like a doctor applying an ice pack to a patient with a fever," Marks wrote. "The ice pack may lower the patient's temperature, but the patient isn't likely to get healthy until the underlying cause of the fever has been dealt with."
"The goal shouldn't be to get interest rates down. It should be to respond to the factors pushing rates up," he wrote.
Marks also noted that buybacks do not change the government's overall indebtedness if they are paired with greater Treasury bill issuance, and that swapping long debt for short debt means more frequent refinancing at whatever rates prevail.
The Numbers Behind the Warning
The US is currently running a deficit in the vicinity of 6% of GDP, an extraordinarily high level for an economy enjoying prosperity with unemployment of only about 4%, per Marks.
Net interest outlays are projected at more than $1 trillion this year, more than the defense budget, and they will rise rapidly if the debt continues to grow faster than GDP.
Marks pointed to three forces pushing long-term rates higher: persistent inflation above the Federal Reserve's 2% target, massive ongoing Treasury issuance to fund the deficit and refinance maturing debt, and surging demand for capital, including an estimated $5 trillion-plus of global spending on AI-related data centers through 2030, per McKinsey figures he cited.
Thanks to the dollar's status as the world's reserve currency, Marks wrote, the US has had what he calls a "golden credit card," with no credit limit, no bill ever sent, and an extremely low interest rate. But the country uses the card unwisely, he argued.
Not a Default Call
Marks was clear that he does not see a serious possibility of the US failing to repay its debt on schedule, noting the debt is denominated in a currency the US itself issues.
The risk, in his telling, is chronic rather than acute: if the 30-year Treasury must trade at a much higher yield to clear, that is not a crisis, it is an invoice the country keeps paying.
Warren Buffett sounded a similar note at Berkshire Hathaway's May 2025 annual meeting, saying US fiscal policy is what scares him and calling the current deficit unsustainable over a very long period of time.
What It Means for Markets
If Marks is right, long-term yields have a structural floor under them regardless of what the Fed does at the short end, which keeps pressure on long-duration bonds and rate-sensitive equities.
Watch long-term Treasury exposure through TLT and intermediate Treasuries via IEF, the broad market through SPY and QQQ, and the traditional fiscal-stress hedge in GLD as deficit headlines build into year-end funding debates.
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