What if we held an auction and no one came?

Great Britain knows how that feels, and now so does Barack Obama.  Treasury had to offer higher-than-expected prices to investors to get them to buy government debt, signaling a distrust of American economic policy and financial strength.  That will have significant consequences for Obama’s deficit spending policies (via Instapundit):

Weak demand at a Treasury bond auction touched off worries in the stock market Thursday about the government’s ability to raise funds to fight the recession.

The government had to pay greater interest than expected in a sale of 30-year Treasurys. That is worrisome to traders because it could signal that it will become harder for Washington to finance its ambitious economic recovery plans. The higher interest rates also could push up costs for borrowing in areas like mortgages.

Investors also pocketed some gains after strong rally in stocks this week and ahead of the government’s April employment report on Friday. Investors were jittery ahead of the formal release of results from the government’s “stress tests” of bank balance sheets, which came out later Thursday.

Major stocks market indicators slid more than 1 percent, including the Dow Jones industrial average which lost 102 points after gaining nearly the same amount Wednesday.

Once again, this shows exactly how speculative the White House and the CBO have been in calculating deficits for the next decade based on Obama’s spending plans.  Let’s take another look at the deficit projections from OMB and CBO:

Both sets of numbers depended on a certain level of economic growth, which so far hasn’t begun despite Obama’s predictions of rebound in Q1 from the application of the stimulus.  It also depended on a constant supply of debt purchase at steady bond rates.  These projections had to consider interest payments on all of the debt Obama planned to buy while running these deficits, and any hike in interest rates means that those interest payments will have to go up.  That also means that we will have to spend more money than Obama projected, creating even higher deficits and the need for even more bond sales — and more interest payments on those.

It’s basically a Ponzi scheme, and it’s accelerating.

One of two things will have to occur to resolve the situation.  Either the federal government will have to massively cut its spending in order to service all that debt at the higher interest rates now demanded, or it will have to pass massive new taxes in order to generate enough revenue to accomplish it.  Which do you think Obama is likely to try?