Wall Street keeps telling us that the Federal Reserve is going to be lowering its policy rates soon and that market rates are going to follow that downward, but Wall Street’s been consistently wrong on this. The Fed has tightened more, and bond yields have gone far higher than the Street expected.  

My crystal ball is no better than anybody else’s, but I was interested when Secretary Yellen’s Department of the Treasury issued its most recent financing details. Big hat tip to my friend Larry Lindsey for writing this up. 

So, get this: the Treasury now expects to borrow $1.6 trillion — that’s trillion — between October 1 and March 31. That would come to roughly 11 percent of GDP. Those are big numbers, big numbers. Virtually unheard of — 11 percent of GDP. Especially in peacetime.  

Now, today, the Federal Reserve head, Jerome Powell, reminded us that the central bank will continue to reduce its holdings of treasury bonds and mortgage-backed securities. Economists call that quantitative tightening. 

So far, the Fed has taken about $1 trillion out of the high-powered money supply over the past year or so. If Mr. Powell and company are to be believed, they’ll take at least another trillion out of the money supply. Which leads to the question: Who is going to buy the $1.6 trillion in new bonds, so President Biden can keep spending his keister off? And spend he will, just like he has the past three years.  

Now it’s foreign aid with a big dollop of so-called emergency spending in areas that have no emergencies. It’s a battle between guns and butter. Mr. Biden is choosing both, just like President Johnson more than 60 years ago. 

Remember, Johnson blew up the budget and inflation rate by spending on both Vietnam and the Great Society. Mr. Biden’s blowing up the budget on Israel, which I totally favor, but also on Ukraine — which really needs a mission statement and an exit strategy and a long conversation — plus some peanuts for more babysitting at our open border. Also, $56 billion for various social spending that has nothing to do with anything except political election-year handouts.  

Coming back to all that borrowing the Biden Treasury just announced: Who’s going to buy that stuff? The Fed says it won’t. China hasn’t been buying in quite some time. Neither has Japan. Meanwhile, the consumer saving rate has come way down, so that cushion may be gone. 

Of course, there are a lot of factors that drive interest rates, but sometimes supply and demand do matter, because investors may well want a higher interest rate to bail out Mr. Biden’s profligate ways.  

Meanwhile, over the past 32 months, worker wages have gone up 15 percent, but the level of the consumer price index has gone up even more — by 17 percent. So you have declining real wages and typical family incomes — some have estimated the drop in median family incomes to be nearly $7,000 — which is the reason why Bidenomics is so unpopular.  

It’s a question of affordability, including an 8 percent mortgage rate. People are working hard, but they can’t afford the Biden economy. 

That’s especially true for lower-income families, where the poverty rate has shot up in the recent Biden years. What’s the economic outlook? 

Well, the Biden Treasury has said the fourth quarter growth will be less than 1 percent, and for all of next year the Treasury is predicting a miniscule 1 percent. That ain’t much.  

Meanwhile, I would say, with a topsy-turvy yield curve, where short rates have been higher than long rates for more than a year, there’s about a 65 percent probability of recession. My hunch is middle-class people are sniffing this out, and that’s why they are giving Bidenomics the lowest grades of any president in recent memory. 

From Mr. Kudlow’s broadcast on Fox Business News.