The US government was boasting of lowest annual budget deficit at 162 billion for the year 2007. And the next year saw the US hitting the historically highest budget deficit at 454 billion dollars, which dwarfed all other annual budget deficit figures.
Now the US is set to dwarf 2008 figures this year, with over 1.8 billion dollars deficit projected based on revised estimates. The huge deficit has been necessitated due to the increasing government stimulus spends plus the spends on Iraq / Afghanistan / Pakistan with no returns.
Now China and Japan has almost stopped further investment into US treasuries due to the risk of losing value for their already high US Treasury papers they are holding. Between these two countries they are holding over 1.5 trillion dollars of papers as of 2008 end.
Now the US has no other alternative than to increase the interest rates on future treasury papers, so that the major global investors like Japan and China start investing back in US treasury papers in a big way.
That is definitely going to hurt the US economy more than what we expect, but you do not have a choice during tough times.