William Gale and Peter Orszag at Brookings estimate that adding 1% of GDP — roughly $100 billion at current rates — to the long-run annual Federal budget deficit will add between half a percentage point and one percentage point (50 to 100 “basis points” to long-term interest rates. So if the Bush tax cuts, once fully in place in 2010, will reduce Federal revenues by about $300 billion per year, that would add about 200 basis points to long-term interest rates (remembering that the GDP will be bigger by then).
That helps explain why, even with inflation, inflation expectations, and short-term interest rates all very low, long-term interest rates have stayed up: since January 2001, the interest rate on three-month Treasury bills is down from from 5.5% to 1.25% — a drop of 425 basis points — but 30-year fixed-rate mortgage rates are down only 110 basis points, from 7.25% to 6.15%. Long-term rates are naturally less volatile than short-term rates, so one wouldn’t expect anything like a point-for-point drop, but the stickiness of long rates has been remarkable.
Brad DeLong provides a link, and a quick explanation of why — contrary to the protestations coming from the vicinity of 1600 Pennsylvania Avenue — expected deficits increase interest rates and thus depress long-run economic growth.