WWith only six months left until the US presidential election, America's public debt has become more of an issue than ever. This subject is inevitable. This represents a real threat, but both Democrats and Republicans pretend to ignore it. The world's leading economies are showing impressive momentum, Europe is on the defensive, and China is facing a problematic slowdown. But behind the undisputed fiscal leadership, rampant growth, and rock-bottom unemployment, there is a dizzying other side of the fiscal coin.
Public deficits are one of the main fuels of permanently overheated economic expansion. The federal deficit has averaged 9% of GDP over the past five years. This is four times the average since 1945 and almost twice the average for other developed countries. The Congressional Budget Office, the federal agency responsible for studying the impact of public debt on the economy, said in its latest projections that public debt could increase by 20 percentage points of GDP to 116% by 2034. I expect there to be. His completion rate during World War II was 106%.
Alarm? Bloomberg Economics, on the contrary, believes the Congressional Budget Office is too optimistic in a recent study, concluding that U.S. debt is on an unsustainable trajectory of exceeding GDP by 123% in 2034. . The annual interest payments will be approximately the same. This is equivalent to 5.4% of GDP, the same amount as all federal social security spending, or more than 1.5 times the current defense budget.
candidate will make the problem worse
A few weeks ago, the International Monetary Fund (IMF) warned of the systemic threat posed by US debt levels, which will reach $34 trillion (approximately €31.5 trillion) by the end of 2023. “The fiscal stance is inconsistent with fiscal sustainability, which is of particular concern,” said Pierre-Olivier Grinchat, economic advisor and head of research at the IMF. “This poses risks to the deflation process in the short term and risks to the fiscal health and financial stability of the global economy in the longer term. Trade-offs will have to be made,” he said.
Both candidates facing off in November are treating debt as if it were a blind spot in this election and are not prepared to make these trade-offs. On the contrary, their programs will make the problem worse. Joe Biden pledged in March to continue increasing spending, but his Republican rival Donald Trump plans to continue the policies he started in his first term and pass massive tax cuts.
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