Press Releases
The head of Congress’ independent fiscal watchdog has warned the US economy is headed for a crisis point.
Director of the Congressional Budget Office (CBO) Phillip Swagel has said that Federal debt relative to gross domestic product is likely to rise above World War II levels, when it stood at 116 per cent of GDP, by 2029.
He warned that there is a risk that ignoring the debt could lead to a market shock similar to what happened when Liz Truss announced plans for sweeping tax cuts.
The announcement led to a run on the pound and forced Truss to resign.
Director of the Congressional Budget Office (CBO) Phillip Swagel has warned about both candidates
Getty
Swagel said that while the US is “not there yet”, government debt held by the public, which stood at $26.2trillion (£20.74trillion), or about 97 per cent of GDP, at the end of last year, is on an “unprecedented” trajectory.
Skyrocketing debt combined with high-interest rates mean the country might not be able to afford crucial borrowing in the future, with the US set to pay $1trillion (£790billion) to creditors in 2026.
It comes as economists have expressed concern over Donald Trump’s pledge to renew his 2017 tax cut program if re-elected, increasing the national debt by an estimated $5trillion (£3.96trillion).
Swagel’s remarks came a day after the independent watchdog issued new longer-term economic projections, which showed debt levels rising to 166 per cent of GDP in 2054.
LATEST ON THE RACE FOR THE WHITE HOUSE 2024:
Economists have warned about extending tax cuts
Reuters
Senior fellow at the Peterson Institute think-tank Kimberly Clausing said: “It would behove policymakers to reduce deficits substantially in part because there are big demographic challenges coming down the pike.
Head of macroeconomic research at Axa Investment Managers David Page said: “Neither [candidate for president] is talking about fiscal rectitude, and one of them is actually talking about extending tax cuts.”
Swagel warned that the dollar’s role as the world’s reserve currency would not always insulate the US from market pressures as debt interest payments increased.
He also acknowledged that next year would be important “for fiscal policy in particular”.
Swagel, who served in the US Treasury under Republican president George W Bush, said: “We need to borrow from foreigners because foreign capital helps keep interest rates low in the US.
“But there are two sides to it, in that the cash flowing overseas means us losing national income.
“On the other hand, not having the capital coming in for us to borrow — boy, that would be even worse.”
24World Media does not take any responsibility of the information you see on this page. The content this page contains is from independent third-party content provider. If you have any concerns regarding the content, please free to write us here: contact@24worldmedia.com
