To begin with, the US fiscal position is not in a good place. Even after the Covid-related spike in borrowing during 2020-22, the US government continues to spend far more than it takes in through tax revenue. The Federal deficit is running at 6.7% of GDP, while net government debt [1], which was 35% of GDP 20 years ago, looks set to breach 100% of GDP this fiscal year.[2]
Concerns about the fiscal trajectory are growing, with the US having now lost its Triple A rating with S&P, Fitch and, just last month, Moody’s. On top of this, President Trump’s One Big Beautiful Bill Act will extend and expand his huge tax cuts from 2017. The Congressional Budget Office estimates this will lower tax revenues by $3.7tr over the next 10 years, while proposed spending cuts would only save $1.3tr, leaving the primary deficit[3] $2.4tr wider than would otherwise have been the case.
On the face of it, this is a huge fiscal giveaway, but we need…
