While it is true that President Donald Trump was never much of a fiscal conservative, the Republican Party championed fiscal conservative principles and lambasted former President Barack Obama and the Democrats for racking up the debt with exorbitant spending programs.
So, in Trump’s second year in the White House, has anything improved on the fiscal file?
Hardly.
From Bloomberg:
President Donald Trump’s tax cuts and new federal spending have fueled a budget deficit that the Congressional Budget Office predicts will reach $1 trillion in 2020. With the Federal Reserve also winding down its debt holdings, that’s forced Treasury Secretary Steven Mnuchin to lift note and bond sales to levels last seen in the aftermath of the recession that ended in 2009.
The upshot is surging government debt that has more than tripled since 2007, generating a tailwind for yields, though so far they’re still relatively low thanks in part to ongoing global demand for the safe haven of dollar assets.
While Americans are feeling the immediate benefits of Trump’s fiscal largesse, with U.S. economic growth above 4 percent in the second quarter and unemployment at 3.9 percent in July, economists worry it will curb policy makers’ ability to fight the next downturn.
“We are in an environment of an unprecedented economic experiment where the U.S. government is increasing the deficits quite strongly at a time when we are at full employment,” said Frankfurt-based Christoph Rieger, head of fixed-rate strategy at Commerzbank AG. “And the sheer size of the Treasury supply numbers are so huge. If the experiment goes wrong, we are talking about a serious risk off.”
The national debt is also nearing $22 trillion, thanks to the ballooning budget deficit. Trump promised to take an ax to the budget on the campaign trail, but this has not happened.
That said, the CBO did warn a year prior to the election that trillion-dollar deficits were coming again, whether a Democrat or a Republican would be residing in the White House.
But it’s time that these politicians take the nation’s finances seriously.
Leave a Comment