Under Harris or Trump, the US government deficit is expected to continue to balloon

The U.S. budget deficit has surged to its third-highest level on record, and analysts at Evercore ISI predict that the deficit will remain relatively similar whether Kamala Harris or Donald Trump wins the 2024 presidential race. In a note released Thursday, the analysts emphasized that the macroeconomic impact of new fiscal policies under either candidate would be comparable and minimal.

For the fiscal year 2024, the U.S. budget deficit has climbed to $1.7 trillion, or 6.3% of GDP, making it the largest deficit outside the COVID-19 pandemic era, according to a Treasury Department report on October 18.

"The key difference between Harris and Trump lies more in how they would structure spending and revenue, rather than the overall size of the deficit," the Evercore ISI analysts noted.

Harris is expected to focus on expanding social programs and infrastructure investments, potentially balancing these with efforts to raise corporate taxes and increase levies on high-income individuals. However, with a likely Republican-controlled Senate, it would be challenging for her to implement these tax policies, leading to a projected increase in the deficit by 1.7% of GDP compared to current baseline figures.

Conversely, a Trump administration would likely concentrate on tax cuts and higher defense spending, while seeking to trim domestic programs. These measures could push the deficit up by 1.8% of GDP, as the fiscal policies would likely face constraints from conservative Republican lawmakers.

The analysts further mentioned that simulations using the Fed’s FRB/US model indicate that the differences between the fiscal outcomes under Harris or Trump would be too marginal to have a significant macroeconomic effect.

They also cautioned that without substantial policy reforms, the U.S. is heading toward long-term fiscal challenges that could harm both economic growth and financial stability.

 

 

 

 

 

 

 

Paraphrasing text from "Reuters" all rights reserved by the original author.