This week, I joined Sally Bundock on BBC News World Business Report to discuss the pressing challenges facing U.S. fiscal policy during the early days of President Trump’s administration. The interview aired during the week of the 47th president’s inauguration, just days after markets signaled growing concerns about fiscal sustainability and inflationary pressures. Here’s a snapshot of the key points we explored:
Rising Treasury yields signal market fears about unchecked deficits fueling inflationary pressures.
Tax cuts, disaster aid, and border and immigration enforcement spending, without matching deficit reductions elsewhere, risk pushing long-term borrowing costs even higher—debt is already excessively high at about 100 percent of GDP.
President Trump and Speaker Johnson are considering an increase in the US debt limit with help from Democrats in a trade involving government funding, including new disaster aid for California wildfires.
Excessive deficits and debt raise interest rates and crowd out private investments, making it harder for Americans to secure mortgages and car loans and for businesses to secure financing to innovate and expand.
DOGE’s scope seems to be narrowing significantly, with the executive order renaming the US Digital Service, a White House entity established by President Obama to improve federal websites and integrate tech.
Congress may need to experience even higher pressures from bond markets before taking action to rein in spending and debt.
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