19 DECEMBER 2024
Strip out times of crisis and the US fiscal deficit has seldom been so large. It clocked in at almost 7% of GDP in Q3 2024.
Team Trump clearly has its sights on reversing this trend.
Treasury Secretary-elect, Scott Bessent, is a renowned fiscal hawk and is targeting a halving of the deficit by 2028.
To achieve this, he will lean heavily on the new Department of Government Efficiency (DOGE), led by Elon Musk and Vivek Ramaswamy. This high profile pair intend to slash U$2trn from the Federal Budget in short order.
At face value, anything that reduces the US (and global) economy’s reliance on debt and government intervention is a good thing.
But it will be nigh on impossible to implement these sort of budget savings without triggering a major economic and market downturn.
Which begs the question, will President Trump continue to support his three fiscal musketeers should his opinion ratings dive as a recession takes hold?
We suspect not, suggesting the era of “fiscal dominance” has a lot further to run.
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