In five years, the U.S. government is forecast to have a bleaker debt profile than Italy, the perennial poor man of the Group of Seven industrial nations.
The U.S. debt-to-GDP ratio is projected widen to 116.9% by 2023 while Italy's is seen narrowing to 116.6%, according to the latest data from the International Monetary Fund. The U.S. will also place ahead of both Mozambique and Burundi in terms of the weight of its fiscal burden.
The numbers put renewed focus on the U.S. deteriorating budget after the enactment in December of $1.5 trillion in tax cuts, and the passage more recently of $300 billion in new spending. President Donald Trump's administration argues that the tax overhaul combined with deregulation will help the economy accelerate, which in turn will generate enough extra revenue to avoid any fiscal fallout.
Federal Reserve officials are skeptical about those growth expectations. The central bank's most recent forecasts show a median estimate of 2.7% for this year's expansion slowing to 2% in 2020.
Former Fed Chairman Alan Greenspan, speaking in an interview Wednesday with Tom Keene on Bloomberg Television, said lowering corporate tax rates was a good move. “The trouble, unfortunately, is it's unfunded,” he said, adding that Republicans should have done “spending cuts first before you try to do tax cuts.”
Spending, meanwhile, is rising. Treasury Department figures last week showed the nation's budget shortfall widened to $600 billion halfway through the current fiscal year, compared with $527 billion in the October-March period a year earlier. Spending in March totaled $420 billion, the second-highest monthly level on record. The record-high month for government outlays was a total of $429 billion in June 2017.
“This president, obviously, is not a president that's interested in fiscal issues,” Senator Bob Corker, a Republican from Tennessee, said in Washington earlier on Wednesday. “This issue is not going to be dealt with without a strong charismatic president who really wants to take it on. This is not going to be dealt with until we have a crisis. It's not going to happen and that's sad. It makes me despondent.”
Corker voted for the tax cuts but against the spending increase.
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