How Trump, Starmer and Macron can avoid a debt crunch
Subscribe to enjoy similar stories. America’s gross national debt is $36trn, or $107,000 per person. It is rising fast and will probably soon be rising even faster.
If Donald Trump’s election campaign was anything to go by, his return to the White House heralds a flurry of tax cuts on everything from corporate profits to tips. In the fiscal year that ended in September, Uncle Sam spent $1.8trn more than he collected in taxes (6.4% of GDP, or over double the annual earnings of America’s seven biggest firms). By one estimate, Mr Trump’s agenda could raise borrowing by $4.1trn in the coming decade.
It is not just America—politicians across the Atlantic are only a bit less profligate. The euro area’s deficit is 3.6% of economic output, and those of several big members—France (5.5%), Italy (7.2%), Poland (5.3%)—are higher. China’s public debts, smuggled by local governments into opaque financing vehicles, exceed 120% of its GDP and will rise to nearly 150% by 2027.
India’s deficit is approaching 8% of its GDP; Brazil’s a hair-raising 10%. Although no finance minister thinks this situation can go on for ever, you would search in vain for serious political will to correct it. Scott Bessent, Mr Trump’s pick for treasury secretary, has in the past been concerned about the size of the deficit.
But he will have to contend with a president who shows little interest in being prudent. Rachel Reeves, Britain’s chancellor, talked tough on fiscal policy while in opposition. Then one of her first acts in office was to raise borrowing by £30bn a year ($38bn, or 1.2% of GDP).
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