Donald Trump has completely distanced the Republicans’ conservative idea of maintaining fiscal discipline. Something that strongly scares the markets. Trump’s economic plan proposes another second wave of tax cuts with the permanent extension of the Tax Cuts and Jobs Act of 2017 (TCJA). This is a tax relief for companies and citizens and that the think tank The Tax Foundation, a nonprofit organization dedicated to analyzing global tax policies, estimates that it will cost $3 trillion over a ten-year period.
For its part, the Center of American Progress (CAP) estimates that the Republican’s tax cuts package will cost $4.4 trillion between 2026 and 2035.
Economists at the Tax Foundation explain that “some of Trump’s tax proposals are well designed and would be efficient ways to promote long-term economic growth, such as permanently accounting for spending on machinery, equipment, and research and development.”
Instead, they warn that Other proposals are “poorly designed” and what they are going to do is “get worse” the structure of the tax code, “would only create a moderate impact on long-term economic growth, such as exemptions for tips and Social Security income.”
Experts at the Committee for a Responsible Federal Budget (CRFB), a nonprofit public policy organization based in Washington, estimated that the president-elect’s tax proposals They would increase the country’s debt by 7.75 trillion dollars.
At the same time, according to the Budget Model panel at the Penn Wharton Business School at the University of Pennsylvania, Donald Trump’s economic program would raise the primary fiscal deficit (which includes debt payments) to $5.8 trillion. of dollars (5.3 trillion euros) in a decade.
This fiscal indiscipline by Trump will not be well received by the market or the Congressional Budget Office (CBO). This entity already said in its reference law that the debt and deficit were going to run out of control in the next decade. Debt is expected to grow to close to 102% of GDP at the beginning of fiscal year 2026 and to 125% by the end of 2035. Thus, the debt will exceed its record as a percentage of the economy (106% established in 1946) in three years.
“We estimate that President Trump’s plan would raise debt to 143% of GDP in 2035which would represent an increase of 18% of GDP,” they say from the Committee for a Responsible Federal Budget (CRFB, for its acronym in English).
A priori, the president-elect’s fiscal plan would make the country’s GDP grow by 2.4% in the long term, but the strong dependence on import tariffs (10% for all countries and 60% for China ) to pay for tax cuts, will cause growth will shorten by 1.7% and will remain at a meager 0.8% for at least a decadeadvance from the Tax Foundation.
“Tariffs are a particularly distorting way to generate revenue, especially because they invite foreign retaliation. We estimate that Trump’s proposed tariffs and partial retaliation from all trading partners would together offset more than two-thirds of the long-term economic benefit of their proposals for tax cuts,” say the organization’s experts.
Now we just have to see how the market will respond to this fiscal indiscipline from the new president of the United States.
#Trumps #tax #cuts #cost #trillion #decade