Economists rip Trump's spending spree as 'foolhardy,' 'ludicrous,' and 'the dumbest'
A massive deficit will be President Donald Trump's legacy, financial strategists are warning as the U.S. budget is expected to rise to accommodate the government's spending plan.Interest payments on debt are set to push the deficit over $2 trillion in the next decade from its current $440 billion, according to the Committee for a Responsible Budget.Inflation data posted Wednesday came out at 0.5 percent for January, up from a previous 0.4 percent and 10-year Treasury yield was higher on Thursday at around 2.931 percent. Natasha Turak | @NatashaTurak
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cnbc.com
A massive deficit will be President Donald Trump's legacy, financial strategists are warning as the U.S. budget is expected to rise to accommodate the government's spending plan.
"My view is that this fiscal expansion is probably the most foolhardy escapade in modern economic policy history," Albert Edwards, an ultra-bearish global strategist at Societe Generale, said in a client note Wednesday.
While agreeing that he felt U.S. corporate taxes were anomalously high, Edwards criticized the timing of the fiscal stimulus as "utterly ridiculous" and warns it "will only accelerate the collapse of U.S. financial markets as the Federal Reserve hikes rates even more quickly."
With the current growth picture in the U.S. — unemployment at a 17-year low and wages and company earnings steadily strengthening — a double-dose of fiscal stimulus is the last thing that is needed and threatens to seriously overheat the economy, numerous analysts and politicians are saying.
The Trump administration's proposed $1.5 trillion infrastructure plan, $200 billion of which is to be provided by the federal government, comes on top of a recently-passed spending budget of $300 billion over the next two years. That stimulus is in addition to the Republican-led Tax Cuts and Jobs Act passed in December, which is estimated to deliver $1.5 trillion in tax cuts over next decade. And interest payments will add $420 billion to the national debt over that same time frame, pushing the deficit above $2 trillion, according to the Committee for a Responsible Budget. The current budget deficit is $440 billion.
continues at cnbc.com
Here are a couple more passages further down in the article from conservative think tanks:
The Heritage Foundation, a notably conservative economic policy think tank in Washington, D.C., described the spending plans as unsound.
"It fails as sound fiscal policy," said Justin Bogie this week, the foundation's senior policy analyst in fiscal affairs, noting that just last year the Trump administration proposed balancing the federal budget within a decade.
"This proposal would add an additional $7 trillion to the national debt — something not even a big spender like President Obama ever proposed," he said on the foundation's website.
Chief economist at Pantheon Macroeconomics, Ian Shepherdson, agreed, albeit in more scathing tones. The bipartisan budget package amounts to 0.7 percent of GDP on top of tax cuts of 0.5 percent of GDP, he observed. This when the economy is growing at near 3 percent is "crazy" and "the economy doesn't need it," he told CNBC.
"This is the dumbest thing the U.S. could possibly do," Shepherdson said of the spending bill. "Politicians are acting exclusively on re-elections and not on the effect of the real economy." |
