Congress must focus on restoring fiscal control and deficit reduction in order to avoid “the grim reckoning,” the billionaire believes
The US is heading for a “fiscal breakdown,” and Congress should take urgent measures to restore fiscal control instead of eyeing more borrowing, billionaire Michael Bloomberg believes.
The former New York Mayor warned about the impending collapse on Tuesday in the media outlet he established. He reflected on the latest Congressional Budget Office (CBO) projections, that indicated the US budget deficit and federal debt are bound to grow, albeit at slower speeds than projected a year ago.
These dire forecasts send an “unambiguous message” that “there’ll be a reckoning, and it will be grim” unless Congress urgently changes course, Bloomberg warned. The US is heading towards a “fiscal breakdown” given that public borrowing is expected “to remain at this elevated level or higher for decades,” he pointed out.
“The federal government is currently spending roughly $7 trillion and collecting only $5 trillion in taxes annually. The resulting deficit is a little over 6% of gross domestic product, a disturbingly high number for an economy around full employment,” he wrote. US deficits have reached record levels this decade.
Assuming no recessions, public debt will rise to 100% of GDP this year and 118% by 2035 – and it just keeps rising from there.
The founder of Bloomberg L. P. criticized the proposed tax cuts repeatedly promised by US President Donald Trump as well as the import duties he is pursuing in order to restore the balance of trade. “The [tariffs’] impact on overall revenue is likely to be negative, because tariffs depress commercial activity and job creation,” Bloomberg suggested.
The ongoing cost-cutting efforts of the Trump administration are unlikely to have any long-term impact on the budget, while damaging public services and angering voters who see that “public parks are closed, health care is declining, and deaths from infectious disease are becoming more common,” Bloomberg suggested.
“Savings from slashing the federal payroll won’t have any appreciable effect, either. For all the media attention generated by cuts to personnel and programs — and some of them are warranted — they are having almost no impact on restraining the budget deficit,” he wrote.
Instead, the US government should cautiously raise taxes while further reducing spending and keep some pro-growth measures intact, such as a “bigger standard income-tax deduction and stronger investment incentives,” in order to “deliver a substantial net reduction in projected deficits,” Bloomberg suggested.
“Restoring fiscal control should be job No. 1 for this Congress. The only sensible approach is to combine moderate tax increases and judicious cuts in spending. Spreading the burden would allow the changes to be more palatable and gradual, if they’re undertaken soon,” he wrote.
