How will Trump’s budget plans impact the U.S. deficit? ING weighs in
Investing.com - Tariffs and an effort to reduce federal expenditures should help offset increases to the U.S. deficit pile stemming from President Donald Trump’s massive tax-and-spending bill, according to analysts at ING.
In a note to clients, the analysts argued that the Trump-backed "One Big Beautiful Bill Act," which would extend tax cuts from 2017 while raising expenditures on defense and border security, is "on the face of it, [...] a huge fiscal giveaway."
They noted that the Congressional Budget Office has estimated that the package will lower tax revenues by $3.7 trillion over the next 10 years, while its proposed spending cuts to some programs would save just $1.3 trillion, "leaving the primary deficit $2.4 trillion wider than would otherwise have been the case."
However, the analysts noted that Trump’s aggressive tariff agenda is already generating tax revenues that are separate from the fiscal package, adding on to a little under $200 billion in savings already registered by reduction measures carried out by the Department of Government Efficiency.
Yet "while these initiatives may fill the financial hole created by ’One Big Beautiful Bill Act,’ U.S. deficits will remain wide and debt levels will continue to grow, especially when we consider the continuous 0.1-0.2 percentage point GDP increase in demography-related spending and how that will feed into the U.S.’s fiscal position," the ING analysts said.
"Moreover, the combination of these policies is likely to be detrimental to economic growth in the near term, which runs the risk of official deficit and debt projections being too optimistic."
The Trump administration has touted the bill as a means to boost small businesses, families and American workers. Among a myriad of measures, the legislation includes a push to put Medicaid on a more sustainable footing and efforts to promote growth and entrepreneurship.
Republicans in Congress are currently aiming to pass the massive legislation and have it on Trump’s desk for signing by a self-imposed July 4 deadline.
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