Goldman Sachs: Trump's Spending Plan Insufficient to Curb Soaring National Debt

As per a recent report from Ainvest news, escalating Debt-to-GDP Ratio: The U.S. debt-to-GDP ratio currently stands at approximately 120% and is projected to climb towards historic World War II-era peaks.Surging Interest Payments: Interest payments on the national debt are projected to hit $1 trillion annually by 2026. This would make interest the second-largest federal expenditure, trailing only Social Security and surpassing spending on Medicare and defense.

Limited Deficit Reduction: While the proposed legislation might offer a slight reduction in the primary deficit (excluding interest payments), it fails to significantly alter the overall trajectory of borrowing. The accumulation of interest will continue to drive total debt upwards. Impact of Rising Interest Rates: Elevated real interest rates are exacerbating borrowing costs, accelerating the increase in debt servicing expenses.

Challenging Policy Outlook: Goldman Sachs economists warn that stabilizing the national debt would necessitate persistent fiscal surpluses, a historically rare and politically difficult achievement. Without significant and decisive action, Congress may be compelled to choose among severe austerity measures, increased taxation, or potentially inflationary strategies to avert a fiscal crisis.

In conclusion, even with new policies intended to stimulate economic growth, Goldman Sachs cautions that these measures are insufficient to curb the escalating national debt. The combination of surging interest costs, continuous debt expansion, and mounting market pressures is propelling the U.S. toward a fiscal impasse unprecedented since the post-World War II period. Without substantial fiscal reform, the nation faces a significant risk of economic distress, manifesting as rising interest rates, inflation, or austerity measures. House Speaker Mike Johnson recently addressed the media after the narrow passage of the GOP's "One, Big, Beautiful Bill," amid these growing concerns.