Donald Trump has completely distanced himself from the conservative Republican idea of maintaining budgetary discipline. Something that seriously 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 businesses and citizens and that the think tank The Tax Foundation, a nonprofit dedicated to analyzing global tax policies, estimates 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 cut program 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 effective 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 will “get worse” the structure of the tax code “would have only a moderate impact on long-term economic growth, such as exemptions from tips and Social Security income.”
Experts at the Committee for a Responsible Federal Budget (CRFB), a nonprofit public policy organization based in Washington, said the president-elect’s tax proposals They would increase the country’s debt by $7.75 trillion.
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 increase the primary budget deficit (which includes debt repayment) to $5.8 trillion ( 5,300 billion euros). in a decade.
This fiscal indiscipline by Trump will not be welcomed by the market or by the Congressional Budget Office (CBO). This entity has already declared in its reference law that the debt and deficit will spiral out of control over the next decade. Debt is expected to reach almost 102% of GDP at the start of fiscal 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 believe that President Trump’s plan would increase debt to 143% of GDP in 2035which would represent an 18% increase in GDP”, they say from the Committee for a Responsible Federal Budget (CRFB, for its acronym in English).
A priori, the president-elect’s budget plan would increase the country’s GDP by 2.4% in the long term, but the heavy dependence on import tariffs (10% for all countries and 60% for China) to pay for tax cuts, would lead to growth will shorten by 1.7% and remain at a meager 0.8% for at least a decadeadvance from the Tax Foundation.
“Tariffs are a particularly distortive way to raise revenue, particularly 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 benefits long-term economic benefits of their proposed tax cuts,” say the organization’s experts.
All that remains to be seen is how the market will react to this budgetary indiscipline from the new President of the United States.
