Ones and Tooze Will the United States Go Broke One Day?
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Mar 7, 2025 The U.S. budget deficit has skyrocketed to $1.8 trillion, raising concerns about the sustainability of a staggering $36 trillion debt. Intriguingly, the contrast between individual life spans and society's infinite outlook on debt is explored. The shifting dynamics of U.S. tax policy reveal how proposed tax cuts exacerbate income inequality. Meanwhile, geopolitical tensions with China are causing ripples in U.S. debt markets, hinting at a potential crisis. A looming threat of stagflation complicates the economic landscape, challenging policymakers' responses.
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German Fiscal Policy Shift
- Germany's incoming government plans to increase military spending and improve infrastructure, marking a significant shift from the country's traditionally strict fiscal policies.
- This change is driven by the perceived need for greater European autonomy in the face of global events.
US Debt and Deficit
- The US budget deficit reached $1.8 trillion in 2024, adding to the existing $36 trillion national debt.
- Despite concerns about sustainability, demand for U.S. debt comes from both private investors and public institutions like central banks.
Demand for US Debt
- Public holders of U.S. debt, such as foreign central banks, are less price-sensitive than private investors.
- Private investors include institutions like pension funds and hedge funds, which have different risk profiles and motivations.