Wolfgang Münchau believes that the US will default because both Republicans and Democrats believe in deficit spending.
The US has been running deficits since the end of the Clinton administration in 2000. The Trump administration’s tax cuts and spending plans, as well as the irresponsible fiscal policies of the Biden administration, have contributed to the growing deficit. The Congressional Budget Office has calculated that Trump’s budget will increase the annual federal deficit to around $3.8 trillion from $1.6 trillion over the next decade.
Although a formal default is unlikely to occur, as the US government can print money to meet its debt obligations, the growing deficit and debt – to – GDP ratio raise concerns about the long – term sustainability of the US fiscal situation. If the US continues to run large deficits and the debt – to – GDP ratio continues to rise, it could lead to a loss of confidence in the US dollar and US government bonds, which could have serious consequences for the global economy.
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