Edited by the Korea IT Times editorial team.
The U.S. Senate is set to vote on President Donald Trump’s controversial tax and spending bill today. Financial experts, including Nigel Green, CEO of deVere Group, warn that this legislation will significantly increase the U.S. debt burden and fuel inflation. Green describes the bill as "economically reckless and globally dangerous." He predicts that if it passes, there will be an immediate rise in U.S. borrowing needs and inflation, leading to severe consequences for both the U.S. and the global economy.
The bill proposes extending Trump-era tax cuts while boosting military and border spending at the expense of healthcare and social programs. Independent forecasts suggest it could add at least $1.2 trillion to the federal deficit over the next decade, potentially increasing the US debt-to-GDP ratio above 130%. This would accelerate one of the steepest debt trajectories in the developed world.
With more government borrowing comes more Treasury issuance, leading to higher yields and borrowing costs for businesses, homeowners, and consumers. Yields on 10-year US Treasuries are nearing their highest levels since 2022, and the Congressional Budget Office has warned that interest costs could become a major budget item if the bill passes.
Green warns, "Investors will, rightly, demand higher returns for holding US debt, which means higher interest rates at every level of the economy," causing increased mortgage costs, corporate borrowing expenses, and reduced consumer and business investment. This poses a direct threat to U.S. growth and jobs.
The inflationary risks are also mounting, as inflation remains above the Federal Reserve’s 2% target. With core inflation staying stubborn, adding fiscal stimulus could push prices higher. Green explains, "You don’t stimulate an already overheated economy with unfunded tax cuts and massive new spending commitments."
The global implications are significant. The U.S. dollar has already dipped on market concerns over the bill's fiscal impact. Credit rating agencies might react soon, with fears of another U.S. downgrade reminiscent of Fitch's 2023 action. Such downgrades would shake global markets, potentially triggering capital flight and currency pressure in emerging markets.
Nigel Green underscores the broader implications: "Policymakers in Washington are playing with fire. The scale of additional borrowing will export volatility to every major asset class and economy. This isn’t just a U.S. problem—it’s a global economic threat." He concludes that every investor, institution, and government should brace for the financial consequences of this legislation.
You can find the Korean version of this article here.
