In recent news, Goldman Sachs has warned the United States of possible increases in not just interest rates, but believes that the country will face high debt levels as well. Moreover, the group also said that the US will not be able to benefit from the tax cuts for a long time as debt is going to hike and so will the interest rate.
While speaking to the news, a representative of Goldman Sachs said that the US is in the red territory and it might go deeper into it. “Things are not looking good for the economy and we see signs of red”, he said. While further talking to the press, he said that the federal deficit is moving towards an ‘unchartered territory”, saying that the Trump administration might not be able to benefit, even despite the tax cuts for long.
Issuing a warning, Goldman Sachs also said that the US federal deficit will increase to 5.2 percent of the growth by next year and at the same time, the firm said that ‘the rates would continue to grow from there’.
It is true that the US economy is currently experiencing tax cuts and tax reforms as well but the firm believes that the tax reforms will diminish by the end of this year. While speaking to the press, the representative of the firm further said, “The increase in fiscal spending and the overall fiscal expansion will increase growth by 0.7pp this year and 0.6pp in the next year but after that, it will come to an end”. The representative raised concerns against the economy, further saying that debt is one of the biggest factors that will continue to undermine the economy.
The tax cuts are one of the main reasons for the situation of the economy and Goldman Sachs said that the rise in spending on social security, Medicaid and medicare along with other income support programs are responsible for the surge in spending. While further commenting on the situation, the representative said, “there is a high chance that there will be a change in the control of the Congress after the mid term election this year, which will further make it difficult for the deficit to expand”.
The US economy currently faces pressures from all sides and one of its biggest concerns remains the high level of spending and escalating debt.