Elon Musk’s US$2 trillion fiscal fantasy
Between Trump’s planned tax cuts and Musk’s absurd estimate of how much federal spending can be reduced, the smart money says they have no idea what they are doing
WHEN the US presidential election was called for Donald Trump, the yield on 10-year US government bonds increased from 4.3 to 4.4 per cent, and the 30-year-bond yield rose from 4.5 to 4.6 per cent, with both remaining at those levels 10 days later. As the bond market declined – higher yields mean lower prices – the stock market rose. Clearly, investors expect the next Trump administration to produce higher government budget deficits and more debt.
It is not difficult to see why. During Trump’s first term in office, he added US$8 trillion to the national debt – all previous presidents combined had accumulated US$20 trillion – despite having promised to run budget surpluses so large that they would eliminate the national debt within two terms.
In the campaign, he vowed to cut taxes for seemingly every group that caught his fancy. According to the Committee for a Responsible Federal Budget’s central estimate, Trump’s tax proposals imply US$10 trillion in foregone revenue over the next 10 years.
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