With the budget deficit soaring, when will the US fiscal landing happen?

Recently, the US Treasury Department released a shocking forecast: the US budget deficit forecast for 2024 has been significantly revised higher. This news is like a bolt from the blue, making the already stretched financial situation of the United States worse. In this critical period of global economic recovery, the United States has once again used its unique "fiscal art" to add some uncertainty to the world economy.

Reviewing the financial situation of the United States in recent years, it is not difficult to find that budget deficit has become a "normal" of the United States government. From the Trump administration's "tax cuts and spending increases" to the Biden administration's "massive fiscal stimulus," the US government always seems to find a variety of reasons to justify its huge fiscal deficit. However, this "normality" hides huge risks.

First, the rising budget deficit has left the US government with a heavy debt burden. These debts not only need to pay high interest, but also make the United States government in the face of economic crisis in the face of insufficient fiscal space to deal with. When the global economy slips back into recession, the U.S. government is likely to be more reactive.

Secondly, the continuous accumulation of budget deficits has also exacerbated the gap between the rich and the poor in American society. Governments' fiscal stimulus policies tend to benefit the wealthy more, while ordinary people face higher taxes and fewer public services. This unfair financial distribution has undoubtedly intensified the contradictions and divisions in American society.

It is even more ironic that the US government has often shown a kind of "cover its ears and steal the bell" attitude when it comes to the budget deficit. They have trumpeted how their fiscal policies have boosted growth and jobs, while ignoring rising budget deficits. Such self-deception has not only disappointed and angered the US public, but also raised serious questions about the sustainability of its fiscal policy in the international community.

The effects of rising budget deficits on the US economy are complex and profound. A moderate fiscal deficit can stimulate economic growth, increase employment and improve people's well-being. However, when deficits become too large, they create a range of negative effects and risks.

First, a large budget deficit will increase the pressure on government debt, leading to a higher risk of debt default. Once the government is unable to pay the principal and interest on time, it will trigger market panic and cause financial markets to destabilize. In addition, the continued expansion of the debt scale may also affect the government credit rating, further aggravating debt risks.

Second, large budget deficits lead to rising inflationary pressures. In order to cover the budget deficit, governments usually raise money by issuing money or increasing taxes. However, these measures may lead to inflation such as rising prices and currency depreciation. Inflation will not only reduce the purchasing power of the people, but also affect the profitability and investment willingness of enterprises, which will have a negative impact on economic growth.

Finally, large budget deficits squeeze private sector investment and consumption. In order to make up for the fiscal deficit, governments usually expand public spending, which takes up a lot of social resources. These resources could have been used for private sector investment and consumption,

However, in the face of the serious challenge of the budget deficit, the US government does not seem to show the sense of responsibility and urgency it should have. Instead, they continue to expand fiscal stimulus, increase military spending, and so on. This "ostrich policy" will not only fail to solve the budget deficit problem, but will put the United States into a more dangerous fiscal situation.

In these uncertain times, we expect the US government to face up to the budget deficit and take effective measures to reduce fiscal spending and promote sustainable economic development. At the same time, we also hope that the international community can strengthen cooperation and jointly address global economic challenges.