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Yahoo
8 hours ago
- Business
- Yahoo
Trump vs. Economists: Will GDP Growth Surge to Historic 9% Rate?
President Donald Trump disputed the Congressional Budget Office's 1.8% estimate for annual economic growth over the next decade, predicting the U.S. economy could as much as quintuple that growth rate. If GDP reached 9% economic growth, it would be the fastest expansion since 1943. Professional forecasters give this about a 0% chance of happening. The growth projections have implications for the Republicans' spending bill now being considered in the Senate. Higher growth would mean more room for tax cuts and spending, and smaller federal budget the economy on track to have its fastest growth since 1943? President Donald Trump thinks it could be, but professional forecasters say there's no made his bold economic prediction on Friday in a social media post. In it, he disputed the Congressional Budget Office's projection for the inflation-adjusted Gross Domestic Product (GDP) to grow at an annual rate averaging 1.8% over the next decade. Trump said the economy could as much as quintuple the CBO's estimated growth rate. The CBO's growth-rate predictions are significant to Trump's public policy priorities. The CBO is tasked with providing budget and economic information to Congress so its members can make informed voting decisions. And the Republican budget bill passed by the House of Representatives needs a fast-growing economy to balance two of Trump's major fiscal priorities—cutting taxes while decreasing the deficit. The higher the economic growth, the more tax revenue the government will collect and the smaller spending deficits will be. The nonpartisan budget research group estimated the Republican bill will increase spending deficits by $3.8 trillion through 2034 if average growth is 1.8% each year. Trump said those estimates are too pessimistic and accused the research group of being biased against him."The Democrat inspired and 'controlled' Congressional Budget Office (CBO) purposefully gave us an EXTREMELY LOW level of Growth, 1.8% over 10 years," Trump posted on social media. "I predict we will do 3, 4, or even 5 times the amount they purposefully 'allotted' to us (1.8%) and, with just our minimum expected 3% Growth, we will more than offset our Tax Cuts (which will, in actuality, cost us no money!)" Five times the CBO's estimated 1.8% growth rate would be 9%. Growth at this level would be a historic economic boom. GDP has grown at an average rate of 2.5% a year since 1990, according to the Bureau of Economic Analysis. GDP growth has surged several times to rebound from recessions. The most dramatic example was during World War II, when the economy grew at double-digit rates: 1943 was the last year the GDP grew at a rate of 9% or more. The best year for GDP growth in recent times was 2021, when the economy grew 6.1% as it bounced back from the pandemic if any professional economists see 9% economic growth in the cards any time soon. The Federal Reserve Bank of Philadelphia surveyed professional forecasters earlier in May and found the median forecast for growth in 2025 was 1.4%, more pessimistic than the CBO projected for the year, and 2% in 2028. The forecasters gave zero probability of 9% economic growth in 2025 or any year through 2028. The GDP is headed the wrong direction in 2025 so far, shrinking at a rate of 0.2% annually in the first quarter. Read the original article on Investopedia
Yahoo
16 hours ago
- Business
- Yahoo
‘Only care when they're out of power': Joe rips GOP hypocrisy on ballooning debt
House Speaker Mike Johnson is responding to Elon Musk's recent comments about the GOP's sweeping budget bill, which Musk said 'increases the budget deficit." On Morning Joe, the panel slams Johnson's dismissal of Congressional Budget Office (CBO) projections and calls out what they say is Republican hypocrisy on the national debt.
Zawya
a day ago
- Business
- Zawya
High yields bring US fiscal 'precipice' even closer: McGeever
(The opinions expressed here are those of the author, a columnist for Reuters.) ORLANDO, Florida - Few would disagree that U.S. public finances are deteriorating, but debt Cassandras have been warning of a fiscal day of reckoning for 40 years and it has yet to arrive, so why should this time be any different? The non-partisan Congressional Budget Office's baseline forecast sees federal debt held by the public rising to 117% of GDP over the next decade from 98% last year, and net interest payments rising to 4% of GDP, a sixth of all federal spending. While these eye-watering figures are concerning, it still seems difficult to fathom the United States experiencing a genuine debt crisis where investors turn their backs on Treasuries and the dollar, the two cornerstones of the global financial system. Both should enjoy strong demand – at least for the foreseeable future – even if their prices may need to fall to attract buyers. And in times of extreme crisis, like 2008 and 2020, the Fed can always buy huge quantities of U.S. bonds to stabilize the market. But that doesn't mean investors should ignore the swelling tide of fiscal gloom. We may not see a full-blown debt crisis, but there's a sense that "the fiscal" matters for markets more now than it has for decades. ECONOMIC ASSUMPTIONS To better understand the risk at hand, it's useful to explore the assumptions baked into the current U.S. debt and deficit projections. The CBO's comprehensive fiscal projections are a benchmark for many policymakers and investors. But amid the fog of uncertainty created by U.S. President Donald Trump's trade war, the baseline economic assumptions underlying this outlook may be too optimistic. The CBO assumes that the United States will experience continuous, uninterrupted economic growth over the next decade. While it's true that since 1990 the U.S. economy has twice gone on streaks of more than a decade without experiencing a recession, conditions today - not the least of which is the country's bloated public debt burden - suggest that a repeat is highly unlikely. And in the event of a downturn, U.S. public finances would almost certainly suffer the double whammy of shrinking tax receipts and a surge in benefit payments, pushing the country closer to a fiscal cliff. Of course, an economic downturn would probably also prompt the Fed to lower interest rates, which would likely cause bond yields to fall and offer some relief on debt-servicing costs. But investor angst over the debt may keep market-based borrowing costs higher than they would otherwise be, something that is also not baked into the CBO's central projections. And if government borrowing costs over the next decade are higher than currently projected, the U.S. fiscal picture is even more troublesome than thought. YIELD CURVE ASSUMPTIONS Yield curve assumptions play a major – and often underappreciated – role in U.S. debt sustainability projections. The current CBO projections are based on the expectation that the yield curve will "normalize" in the coming year. They assume that the three-month Treasury yield will fall to 3.2% and the 10-year yield will settle at 3.9%. But what if the yield curve stays near current levels over the next decade, with a three-month rate of 4.40% and a 10-year yield of 4.50%? Chris Marsh at Exante Data crunches the numbers and finds that, in this scenario, federal debt held by the public could rise to 125% of GDP by 2034 and interest payments as a share of revenue would approach 30%. Interest payments as a share of revenues are already about to exceed their late-1980s peak and may end up at the highest level since at least the 1950s. Adding to this concern, Saul Eslake and John Llewellyn at Independent Economics note that if the yield curve does not normalize, the United States could get in the dangerous position where nominal GDP growth remains persistently below the 10-year Treasury yield, meaning debt dynamics would deteriorate because interest payments would outstrip growth. Given that the Trump administration's current budget bill is expected to add nearly $4 trillion to the federal debt over the next decade, the risk of this is especially pertinent today. One consequence of higher-for-longer U.S. interest rates then could be a much-heavier-for-much-longer debt burden. (The opinions expressed here are those of the author, a columnist for Reuters) (By Jamie McGeever; Editing by Mark Porter)
Yahoo
a day ago
- Business
- Yahoo
Prolific thief returns to jail after stealing biscuits from Mansfield shop
A prolific Nottinghamshire thief has been returned to prison after he stole multiple items, including biscuits, from a shop he was banned from. John Evans, 34 and of Babworth Court, Mansfield, entered a convenience store on Barringer Road, Mansfield, on three occasions, despite his ban. This happened on March 24, 27 and 31 this year, with the ban imposed in November 2023 as part of a Criminal Behaviour Order (CBO) secured by local officers. During the incidents, he stole various items, including biscuits. He also stole goods from other local businesses on March 2 and April 1. Evans appeared at Nottingham Magistrates Court on Monday, May 26, and was was jailed for 24 weeks after pleading guilty to theft and breaching his CBO. READ MORE: New dog exercise field planned for former horse paddock READ MORE: Police say nine-year-old was among those injured in Liverpool FC parade crash As well as being ordered to pay compensation, the order was updated to include multiple additional businesses. Shoplifting offences in Mansfield have fallen by more than 30 per cent over the last year, police said. Prolific offenders have been identified and targeted with restrictive court orders banning them from certain areas of the town and / or from doing certain things such as carrying large bags. Currently, nine such orders are in place and officers will be working to secure more. Sergeant Catherine Darby, of the Mansfield town centre policing team, said: "Shoplifting offences are damaging not only for local businesses, but also for the town as a whole. That's why we are working so hard to target known offenders and to make their lives as difficult as possible. "People like Evans should know that – for as long they keep committing offences – we will remain on their case and will leave no stone unturned in order to bring them to justice."
The Star
a day ago
- Business
- The Star
Pressure on US to follow Japan in debt profile rethink
IN the face off between heavily indebted developed economies and increasingly wary investors, Japan has blinked first, announcing that it will reconsider its debt profile strategy amid plunging demand for long-dated bonds. The United States could soon follow. Japan has the second-longest debt maturity profile of the Group of Seven (G7) nations, with an average of around nine years. Decades of ultra-low policy rates allowed Tokyo to borrow huge amounts at very low cost across the Japanese government bond yield curve. But in recent weeks, 30-and 40-year yields have soared to record highs, as appetite for long-dated paper at Japanese government bond auctions has dried up, a one-two punch that has forced officials to consider reducing issuance of long-term bonds in favour of short-dated debt. Many of the debt pressures bearing down on Tokyo are also being felt in Washington. The United States no longer boasts a AAA credit rating, following the downgrade from Moody's earlier this month, and the non-partisan Congressional Budget Office (CBO) projects federal debt held by the public will rise to a record 118.5% of gross domestic product (GDP) over the next decade from 97.8% last year. Net interest payments will rise to 4.1% of GDP from 3.1%, it predicts. Finally, there is Trump's tax-cut bill, which is projected to lump US$3.8 trillion onto the federal debt over the next decade, according to the CBO. All this is creating understandable unease among investors, and even though foreign demand at bill auctions has remained high, on average, demand at bond auctions is the lowest in years. Treasury may be forced to grab a page out of Japan's recent playbook and shorten its maturity profile. The United States has the shortest 'weighted average maturity' (WAM) of all G7 countries at 71.7 months, according to Treasury. That's due to a mix of factors including rising deficits, the Federal Reserve (Fed) holdings of longer-dated bonds, and high liquidity and demand at the short end of the curve. But this figure has rarely been higher on its own terms. While the WAM reached a record 75 months briefly in 2023 and was elevated during the post-pandemic period, it has otherwise rarely exceeded 70 months. Indeed, the average going back to 1980 is 61.3 months. Shifts in Treasury's WAM over the past half century have largely been driven by the interest rate environment, economic and financial crises and investor preference. While today's mix of market, economic and geopolitical trends is unique, it doesn't point to strengthening investor demand for long-dated bonds. The decades before the pandemic – the period known as the 'Great Moderation' – were generally marked by falling interest rates, flattening yield curves, and weak inflation. That era is over, or at least that's the growing consensus among investors and policymakers. This largely reflects the belief that inflation pressures in the coming decades will be higher than those seen during the 'Great Moderation' – particularly given the move toward high tariffs and protectionism – meaning interest rates are likely to remain 'higher for longer'. At the same time, America's apparent move toward isolationism and increased political volatility is apt to make global investors consider reducing their elevated exposure to dollar-denominated assets. That could make it harder for the Treasury to borrow long term at acceptable rates. These are broad assumptions, of course, and there are many moving parts. A sharp economic slowdown or recession could flatten the yield curve and spark an increase in longer-term issuance. But the curve is currently steepening, and the United States 'term premium' – the risk premium investors demand for lending 'long' to Treasury instead of rolling over 'short' loans – is the highest in over a decade and rising. This creates two problems. First, the Treasury may prefer to borrow longer term but not if yields are prohibitively high. Second, even though the United States can borrow more cheaply at the short end when the curve is steepening, this increases the 'rollover risk', meaning the government becomes more vulnerable to sudden moves in interest rates. T-bills' 22% share of overall outstanding debt is already above the Treasury Borrowing Advisory Committee's recommended 15% to 20% share, but it's hard to see that coming down much any time soon. Morgan Stanley analysts earlier this month outlined a 'thought experiment' whereby low demand for notes and bonds could see the share of bills approach 30% by 2027. Ultimately, Treasury supply will largely depend on investor demand. If primary dealers indicate a preference for shorter-dated bonds, the WAM will probably fall. Japan won't be the only developed economy rethinking its onerous borrowing plans. — Reuters Jamie McGeever is a columnist for Reuters. The views expressed here are the writer's own.
