Leading investment banking group Goldman Sachs says the fiscal outlook for the U.S. “is not good,” with new economic forecasts predicting massive increases to the federal deficit.
“An expanding deficit and debt level is likely to put upward pressure on interest rates, expanding the deficit further,” wrote the firm’s chief economist, Jan Hatzius, on Sunday, according to CNBC.
The economist notes that the ballooning deficit could spike interest rates, which would expand the deficit, and he predicted lawmakers, as a result, “might hesitate” in approving a high-dollar stimulus package to help with a future economic recession.
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“While we do not believe that the U.S. faces a risk to its ability to borrow or repay, the rising debt level could nevertheless have three consequences long before debt sustainability becomes a major obstacle,” Hatzius wrote.
The predictions come after the Republican-controlled Congress passed a massive tax overhaul in December, which cut individual and business tax rates but increased the federal budget deficit to more than a trillion dollars.
The Congressional Budget Office predicted after the bill’s passage that while it would stimulate job growth, the U.S. could reach a deficit that matches its gross domestic product by 2028.
President Trump is now pushing for more than $15 billion in reductions to the federal budget, after reluctantly signing the spending bill in March.