The IMF has published the following documents: financial monitor Report twice a year About spending and tax levels around the world.of April 2024 report, subtitled “Fiscal Policy in a Big Election Year”; Includes some warnings about the size of the U.S. budget deficit.
For context, here is a table of fiscal balances for high-income countries. Shows actual data from 2019 to 2023 and forecast data from 2024 to 2029. We can see that even before the 2019 pandemic, the United States was already running an above-average budget deficit. Pandemics increase budget deficits everywhere, but among high-income countries, the United States has the largest deficits. The U.S. budget deficit is expected to be much higher than that of other high-income countries. For example, the US budget deficit in 2025 is 7.1% of GDP, while the deficit for all other developed countries is 2% of GDP. GDP.
By the way, this is not a partisan issue. The US budget deficit was already high under President Trump. The increase in U.S. government spending to combat the coronavirus was bipartisan. High budget deficits continue even under President Biden.
The IMF explains the US budget situation as follows (reference to figures is omitted).
In 2023, the United States experienced a significantly larger fiscal slippage, with the general government deficit increasing from 4.1% of GDP in 2022 to 8.8%. Due to the capital gains tax cut in 2023 and the postponement of the tax deadline, income tax revenue has significantly decreased by 3.1 percentage points as a percentage of GDP. Meanwhile, spending increased by 1.3 percentage points as a percentage of GDP.
The overall budget deficit is expected to remain above 6% of GDP in the medium term. Financing costs have increased significantly in recent years. Nominal yields on 10-year U.S. Treasury bonds rose from less than 1% in 2020 to a 16-year high of 5% in October 2023, but have recently fallen to around 5% due to rapidly rising inflation and inflation expectations. It dropped to 4%. …
Rising nominal term premiums also contributed to the rise in nominal government bond yields in mid-2023. This increase reflects several factors, including the perceived risk of sustained inflation and uncertainty about the future direction of monetary policy (U.S. Congressional Budget Office, 2023). Additionally, the Treasury's plans to issue additional debt at the same time as quantitative tightening likely contributed to increased volatility in bond markets and higher term premiums…long-term nominal interest rates in the United States vs. other countries' nominal interest rates. An empirical analysis to quantify the spillovers to national economies shows that a 1 percentage point jump in U.S. interest rates is associated with an increase in long-term nominal interest rates that peaks at 90 basis points in other developed countries, and that This suggests that the effects will last for many months. In emerging market countries, a similar jump in U.S. interest rates is associated with a peak increase of about 100 basis points in long-term interest rates. Furthermore, uncertainty surrounding US fiscal policy and long-term interest rates may have a negative impact on financial conditions in other regions. …
In summary, our previous analysis points to the risks of fiscal policy easing. America along several dimensions. Loose fiscal policy in the United States could make it difficult to reach the last mile of eliminating inflation while exacerbating the debt burden. Furthermore, global interest rate spillovers could contribute to tighter financial conditions and increase risks elsewhere.
The IMF also attributes most of the rise in core inflation in the US to very high budget deficits.
In the run-up to this fall's U.S. presidential election, the lack of serious discussion on central economic issues like the federal budget is remarkable and discouraging, and in fact, barely mentioned at all.