Latest news with #fiscalstability
Bloomberg
3 days ago
- Business
- Bloomberg
Irish Government Must Widen Tax Base, Central Bank Warns
Ireland should broaden its tax base to ensure its budget protects long-term fiscal stability, the Central Bank of Ireland warned. 'The need to reduce the risks to the public finances from an excessively narrow tax base has become more immediate, given the reliance on corporate tax receipts from an excessively narrow tax base from a small number of multinational enterprises, which may be more vulnerable in light of geoeconomic fragmentation,' Governor Gabriel Makhlouf wrote in a pre-budget letter to the Irish government.
Reuters
6 days ago
- Business
- Reuters
Spain's economy minister launches bid to lead Eurogroup
MADRID, June 27 (Reuters) - Spanish Economy Minister Carlos Cuerpo has launched his candidacy to preside over the Eurogroup, an informal body of euro zone finance and economy ministers, a ministry spokesperson said on Friday. Cuerpo will seek to "revitalise" the Eurogroup, the spokesperson said in a statement. "The euro area requires urgent and decisive action to strengthen our economic union and enhance the global role of the euro, all while maintaining fiscal and financial stability," the statement added. If picked to lead the Eurogroup, Cuerpo intends to push reforms such as the protracted savings and investment union, as well as strategic investments. The current Eurogroup president is Irish Finance Minister Paschal Donohoe, whose second two-and-a-half year term started in January 2023.
CBS News
11-06-2025
- Business
- CBS News
The U.S. spends $1 trillion a year to service its debt. Here's why experts say that's a concern.
The Republicans' "big beautiful" budget package is uniting everyone from Elon Musk to Wall Street over an issue that experts say could pose a threat to the nation's long-term fiscal stability: The rising cost of servicing the U.S. government's growing mountain of debt. The U.S. spent $1.1 trillion in interest on its debt in 2024 — almost double the amount it was paying five years ago, according to Federal Reserve Bank of St. Louis data. The nation now spends more on interest payments than it does on defense, data from the Stockholm International Peace Research Institute shows. Those costs could rise even more under the Republican tax and spending bill now being considered in the Senate, according to a June 5 analysis by the Congressional Budget Office. The version of the tax bill passed by the House last month is projected to increase the federal deficit — the gap between what the federal government spends each year and what it collects in revenue — by $2.4 trillion over the next decade, the nonpartisan agency found. That would require the government to raise additional debt, resulting in additional interest payments of about $550 billion over the next decade, the CBO forecasts. By 2035, interest on the nation's debt could reach $1.8 trillion, according to the Committee for a Responsible Federal Budget, a nonpartisan think tank focused on fiscal issues. "The interest costs now are bigger than defense spending, which is an extraordinary," Chris Edwards, an expert on federal tax issues at the Cato Institute, a libertarian-leaning think tank, told CBS MoneyWatch. "The budget threat here is that all of these increasing federal interest costs will crowd out all the other priorities in the federal budget that the policymakers want to spend on." In other words, the federal government could struggle to support vital programs like Social Security as a larger share of its budget is eaten up by interest payments on the nation's swelling debt. Federal interest payments as a share of the nation's gross domestic product stood at 3% last year, according to Federal Reserve Bank of St. Louis data. If current trends holds, that could rise to 4.1% of GDP by 2035, the nonpartisan Peter G. Peterson Foundation estimates. Democrats have pointed to analyses showing the bill's tax cuts will benefit wealthier Americans far more than low- and middle-income workers while also adding to the national debt. "No single piece of legislation in my time here in Congress will do more to add to the national debt than this one," Rep. Brendan Boyle, a Democrat from Pennsylvania who voted against the legislation, said last month on the House floor. Many Republicans, however, point to the bill's proposed tax cuts as providing an avenue for economic growth. "We are going to celebrate a new golden age in America," House Speaker Mike Johnson said last month after the bill passed in the House. Concerns from Elon Musk, Wall Street The cost of paying for the nation's debt has drawn concern from many corners, including Tesla CEO Elon Musk, who earlier this month posted about it on social media as he voiced his objections to the GOP bill. "Congress is spending America into bankruptcy!" Musk posted on June 5, pointing to data showing that interest payments have risen from $416 billion in 2014 to more than $1 trillion in 2024. Moody's Ratings downgraded U.S. credit last month, citing among its reasons the mounting concerns about the nation's increasing debt load and interest payments. "Successive U.S. administrations and Congress have failed to agree on measures to reverse the trend of large annual fiscal deficits and growing interest costs," the credit rating agency said. "Over the next decade, we expect larger deficits as entitlement spending rises while government revenue remains broadly flat." Moody's added, "In turn, persistent, large fiscal deficits will drive the government's debt and interest burden higher." On June 7, the White House said in a memo that the GOP tax bill "significantly improves our nation's fiscal trajectory by including $1.7 trillion in mandatory savings," while President Trump's tax cuts will spur economic growth. Some economic forecasters project that Mr. Trump's tariffs will drag down U.S. growth. The nation's growth could slide to 1.6% in 2025 and 1.5% next year partly because of those import levies, a sharp reduction from the 2.8% growth recorded last year, the Organization for Economic Cooperation and Development said last week. How did interest payments get so big? In recent years, interest payments on the federal debt have ballooned for two main reasons. First, a series of COVID-related spending bills provided $4.6 trillion to individuals and businesses to help them keep afloat during the pandemic, with much of that financed through new debt. Second, the Federal Reserve started hiking interest rates in March of 2022 to tame high inflation. But that also meant the Treasury Department needed to pay higher rates to bondholders, adding to the cost of servicing the nation's burgeoning debt. In 2020, the U.S. had about $27 trillion in outstanding debt, according to Treasury data. By 2024, that had jumped 32% to $35.5 trillion. Over that time, the Fed's benchmark interest rate rose from close to zero percent to a high of more than 5% in 2024. One reason the Republican budget bill is forecast to increase the deficit — and add to the nation's interest costs — is that it would extend President Trump's 2017 tax cuts, as well as add other breaks, such as eliminating taxes on worker tips and overtime pay. Altogether, those tax cuts will cost $3.75 trillion, the CBO estimates. The revenue loss would be partially offset by nearly $1.3 trillion in reduced federal spending elsewhere, namely through Medicaid and food assistance. But that still leaves a significant funding gap. In the meantime, the U.S. could face a financial strain in servicing its debt, especially in the face of an economic slowdown, experts have warned. "The most dangerous scenario is that the giant size of our debt precipitates a U.S., and even global, economic recession and financial crisis," Cato's Edwards told CBS MoneyWatch. "We saw this 15 or so years ago in Greece and some other European countries. That sort of crisis could be coming to the United States at some point, but no financial expert knows exactly when that's going to be."
Daily Mail
06-06-2025
- Business
- Daily Mail
ALEX BRUMMER: 'Wise old hen' Chancellor dances on a pinhead
Rachel Reeves's pledge to restore fiscal stability and confine herself to one budgetary event a year is threadbare. When she delivers Labour's first full spending review next Wednesday, it will be her fourth visit to the dispatch box. As the Economist magazine remarked this week, it has been 'all pain, no gain'. Most of her difficulties can be traced back to the alleged discovery of a £22billion black hole in her public spending audit on July 30 last year. Reeves established a narrative, repeated by rote by her Cabinet colleagues, about a terrible inheritance. The number was contrived, in that the biggest element was a giveaway to public sector unions and railway workers, which brought a temporary truce. The Chancellor has made a series of tactical and strategic mistakes. At that very first appearance at the Treasury, she sowed the seeds of festering political dissonance by withdrawing the winter fuel allowance from pensioners. A costed gain to the Exchequer of £1.4billion last year and £1.5billion this year has proved ferociously politically expensive. It is now to be partly reversed in the spending review with the fuel payments restored but taxed as income for better-off silver surfers. Reeves then created a new rod for her back in her first Budget in October. The impact of £40billion of tax increases, fuelled by the debilitating rise in National Insurance Contributions, caused a growth stammer. The fundamental error was in shaping the fiscal rules. Taxation and current spending would be broadly balanced. The Government would only borrow for investment. But by leaving herself so little room for error on current spending, £10bn of headroom, the Chancellor sprung a trap. She ignored Harold Macmillan's dictum, 'Events, dear boy, events.' The headroom detonated another booby trap. Reeves's third intervention came in the spring. She took the axe to welfare, most notoriously to personal independence payments (PIPs) for those claiming disability benefits. It started a debate about Labour values, which has exposed Reeves to pressure to restore £3.5billion of payments to families with more than two children. Which brings us to the spending review. Any hopes that this would be the moment for Reeves to repair struggling public services have been smashed. A downgrade to the Office for Budget Responsibility's growth forecast, surging defence spending, the U-turn on winter fuel and the rocketing cost of servicing the national debt mean the envelope for current spending is negligible, with overall increases confined to 1.2 per cent or so. The joy, such as it is, will come from the capital spending plans. We had a flavour of this earlier in the week when Reeves unsheathed £15billion of transport investment across the North. One cannot but think most of these are reheated plans already announced by her predecessors. Infrastructure is critical and the Elizabeth Line in London and HS2 activity around Birmingham provide graphic evidence of how bold schemes can generate growth. But axing a supercomputer project in Edinburgh, as the Chancellor did last July, hardly speaks to UK tech ambition. In conversation at the CBI this week, Reeves described herself as a 'wise old hen' among G7 finance ministers as elections have brought newbies to the table. Her fiscal fortitude is creditable. Further tax increases, having pledged not to come back for more, would be a deception too far.
