The US is heading towards a “budget collapse”, according to billionaire Michael Bloomberg and Congress should take immediate action to regain control of the budget instead of continuously accumulating debt.
Bloomberg, the former New York City mayor, warned on a portal bearing his name that the Congressional Budget Office’s latest predictions suggest the US federal budget deficit will continue to grow, albeit at a slower pace, if the current course is not changed.
This “unambiguous message” implies that “there will be a reckoning and it will be bad” if Congress does not alter its course, Bloomberg said. The US is on a path to a “budget collapse” due to the ongoing high level of debt, he emphasized.
The federal government is currently spending around seven trillion dollars a year and taking in only five trillion in taxes, resulting in a deficit of more than six percent of the GDP, a high number for an economy with full employment, Bloomberg wrote. The deficit has reached record highs in this decade.
Assuming no recession, the public debt will rise to 100 percent of the GDP this year and 118 percent by 2035 and will continue to rise after that, he predicted.
Bloomberg criticized the proposed tax cuts and import tariffs pursued by US President Donald Trump, saying the tariffs will likely have a negative impact on overall revenue because they will dampen business activity and job creation.
The ongoing efforts of the Trump administration to reduce costs will likely have little long-term impact on the budget, while harming public services and angering voters who see public parks being closed, healthcare deteriorating and death from infectious diseases on the rise, Bloomberg wrote.
Instead, the US government should increase taxes cautiously, while continuing to reduce spending, but maintaining some growth-promoting measures, such as a higher standard deduction in the income tax and stronger investment incentives, to achieve a significant reduction in the expected deficit, Bloomberg suggested.
“Restoring budget control should be the top priority for this Congress” he wrote. “The only sensible approach is to combine moderate tax increases with well-thought-out spending cuts. Sharing the burden would make the changes more digestible and gradual if they happen soon.