US Heading for ‘Fiscal Collapse’ Warns Billionaire Michael Bloomberg
Billionaire Michael Bloomberg, the former mayor of New York, has warned that the US is heading for a “fiscal collapse” and that the Congress should take immediate measures to regain control of the budget, rather than focusing on increasing debt.
Bloomberg made the warning on his eponymous portal, citing the latest forecasts from the Congressional Budget Office (CBO) which suggest that the US federal budget deficit will continue to grow, albeit at a slower pace, than previously predicted.
“This is an unambiguous message that there will be a wake-up call and it will be bad” Bloomberg said, warning that the Congress needs to change its course soon. He noted that the US is on a path to a “fiscal collapse” due to the continued high level of debt, which is expected to remain or even increase over the next few decades.
Bloomberg pointed out that the federal government is spending around seven trillion dollars a year, but only taking in five trillion in taxes, resulting in a deficit of over six percent of the GDP, a high number for an economy with full employment.
He criticized the proposed tax cuts and import tariffs, which he believes will have a negative impact on the overall revenue. “Assuming no recession, public debt will reach 100 percent of GDP this year and 118 percent by 2035 and then it will just keep going up” he wrote.
Bloomberg also criticized the Trump administration’s efforts to reduce costs, saying they would have little long-term impact on the budget while harming public services and enraging voters who see “public parks being closed, healthcare getting worse and death from infectious diseases becoming more frequent.”
Instead, Bloomberg suggested that the US government should increase taxes cautiously, reduce spending, but maintain 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.
“Restoring fiscal control should be the top priority for this Congress. The only sensible approach is to combine moderate tax increases with well-thought-out spending cuts” he wrote. “Sharing the burden would make the changes more palatable and achievable if done soon.