Amid soaring US debt, can Trump balance fiscal challenges with campaign promises?

21 Jan 2025 03:24 PM

EXPERT COMMENT

How Trump and Congress address looming fiscal challenges will have far-reaching consequences that could affect the foundations of US economic power.

President Trump’s second term begins with a series of fiscal hurdles that will shape the trajectory of the US economy. These include avoiding a government shutdown, preventing a default on US sovereign debt and extending his 2017 tax cuts – each connected to managing America’s ballooning national debt. Failure to adequately deal with any of these issues could have enduring political and economic consequences. 

Trump inherits a strong economy, with the US pandemic recovery outpacing that of other advanced economies across inflation, productivity and growth measures. But beneath this surface lies a troubling fiscal reality. At over $36 trillion – over six times its 2001 level – the national debt is on an unsustainable trajectory, with the debt-to-GDP ratio poised to hit record heights under Trump’s second term. 

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