U.S. Budget Deficit Analysis

Analysts from Evercore ISI have indicated that the U.S. budget deficit is the third-highest on record, expected to remain similar whether Kamala Harris or Donald Trump wins the presidency.

Key Points

• Current Deficit: The U.S. budget deficit for fiscal year 2024 is estimated at $1.7 trillion, or 6.3% of GDP.
• Historical Context: This marks the third-largest deficit in U.S. history, and the highest outside the COVID pandemic.
• Impact of Candidates: The macro impact of fiscal stimulus under either candidate is expected to be similar and relatively small.
  • Harris’s Approach: Policies may focus on expanding social programs and infrastructure, funded by increased taxes on corporations and high-income individuals. In a divided government scenario, the deficit could rise by 1.7% of GDP.
  • Trump’s Approach: Likely to emphasize tax cuts and defense spending, potentially increasing the deficit by 1.8% of GDP. However, some domestic program reductions may also be pursued.
• Conclusion: Differences in fiscal outcomes between the two candidates may be minimal. Analysts emphasize the urgent need for significant policy changes to avoid long-term fiscal challenges affecting economic growth and financial stability.