Report Considers Presidential Nominees Impact on Debt

Yesterday, the Committee for a Responsible Federal Budget (a non-partisan organisation based in Washington DC) published a report analysing the impact that either Harris or Trump could have on the nation’s finances.

The publication comes against a backdrop of US debt-to-GDP standing at $33.17tn or 121% of GDP during the 2023 fiscal year (though it has since risen to $35.68tn).

The report warned that “the next President will face significant fiscal challenges upon taking office, including record debt levels, large structural deficits, surging interest payments, and the looming insolvency of critical trust fund programs”.

By examining, policies put forward on campaign both candidates’ websites, official campaign announcements and white papers, the report looked at policies.

According to the CRFB’s central estimate, Harris’ plans could raise the US’ national debt by $3.5tn compared to Trump’s $7.5tn. On a high estimate, the report further indicated that Harris’ plans could increase national debt by $8.1tn, against Trump’s whose plans could increase it by a colossal $15.15tn. Meanwhile, under a low-cost estimate, Harris plan would be near enough to deficit neutral, while the Trump’s plans would see $1.45 trillion added to the national debt.

According to the report, uncertainty remains around the TCJA. This Tax Cuts and Jobs Act (implemented through Trump during 2017) represented the largest change to the tax code in decades, reducing taxes for tens of millions of households and business across the US economy. Many of the TCJA’s cuts covering individuals and smaller business, however, is set to expire at the end of next year.

Ahead of this, talk of a debt ceiling crisis will no doubt come back in common parlance given that its suspension is set to expire on 1 Jan 2025.

Sticking with US Debt, it may be of interest to note that US debt grew over 4,000% throughout the course of the American Civil War. According to the US Treasury, the country saw their debt increase from $65m in 1860 to $1bn in 1863 ahead of increasing to around $3bn shortly after the conflict in 1865.

Following a report from the industry regulator Ofwat, thirteen water companies will be forced to repay a total of £158 to customers next year following a failure to meet targets and for causing damage to the environment. It is understood that the rebate will come in the form of lower bills to consumers.

The CEO of Ofwat signalled that “Companies must implement actions now to improve performance…and not wait till government or regulators ask them to act”.

Thames Water will have to pay back £56.8m – the largest repayment – which will no doubt add to its spiralling list of problems.

In July, Ofwat’s put the monopoly into a “turnaround oversight regime” and rejected their proposals to increase water bills by 45% proposals. The regulator signalled that water bills would rise 21% but insisted that the company would have to make improvements to “customer service and the environment at a fair price for customers”.

Also in July, Thames Water said that it has £1.8bn in liquidity, which it said is enough to cover its operations until May of next year. This comes as their net-debt position sits at around £15.2bn, having risen by as much as £14bn since their previous financial year because of greater levels of spending on infrastructure.