U.S. President Donald Trump is pushing for an extension and expansion of tax cuts, while reports indicate that the U.S. federal liability is reaching an all-time high.
According to the New York Times (NYT) and Financial Times (FT) on the 27th (local time), the Congressional Budget Office (CBO) recently reported that the U.S. liability will reach 100% of the gross domestic product (GDP) this year and is expected to exceed its highest level since World War II by 2029, reaching 156% of GDP by 2055.
The CBO noted, "The federal government is under financial pressure to cope with rising expenses due to an increasing retiree population," adding, "As the working population ages and immigration slows, population growth will also slow, leading to further sluggish economic growth." It warned that "the federal government's liability could have wide-ranging impacts not only on the government but also on all citizens."
According to the NYT, in this situation, President Trump is expanding and resuming the tax cut policies implemented during his first administration. This includes lowering the corporate tax from 21% to 15% and reducing taxes on employee tips and overtime pay. If the tax cuts become permanent, the CBO projects that the debt-to-GDP ratio will increase by an additional 47 percentage points (p) by 2054.
To secure financial resources, the Trump administration has instructed Elon Musk to cut expenditures worth $2 trillion by 2026. This is mainly achieved by freezing or cutting support for government programs addressing climate, education, and health. In particular, Musk reportedly referred to social security schemes that support retirement benefits as a "Ponzi scheme" that should be "eliminated," according to the NYT.
The Trump administration is also attempting to increase revenues through tariffs to offset the shortfall in income tax and corporate tax. However, the Peterson Institute for International Economics (PIIE), a U.S. think tank, forecasts that the tax shortfall due to tax cuts will reach several trillion dollars, making it insufficient to cover the gap through tariffs.
Meanwhile, the U.S. budget proposal for 2026 is expected to include hundreds of billions of dollars in federal expenditure cuts, with a budget that passed the House including $4.5 trillion (approximately 660 trillion won) in tax cuts and $2 trillion (around 3 trillion won) in expenditure cuts over ten years.