The US faces a Liz Truss-style market shock if the government ignores the country’s ballooning federal debt, the head of Congress’s independent fiscal watchdog has warned.
Phillip Swagel, director of the Congressional Budget Office, said the mounting US fiscal burden was on an “unprecedented” trajectory, risking a crisis of the kind that sparked a run on the pound and the collapse of Truss’s government in the UK in 2022.
“The danger, of course, is what the UK faced with former prime minister Truss, where policymakers tried to take an action, and then there’s a market reaction to that action,” Swagel said in an interview with the Financial Times.
The US was “not there yet”, he said, but as higher interest rates raise the cost of paying its creditors to $1tn in 2026, bond markets could “snap back”.
FT Exclusive: US debt is on an 'unprecedented' trajectory that could lead to a Liz Truss-style market shock, the head of Congress’s independent fiscal watchdog has warned https://t.co/JLiKKeQE9z pic.twitter.com/ljX3OpInL1
— Financial Times (@FT) March 26, 2024