Trump’s fiscal clean-up job won’t be easy

President Trump was sworn in amid much fanfare and celebration, and immediately went to work on Monday. He started with a hiring freeze on federal employees and a regulatory freeze as part of a series of executive orders, but taming the nation's fiscal situation could be even more difficult.

“The biggest headwinds are probably huge debts and very bloated budgets, and a lot of that includes spending, money that hasn't actually been spent at this point, but is still going to be spent. “You know, the promise.''So that would be very problematic,'' Heritage Foundation researcher EJ Antoni told FOX Business before Trump took office.

The national debt, which measures the amount the United States owes its creditors, is more than $36 trillion and rising, according to the U.S. Treasury tracked.

President Trump's key fiscal deadlines

On the budget front, last Friday the nonpartisan Congressional Budget Office (CBO) released its latest 10-year budget and economic outlook, showing that the federal government is on track to break debt records set nearly 80 years ago. Showed.

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“From 2025 to 2035, the debt will increase because increases in spending on Social Security, Medicare and interest payments will outpace revenue growth,” Chief Financial Officer Philip Swagel told reporters. Ta.

The federal government is expected to post a $1.9 trillion budget deficit in fiscal year 2025. The budget deficit is expected to decline temporarily over the next two years, then rise again. The short-term decline is related to the expiration of parts of President Trump's 2017 Tax Cuts and Jobs Act, which is set to expire at the end of this year. But Trump Treasury nominee Scott Bessent vows that won't happen. Bessent plans to move forward with the approval process.

Scott Bessent vows to make 2017 tax cuts permanent

United States – January 16: President-elect Donald Trump's nominee for Treasury secretary, Scott Bessent, testifies at the Senate Finance Committee confirmation hearing on Thursday, January 16, 2025, at the Dirksen Building. . (Tom Williams/CQ-Roll Call, Inc, Getty Images/Getty Images)

“We will make the Tax Cuts and Jobs Act of 2017 permanent and introduce new pro-growth policies to reduce the tax burden on America's manufacturing, services and senior citizens,” Bessent told the Senate Finance Committee during his confirmation hearing. There must be,” he said. “President Trump is the first president in modern times to recognize the need to change trade policy and stand up for American workers.”

U.S. President Donald Trump reviews troops during his inauguration ceremony in Emancipation Hall at the U.S. Capitol on January 20, 2025 in Washington, DC. (Greg Nash/Pool/AFP via Getty Images/Getty Images)

CBO's analysis is based on current law, so changes in federal tax and spending policy may change these numbers.

Another demon in disguise. The Federal Reserve's easing cycle aimed at combating inflation. Policymakers cut rates three times in 2024, with a 50 basis point cut followed by two 0.25 basis point cuts. Still, the 10-year Treasury yield, which determines interest rates on several borrowing benchmarks, including mortgage rates, remains above 4%. Mortgage rates just topped 7%, rising for the fifth straight week, according to Freddie Mac.

Investors certainly welcomed the latest consumer price index readings, which came as no surprise. Core interest rates, which exclude volatile food and energy, rose an annualized 3.2% in December, lower than the 3.3% expected by economists. Market participants expect no change at the Fed's first meeting of the year on Jan. 29, the paper said. CME's FedWatch tool.

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Still, inflation remains a wild card. Nymex and Brent crude oil are up more than 8% this year, and gold is trading just below its all-time high of $2,788.50 an ounce.