US 3% Budget Deficit: Achievable Target or Just Optimistic Expectation?
Washington (Investing.com) – Amid growing concerns about the huge national debt, the Trump administration is considering a number of unorthodox measures to reduce the budget deficit and control public spending. However, according to Wolfe Research, the goal of reducing the deficit to 3% of GDP remains a major challenge.
The total US public debt has now reached $36.22 trillion, equivalent to more than 120% of GDP - an alarming figure for financial sustainability. Treasury Secretary Scott Bessent said he aims to cut the budget deficit to 3.5%, compared to 6% of GDP last year, through measures such as boosting growth, deregulation, cutting DOGE forces and increasing tariffs.
DOGE, or the Department of Government Efficiency, is a federal workforce reduction initiative spearheaded by Tesla (NASDAQ: TSLA) CEO Elon Musk.
However, in its latest report, Wolfe Research said that a 5% deficit is possible, while 4.5% is optimistic. The analysts said:
> We cannot adjust the current fiscal model sufficiently to reach 3.5%, let alone 3%.
In an effort to fill the budget, Trump also just announced the largest list of tariffs ever. Specifically, a basic 10% tax will apply to all foreign imports from April 5, while higher tariffs for China, the EU, India and Japan will take effect from April 9.
The US government argues that these are reciprocal tariffs to address unfair trade policies and protect domestic manufacturing. But economists warn that such measures could fuel inflation, complicate business operations, and hurt growth.
The White House is also considering a number of controversial ideas, including:
- Forcing countries that hold US bonds to swap them for lower-yielding bonds.
- Selling $5 million residency cards to wealthy foreigners.
While none of the proposals have been approved by Congress, they underscore the urgency of finding a solution to a growing problem: spending outpacing revenue.
With markets increasingly volatile and uncertain, many investors are turning to artificial intelligence tools like Investing.com’s ProPicks AI. The system has identified a number of outperforming stocks—including nine that have surged more than 25% this year alone. The big question: Will Tesla continue to be a safe haven? When Elon Musk himself is also taking on the responsibility of reforming the US government apparatus.