Guggenheim’s Millstein Warns of Potential ‘Fiscal Disaster’

Congressional Republicans risk “fiscal disaster” if a recession hits as they push through sweeping tax cuts, Guggenheim Securities Co-Chair Jim Millstein warned. “What today is 6.4% of GDP as a deficit, a $2.4 trillion deficit, could easily expand to $4 trillion if we had a recession,” Millstein said in an interview on Bloomberg Television. The cost estimates of the current GOP package “assume consistent economic growth. So imagine we have a recession. In the last five or six recessions, the budget deficit actually blows out because tax revenues go down and spending increases.”

A key House committee advanced President Donald Trump’s giant tax and spending bill over the weekend. The Joint Committee on Taxation had pegged the total cost of the bill at $3.8 trillion over the next decade, though an analysis by the Committee for a Responsible Federal Budget says the outcome will be more dire. Long term Treasury yields have been rising this month in the wake of investor fiscal concern. Yields on the 30-year bond breached 5% Monday in the aftermath of Moody’s announcement Friday that it was joining other ratings agencies in downgrading US sovereign debt to Aa1 from Aaa.