NEW YORK, Jan 8 (Reuters) – U.S. President Donald Trump’s proposed increase in defense spending for 2027 is unlikely to be offset by savings or revenues and would have a negative impact on already large U.S. fiscal deficits, said an analyst at Moody’s Ratings.
Trump said on Wednesday the 2027 U.S. military budget should be $1.5 trillion, significantly higher than the $901 billion approved by Congress for 2026. Any such increase in the military budget would require congressional authorization. The Committee for a Responsible Federal Budget, a nonpartisan think tank, estimated the proposal would cost $5 trillion through 2035, while adding $5.8 trillion to the U.S. debt with interest.
“A substantial increase in defense spending, of a similar order of magnitude as the 50% rise proposed by the President, would be highly unlikely to be offset elsewhere given the political and policy difficulties in finding commensurate savings or revenue sources,” said David Rogovic, senior vice president of sovereign risk group at Moody’s Ratings, in a statement.
He added that a large and sustained debt-financed increase in spending would widen already sizeable U.S. fiscal deficits, increase the interest burden over time, and further limit fiscal flexibility.
“While higher defense spending would also lift GDP growth, the related additional government revenue would not offset the spending increase,” said Rogovic.
(Reporting by Davide Barbuscia; Editing by Chris Reese and David Gregorio)
Comments