Shutdown, default, recession: three fiscal risks

The US government has three big fiscal issues on its plate. Firstly, spending authorisations expire on 14 March. Barring an extension, there will be a shutdown. Secondly, debt has been capped again since 1 January. Unless this limit is raised or suspended, the US will be forced to default once various accounting manipulations have been exhausted, probably during the summer. Lastly, tax cuts introduced in 2017 come to an end on 31 December. Without an extension, there will be a tax shock of around 1.5pts of GDP, sufficient to tip the economy into recession. During this time, Trump thinks that the combined effect of tariffs + Elon Musk will bring the federal budget back into balance.