Debt Eruption Coming: Kudlow Says “Tax Cut 2.0” Will Be Unveiled Later This Year

Shortly after Charlie Gasparino tweeted that the Trump admin is “mulling an election-year fiscal stimulus as part of budget proposal” and which may “include a payroll tax reduction, and increase in earned income tax credit”…

SCOOP via @LJMoynihan — Congressional sources say @WhiteHouse is mulling an election-year fiscal stimulus as part of budget proposal; sources say ideas on the table include a payroll tax reduction, and increase in earned income tax credit. more as we get it @FoxBusiness

— Charles Gasparino (@CGasparino) January 15, 2020

… Larry Kudlow spoke on CNBC confirming that the White House indeed plans to unveil a plan for additional tax cuts later in 2020.

“I am still running a process of Tax Cuts 2.0. We’re many months away – it’ll come out something later during the campaign,” Kudlow told CNBC. “Tax Cuts 2.0 to help middle-class economic growth: That’s still our goal.”

“I had a tremendous meeting with my friend Kevin Brady, who will undoubtedly be the new chairman of the House Ways and Means Committee,” he added. “But we will unveil this perhaps sometimes later in the summer.”

What this means is that after the $1.1-$1.2 trillion budget deficit in 2020, the US is staring at an even wider deficit next year, which of course will be funded by debt, and since foreign buyers have been increasingly less excited to buy US debt, will force the Fed to expand its QE4 to buy coupon bonds across the entire curve. It also means that the following chart projecting the trajectory of US debt is now the optimistic case.