Bank of America reveals the motivation behind Trump's reforms: One-third of GDP comes from fiscal spending, and 85% of new jobs rely on the government

To "detox," the U.S. economy is undergoing a painful but necessary transformation: shifting from an over-reliance on government spending to more productive private sector growth. Bank of America pointed out the driving forces behind the reforms in the latest research report: The U.S. economy's dependence on government has reached unprecedented levels, with 85% of job growth coming from the government, government spending accounting for one-third of GDP, and a record budget deficit of 6-7% (excluding times of crisis and war). Jared Woodard, head of the Bank of America Research Investment Committee, revealed the truth behind the apparent prosperity of the U.S. economy in recent years in the latest report: "U.S. economic growth has relied on unsustainable government support and protectionist policies. As Trump attempts to shift U.S. economic growth from an inefficient, debt-driven government growth model to an efficient, self-funded private sector growth model, he is facing a high-risk gamble." The Painful Transition from Government-Led Growth to the Private Sector Bank of America data shows that a year ago, 85% of job market growth in the U.S. came from the government and sectors reliant on government spending, such as healthcare and education. Although this figure has now dropped to 70%, it remains at an unhealthily high level. Even more concerning is that in 2024, government spending will account for one-third of GDP, reaching a historical high outside of wartime or crisis periods. This growth is supported by a budget deficit of 6-7%, which is exceptionally dangerous in peacetime. Bank of America's analysis suggests that transitioning the U.S. economy from government-led to private sector will be a difficult but necessary process: "The global handover from big government to free markets may be fraught with risks, but given the massive deficits and debt burdens, this transition seems inevitable." Moreover, this shift is not unique to the U.S. According to the Bank of America report, the transition from the public sector to the private sector is happening globally: In Japan, accelerated corporate reforms (buybacks and capital expenditures) are releasing ¥206 trillion (33% of GDP) to support the stock market rebound this spring. In Germany, Chancellor Merz is preparing to lift the debt brake to fund €1 trillion in defense and infrastructure spending. In Argentina, fiscal cuts worth 5% of GDP have balanced the budget, reducing inflation by 25 percentage points and boosting the stock market. Painful but Necessary: Long-Term Benefits of Restarting the Market Economy Bank of America acknowledges that accelerated private sector job growth, the relocation of government workers, widespread corporate profit growth, and global trade finding a new balance may take time, and the effects will not be seen overnight. This aligns with the views of Howard Lutnick, a member of Trump's economic team, who stated that Americans may not feel the impact of Trump's economic policies until the fourth quarter of 2025 Despite short-term pain, Bank of America’s conclusion remains optimistic. Analysts stated: “The productivity gains that may come from the market's economic restart outweigh the risks, while the risks of maintaining a debt-financed, sluggish, and narrow economic growth status are quite severe.”