Deutsche Bank's "Pennsylvania Plan" seeks to manage U.S. debt without raising taxes or cutting spending.

From Yahoo Finance: 2025-06-24 17:39:00

Deutsche Bank has proposed the “Pennsylvania Plan” to manage U.S. debt, aiming to boost domestic manufacturing. The plan would involve Treasury Department management and could buy time to address the $36 trillion national debt. Implementation is underway, with the Trump administration supporting changes to support the plan.

The plan involves reducing reliance on foreign investors for U.S. debt and encouraging domestic investors to step in. It addresses the deficit without raising taxes or cutting spending, as there is no appetite for such actions in Washington. Trump’s budget plan may increase deficits, but stablecoins and exempting Treasurys from banking leverage ratios could help.

Foreign investors owning more U.S. assets than U.S. investors own of foreign assets poses a vulnerability. Deutsche Bank warns that destabilization could occur if foreign investors withdraw money from U.S. assets. The plan aims to shift more U.S. debt to U.S. investors and weaken the dollar, with easier Fed policy support.

The Mar-a-Lago Accord, proposed by Trump’s Council of Economic Advisers, aims to weaken the dollar by striking deals with trading partners. It suggests swapping Treasury bonds and charging fees to foreign bondholders. Implementing the plan could help address the debt and stabilize the U.S. economy.

Read more: A new plan might be taking shape in Washington to help manage explosive U.S. debt