Tag: Debt Ceiling

The Pant Suit vs. The Pant Load – Budget Edition

Now that both presidential conventions are history, the real discussion about the merits of the candidates and their programs begins. The first question to answer is: What are the costs of the promises made to America by Donald Trump and Hillary Clinton?

Both candidates have made political promises that, if implemented, have both costs and benefits to the nation. While the analysis of benefits may be difficult to assess, the costs are not.

The Committee for a Responsible Budget (CRB) has issued a report, “Promises and Price Tags: A Fiscal Guide to the 2016 Election” that estimates how our national debt would rise under the programs of both presidential aspirants. It shows that gross debt held by the public would rise from about $19 trillion today to $23.9 trillion by 2026 under Hillary Clinton’s plan and to $35.2 trillion under Donald Trump’s plan.

They based the estimates on the public positions taken by each campaign as of June 24, 2016. They also generated a low, central, and high cost estimate of the fiscal implications of Trump’s and Clinton’s proposals.

We need to stop and say that our gross debt will rise no matter who is elected, since under existing law, gross debt is projected to rise from about $19 trillion today to about $29.1 trillion by 2026, about a 50% increase. With that in mind, here is CRB’s summary of the impacts of both candidate’s plans on the national debt:

Debt Under Candidates Proposals

Donald Trump has expressed concern about the dangers of our current $19 trillion debt. Yet his plan would increase that number significantly. Under CRB’s central estimate of Trump’s plan, gross debt would more than double from $19 trillion today to $39.5 trillion by 2026.

The increase in gross debt under Clinton’s plan would be smaller but still significant. Under the central estimate of Clinton’s plan, gross debt would rise by more than 50%, from $19 trillion today to $29.6 trillion by 2026, in line with the current law. So, her promise to pay for new spending seems to be true.

Digging a little deeper, here is CRB’s breakdown of both candidates’ plans by revenue, costs and spending. Most of Hillary Clinton’s increased costs come from spending in non-health, non-retirement programs:

  • She would spend $350 billion more on college education, $300 billion more on infrastructure, another $300 billion on paid family leave, and nearly $500 billion on a variety of other initiatives.
  • Clinton would also make several health-related changes that would cost about $150 billion.
  • To offset these costs, Clinton proposes a variety of tax increases – mostly on higher earners and businesses – totaling $1.25 trillion.

The largest share of Trump’s deficit impact comes from his proposed individual and business tax reforms, which would reduce revenue by about $9.25 trillion:

  • His plan to reform the veteran’s affairs system and increase veterans’ access to private doctors would cost about $500 billion.
  • And his plans to repeal and replace the Affordable Care Act and reduce illegal immigration would cost about $50 billion each.

So, what happens to the total amount of our national debt?

Donald Trump wants to dramatically reduce taxes for most Americans while maintaining spending relatively near its current levels. As a result, under CRB’s central estimate, he would add $11.5 trillion to the debt through 2026.

Hillary Clinton wants to increase both spending and taxes, adding about $250 billion to the debt over 10 years under CRB’s central estimate. Under their low cost estimate, Clinton’s plan would reduce 10-year deficits by $150 billion.

Increases in debt are not always a bad thing, particularly in times of economic slack, if the debt accumulation is driven by stimulative fiscal policy. But a 40 percentage point of debt to GDP increase, from 87% of GDP to 127% of GDP, seems unlikely to give us a positive outcome.

But, if we elect The Pant Load, that’s what we will get. Trump said to the WaPo in May:

I am the king of debt. I do love debt. I love debt. I love playing with it.

This should worry you. Trump went on to say:

Look, I have borrowed, knowing that you can pay back with discounts. And I have done very well…I would borrow, knowing that if the economy crashed, you could make a deal, and if the economy was good, it was good, so, therefore, you can’t lose.

So, Trump would stiff the nation’s creditors. Haven’t we had enough of Republican mis-leadership on the nation’s finances?

Haven’t we had enough of Republican tax cuts for the most comfortable among us at a cost to the least comfortable among us?

Remember that it was the GOP-led Congress that threatened not to raise the debt ceiling in 2011. That led to the Standard & Poors rating agency’s lowering of the US credit rating.

Think carefully about what Trump’s glib plans imply for America.

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Monday Wake-Up Call – October 19, 2015

Page A21 of Friday’s New York Times carried the news that our budget deficit for the fiscal year that ended on September 30th was $439 billion, or $44 billion less than the prior year, and nearly $1 trillion less than its peak during the Great Recession. Oh, and it equaled just 2.5% of Gross Domestic Product (GDP). The Wall Street Journal reported that the budget shortfall was 9% lower than last year, and at its lowest level since 2007.

If the “paper of record” buries this story, don’t expect to see it on the nightly news, or the Sunday bloviator shows. Yet, it was not very long ago that the media was obsessed with the budget deficit, egged on by Republicans who returned incessantly to Talking Points 101 from their slash Social Security and Medicare playbook . The WSJ provides a history of recent deficits:

Deficit History

The surplus on the top graph occurred during the Clinton administration. That would be about the same time that “spending” began exceeding “revenue” on the second graph.

The budget deficit is less of a problem than it has been since 2007, and since our economy is larger, it is also even less as a share of US GDP. Indeed, at 2.5% of GDP, our current deficit is less than the average of the past 40 years. The increase in tax receipts from higher tax rates, an improving economy (and stock market), combined with marginal cuts in federal spending (the Sequester) have all helped drop the deficit by almost 75% from its 2009 high.

So the deficit is falling, but the total debt of the US government is still increasing.

The debt is the total amount of money the US government owes. It’s the amount borrowed to cover all the deficits over the years. When the fiscal year ended on September 30, the US government owed $13.124 trillion to the public (a measure that includes Treasury securities held by the Federal Reserve.) To see the current tally, see the Treasury’s “The Debt to the Penny and Who Holds It” website.

To increase our debt, we have to increase the debt ceiling. But, once again, Congress can’t agree to increase the debt ceiling unless the Tea party faction of the Republican Party can score a few political points about Medicare, Social Security and Planned Parenthood.

Why does the Beltway media continue to fall for the Republican trope that they are the fiscally prudent party? We now have 35 years and five Presidents of proof that Republican Presidents spend like teenagers with their parents’ credit card.

But the “meh, so what?” emoji from the Beltway media after we cut $1 trillion from the deficit is truly disappointing. So today’s wake up is for the media who think that cutting the deficit is a low value target for our collective consciousness.

Today’s Wake Up is “For What It’s Worth”. Even though it is associated with Vietnam and Kent State, it isn’t an anti-war song. It was written about the “Sunset Strip riots” in November, 1966. From Wikipedia:

On one evening, 1,000 demonstrators gathered to protest against the enforcement of the curfew laws. Although the rallies began peacefully, trouble eventually broke out among the protesters and police. The unrest continued the next night and periodically throughout the rest of November and December forcing some clubs to shut down within weeks.

Here are Buffalo Springfield with “For What Its Worth”:

50 years later, this song is still relevant. That speaks to the song’s genius.

Unfortunately, we can’t say the same for our media and politicians.

For those who read the Wrongologist in email, you can view the video here.

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