After months of relative silence from the candidates, the 2016 presidential campaign trail suddenly is alive with ideas – both substantive and frothy -- for addressing the long-term federal debt.
And while the debt is not likely to dominate the first GOP presidential debate in Cleveland next month, budget watchdog and anti-deficit groups have begun putting pressure on the candidates to explain their views on averting a long-term debt crisis.
Maya MacGuineas, president of the Committee for a Responsible Federal Budget, a budget watchdog group, said on Monday that she and other advocates of spending restraints have been surprised by the extent of voter interest in the long-term debt in Iowa, New Hampshire and other early primary states. “It is getting brought up with the candidates a lot,” she said.
However, she added, the jury is still out on the extent to which Republican and Democratic candidates begin to offer more thoughtful and far-ranging ideas that would be useful in starting a real discussion about the deficit.
Plans Start Emerging
Republican New Jersey Gov. Chris Christie arguably is leading the Republican pack with the most provocative and politically risky plan for averting a long-term debt crisis through major reforms of Social Security and Medicare and the federal tax code.
Christie’s Social Security plan would gradually raise the normal retirement age to 69 and the early retirement age to 64, as well as eliminate the payroll tax for people above age 62 and below age 25. His Medicare plan would gradually raise the eligibility age to 69 by 2064, while expanding the existing sliding scale for Medicare premiums for higher income seniors.
Former Florida governor Jeb Bush has vowed to address the debt problem by shrinking the size of government and generating government revenues with policies that would foster a four-percent annual increase in the economy, a GDP goal far more ambitious than many budget and economic experts say is realistic.
Other Republicans -- including Sens. Ted Cruz of Texas and Marco Rubio Florida and former Arkansas governor Mike Huckabee -- are calling for adoption of a balanced budget amendment to the U.S. Constitution – long a favorite chestnut of conservatives but one virtually impossible to achieve. Sen. Rand Paul (R-KY) has called for entitlement reform and more spending cuts across the board. And Wisconsin Gov. Scott Walker says that a combination of tax reform and shifting responsibility for costly social and domestic programs from the federal government to the states would be his solution.
On the Democratic side, former Secretary of State Hillary Clinton has yet to offer any specific proposals for addressing the long-term debt, although she has spent considerable time blaming former Republican President George W. Bush for squandering a huge budget surplus with major tax cuts and wars in Afghanistan and Iraq. Clinton’s main Democratic challenger, Sen. Bernie Sanders of Vermont, says that wealthy Americans must bear the burden of debt by paying higher taxes.
The Story Shifts
In the wake of a dramatically shrinking deficit – from a zenith of $1.4 trillion in fiscal 2009 in the depths of the recession to a mere $483 billion last year – the fiscal narrative in Washington shifted from how to reduce the deficit to how to keep the economic recovery going.
However, a sobering report issued June 13 by the non-partisan Congressional Budget Office warned that the budgetary good times will be short-lived. A return to ballooning deficits in the next few years could undermine the economy and greatly add to the government’s borrowing costs.
Largely because of the aging baby boomers and rising health care costs, the extended baseline projections indicate that revenues will fall far short of spending over the long term, producing a substantial imbalance in the federal budget. Consequently, budget deficits are projected to rise steadily. By 2040, federal debt held by the public will rise to a percentage of the Gross Domestic Product last seen during the final year of World War II, the CBO warned.
More recently, amid fears that the debt crises in Greece and Puerto Rico could ripple throughout the global economy, many of the 2016 presidential aspirants have begun paying more attention to the U.S. government’s long-term debt prognosis.
Evaluating the Plans
“We’re not Greece yet, but there’s always that fear because somewhere in the future we’re in uncharted [financial] territory,” Bob Sunshine, deputy director of the CBO, said today. “Nobody really knows what the tipping point is, but we’re in uncharted territory” with regard to the U.S. economy.
Sunshine took part in a program sponsored by the Committee for a Responsible Federal Budget, a budget and deficit watchdog group, to review the state of play in government defense and domestic spending and entitlement programs.
The CFRB’s “Fix the Debt” campaign and the Concord Coalition have been jointly beating the drum on the presidential campaign trail recently to try to generate more discussion about debt issues and force the candidates to take public stands on what they would do with their budgets. As part of this effort, MacGuineas and other officials have been compiling and evaluating the public statements of candidates.
With regard to Bush’s proposals, for example, MacGuineas said that “4 percent growth is certainly unlikely,” while calls by other GOP candidates for a balanced budget amendment are misguided because they are focusing on a process and not a comprehensive policy for reducing the deficit.
As for Sanders’ call for expanded Social Security benefits, MacGuineas argued that it would be unwise to promise expanded retirement benefits when the existing program is projected to run low on money.
She praised Christie for unveiling a comprehensive plan for addressing the debt and deficit despite widespread opposition to such a move by many Democrats and some Republicans who are reluctant to touch major entitlement programs.
“He talked about some hard choices,” MacGuineas said. “He talked about raising the retirement age and he talked about means testing [of benefits]. A lot of things that you could agree with or disagree with his policy, but he put out some things that he definitely will take arrows for.”