In their final presidential debate Wednesday night, both Democratic nominee Hillary Clinton and Republican Donald Trump acknowledged the problem of the mounting $19.7 trillion national debt, but offered vastly different prescriptions for how best to slow its growth, and virtually no plans to reduce it.
Clinton called for a combination of major investments in infrastructure, education and other domestic programs to spur economic expansion while offsetting the cost with a sharp increase in taxes on upper income Americans. Trump claimed he could grow the economy out of debt with one of the largest tax cuts in modern times, the repeal of the Affordable Care Act and shrewd renegotiations of major trade agreements.
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However, despite a consensus among many budget policy experts and the non-partisan Congressional Budget Office that it will take a comprehensive strategy of spending cuts, higher taxes and major reforms of Social Security, Medicare and other entitlements to slow the growth of the long-term debt, neither candidate was willing to embrace such an approach.
Chris Wallace of Fox News, the debate moderator, pressed the two candidates to say whether they would support a “grand bargain” to reduce the deficit akin to a plan developed in late 2010 by a presidential debt commission co-chaired by Republican Alan Simpson and Democrat Erskine Bowles that included major cuts in entitlements and tax increases.
“I’m cutting taxes, we’re going to grow the economy, it’s going to grow at a record rate ... and it’s going to totally help you control the costs of major entitlement programs,” Trump insisted in outlining his approach to addressing the debt. “And one thing we have to do is repeal and replace the disaster known as Obamacare. It’s destroying our country, it’s destroying our businesses.”
Clinton reiterated her support for increased tax funding for the Social Security Trust Fund to insure its long-term solvency, as part of her overall tax increase. However, she flatly declared that she would not cut benefits provided by Social Security and other entitlement programs.
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Both Clinton and Trump have gone on record in opposition to cuts in Social Security, the politically sensitive entitlement that provides monthly benefits to about 60 million people, mostly retirees and disabled workers. The trust fund has been on shaky financial ground for years as more and more Baby Boomers retire and is projected to begin running out of money in 2034 absent action by Congress and the White House.
Under pressure from Sen. Bernie Sanders of Vermont and other liberal Democrats, Clinton earlier this year embraced a proposal to expand the amount of monthly Social Security benefits to many struggling Americans, especially surviving spouses and people who left their jobs to care for an ailing relative. She said she would help pay for the increased benefits by raising the current $118,500 ceiling on wages subject to a payroll tax.
“I want to enhance benefits for low income workers and for women who have been disadvantaged by the current Social Security system,” Clinton said last night. “But what Donald is proposing with these massive tax cuts will result in a $20 trillion additional national debt. That will have dire consequences for Social Security and Medicare.”
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Last night’s debate highlighted many of the stark contrasts in the two candidates’ plans to spur economic growth and job creation and begin to address long term spending on Social Security and other entitlements. The CBO has repeatedly warned that unless Congress acts soon, the government will see a return to annual budget deficits of as much as $1 trillion.
While analysts including the Tax Policy Center and the Tax Foundation have differed on the likely impact of Trump’s and Clinton’s dueling tax plans and domestic and defense spending agendas, the emerging consensus is that Trump’s plan to slash taxes on individuals and businesses by $6.2 trillion over the next decade will likely boost the economy in the short term but send the debt skyrocketing in the long term, compared with current policy.
Trump’s economic advisers, invoking dynamic budget scoring techniques, argue that the billionaire’s tax cuts would practically pay for themselves by encouraging economic growth over the coming decade.
Trump boasted during that debate that he could increase the gross domestic product growth rate to as much as five or six percent with his policies – a feat that some economists say is unrealistic. Current annual GDP growth is roughly 2.2 percent.
A recent report by the Committee for a Responsible Federal Budget projected that Trump’s policies would add $5.3 trillion to the debt in the coming decade.
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Clinton, meanwhile, might slow the economy in the short run by raising taxes by $1.4 trillion over the coming decade, with the top one percent of taxpayers bearing the brunt of the overall increase, according to analysts. But in the long run, the combination of her tax increases and domestic spending on infrastructure, education, new child care tax credits and other programs for the middle class would likely encourage economic expansion without a huge run-up in the debt and related interest costs.
Clinton last night repeated her vow that “I will not add a penny to the debt” with her proposals. However, even if Clinton as president succeeded in persuading Congress to offset the cost of her domestic agenda with $1.4 trillion of new revenue, she would still come up short and add an estimated $200 billion to the long term debt, according to Committee for a Responsible Federal Budget calculations.
Under Clinton’s approach, the debt would increase from 77 percent of GDP now to more than 86 percent by 2026, according to calculations of her tax and spending proposals by CRFB. Trump’s tax cuts and new spending would increase the debt to 105 percent of GDP over the same period.