A few of the nation’s most prominent deficit hawks made their pitch to Republican President-elect Donald Trump on Thursday to rearrange his budget and economic priorities and help contain an exploding long-term debt.
But trying to convince the billionaire New York real estate businessman to curb his $9.5 trillion tax cut proposal, a $1 trillion infrastructure spending binge, a defense buildup and a hands-off posture on Social Security reform may well be mission impossible, as the anti-deficit crowd readily admits. Moreover, Trump is no stranger to debt and has used it to his advantage often throughout his high-flying career.
“This guy has lived on debt, for god sake,” former CIA director Leon Panetta quipped on Thursday at a conference staged in Washington by the Committee for a Responsible Federal Budget, a premier anti-deficit research organization. “He doesn’t think it’s a bad thing.”
Panetta, a Democrat who also served as President Obama’s secretary of defense and President Bill Clinton’s White House budget director, teamed up with former Rep. Tim Penny (D-MN) and former Republican Indiana governor Mitch Daniels to draft a ten-point fiscal agenda for Trump to avert what some fear will be the worst debt crisis since the aftermath of World War II.
But none of them seemed hopeful the message would get through.
“With the exception of President Harry Truman during World War II, no new president has entered office with a debt burden as high as the one you will face upon being sworn in,” they wrote. “And unlike under Truman’s presidency, when debt was expected to come down quickly, during your administration debt levels are projected to grow continuously and rapidly.”
Indeed, on the day Trump takes office Jan. 20, the publicly held debt will be at a post-World War II record high of 77 percent of Gross Domestic Product (GDP) and is projected to double by 2050. The federal budget deficit – the annual gap between spending and tax revenue – currently stands at $600 billion and will surge to $800 billion by the final year of Trump’s first term.
More than eight of every ten dollars of federal revenue will go for “auto-pilot” spending on Social Security, Medicare, and interest on the government debt, gradually crowding out spending for other priorities. And Trump will have the misfortune of presiding over a gross national debt that will shortly exceed $20 trillion.
Throughout the presidential campaign, Trump frequently sought to overshadow Democratic nominee Hillary Clinton with promises to grow the economy with major corporate and individual income tax cuts, $1 trillion of new highway, bridge and airport construction, a far more robust defense, affordable child care, and family leave benefits and more affordable health care and insurance.
Trump boasted that his administration could deliver on these and other initiatives without driving up the debt. He insisted that the “dynamic” effect of his tax cuts and the elimination of government “waste, fraud and abuse” would be enough to offset any revenue losses.
Last April, he told The Washington Post that he could retire the nearly $20 trillion national debt in eight years through his tax cuts, budget savings and renegotiated trade deals with China, Mexico, Canada and other countries. Economist Doug Holtz-Eakin, president of the conservative American Action Forum and a former director of the Congressional Budget Office (CBO), responded that “It strikes me as wildly implausible at best.”
Panetta, Penny, and Daniels, the president of Purdue University and a former budget director in the administration of Republican George W. Bush, are all veterans of past Washington budget battles and negotiations.
They are leading proponents of so-called “grand bargains” of combined spending cuts, tax increases and Social Security and Medicare savings as the best way of controlling the long-term debt. One of their touchstones is the December 2010 report of the National Commission on Fiscal Responsibility and Reform, which was co-chaired by Republican Alan Simpson and Democrat Erskine Bowles.
Although those far-reaching proposals never gained traction in Congress, they are frequently cited by deficit hawks as a viable path to averting exploding deficits as baby boomer retire and more and more of the budget is consumed by entitlements and government interest costs. The Congressional Budget Office has warned that the U.S. will return to trillion-dollar annual budget deficits by 2024 unless Congress and the White House intervene before then.
The three men cautioned Trump that none of his campaign goals and promises “can ultimately be achieved and sustained if you neglect our high and rising debt.”
“Slowing the unsustainable growth of our national debt is a key ingredient to growing the economy and ensuring adequate government resources to afford other important priorities,” they wrote. “Unfortunately, you will enter office with a deteriorating fiscal outlook.”
Among their recommendations: Trump should use the presidency as a bully pulpit to “put the debt issue on the national agenda.” He must set fiscal goals for the short, medium and long-term and use his storied negotiating skills to enact a bipartisan budget and tax deal that would eliminate the need for current discretionary spending caps and automatic across the board cuts.
They lectured the president-elect against embracing pie-in-the-sky economic growth forecasts and assumptions to hide the effects of his tax cuts and spending plans. And they insisted that Trump pay for his proposed domestic spending initiatives and veto legislation that adds to the debt.
Among their most politically sensitive and risky proposals, the three urged the new administration to press for major cost containment In Medicare and Medicaid, and to “take initial steps to save Social Security” by appointing a new commission “to break the political stalemate.”
During remarks at the conference, Panetta, Penny and Daniels all voiced skepticism that Trump and Republican and Democratic leaders can come to a consensus on a “sustainable fiscal outlook.”
Penny, a Democratic House member from Minnesota between 1983 and 1995, said that a comprehensive deficit reduction package “is a tough sell” in his district because the very voters who say they “care terribly” about the deficit “haven’t made the connection with [the cost of] Social Security, Medicare, and Medicaid.”
Panetta declared that “none of this is easy, but we should have solved this problem a long time ago.”
“The problem is that Republicans don’t want to raise taxes to cut the debt and the Democrats don’t want to touch Social Security and Medicare,” he said. “That’s the politics of it. Neither of them wants to touch programs that are important to their constituencies. So the only way you’re ever going to get a deal is if both are willing to put both issues on the table. That’s the only way we’re going to get a budget deal.”
“They both have to walk the plank,” he added.
But no one is holding his breath expecting that to happen anytime soon.