ANALYSIS (CNN) – Not long ago, candidates vying for the White House tried to win over voters with their plans to reduce the budget deficit or, better yet, leave the country deficit-free.
But now, as the dangers of a widening deficit and rising debt grow, former President Donald Trump and Vice President Kamala Harris are making little effort to address them. Quite the contrary: If their economic policy agendas are enacted, they will add to the growing deficit, several nonpartisan groups project.
But that’s a big issue, and Americans can’t afford to have a president who takes the issue lightly, when everything from the ability to buy a home to the government’s ability to deal with problems is at stake. emergencies like covid-19.
A budget deficit occurs when a country’s spending exceeds what it collects in revenue, primarily through taxes. The government makes up the difference by borrowing money by selling securities such as Treasury bonds and notes. The deficit is expected to widen under the status quo and could get even worse under both Harris and Trump’s proposals, if enacted.
America is already knee-deep in debt. It’s $28 trillion, so the public federal debt is worth almost as much as the entire US economy.
Even Federal Reserve Chairman Jerome Powell, who rarely weighs in on what elected officials should do, is concerned.
“It is probably time, or already time, to return to a grown-up conversation among elected officials about how to get the federal government back on a sustainable fiscal path,” Powell said in a interview with “60 Minutes” earlier this year.
During the Trump-Harris presidential debate earlier this month, the budget deficit was mentioned only twice, when Harris criticized Trump for his proposals, which are expected to increase the deficit considerably more than her own. However, neither she nor Trump talked about trying to reduce the deficit, and the debate moderators did not ask about it.
Regardless of who wins the presidential election, there will be a “mandate to make things worse unless something changes,” said Maya MacGuineas, president of the Committee for a Responsible Federal Budget, a nonpartisan group. The debt contributions entailed by both candidates’ plans would undermine “every part of their agendas to help American families,” he said.
During the third presidential debate before the 2008 election, then-Senator Barack Obama said: “There is no doubt that we have been living beyond our means and we are going to have to make some adjustments.”
“I have been a strong defender of the pay-as-you-go system,” he added. “For every dollar I’ve proposed (of spending), I’ve proposed an additional cut to match.”
The Government had just concluded a fiscal year in which it had a deficit of $450 billion, without adjusting for inflation. Still, that’s a quarter of the country’s $1.9 trillion deficit for fiscal year 2024.
When Obama sought a second term, now-Senator Mitt Romney, then a Republican presidential candidate, said in one of their debates: “My most important principle is that there will be no tax cuts that will increase the deficit.” Obama and Romney even spent much of the debate arguing over which plan would be best for the deficit.
In fiscal year 2017, when Obama left office, the country’s deficit was $670 billion, about half what it was when he arrived in 2009. But that’s mostly the result of overcoming the Great Recession, which meant that the Government did not spend as much on social safety net programs and far fewer funds were spent on shoring up financial institutions.
In 2016, Trump briefly mentioned the deficit in his second debate with Democratic candidate Hillary Clinton, saying, “I will bring our energy companies back and they will be able to compete and they will make money and they will pay off our national debt and budget deficits, which are tremendous.” (The country’s debt is an accumulation of the deficits it has had over time.)
But after Trump took office in 2017, the deficit gradually widened and national debt levels grew each year before both soared in 2020 as government spending increased to confront the health crisis and stimulate the economy. In fiscal year 2021, during which Trump left office, the country had a deficit of $2.8 trillion.
Wider deficits tend to go hand in hand with more debt owed to the people who buy US debt, which creates more risk for the people who lend us money and likely causes them to demand higher interest returns from the government. In turn, since banks and other lenders often base interest rates on U.S. bond yields, that could make it more expensive for ordinary Americans to get a mortgage.
Furthermore, when the Government spends more money paying interest on its debts, there is less money available to, for example, invest in new infrastructure. An example: The Government will spend more on interest payments than on national defense, Medicaid and programs dedicated to supporting children, according to Congressional Budget Office projections for fiscal year 2024, which ends September 30.
Powell summed it up in his “60 Minutes” interview: “We’re borrowing from future generations,” he said, when instead “we should be paying for those things and not passing the bills on to our children and grandchildren.”
All the borrowing going on is slowing economic growth, MacGuineas told CNN. It may also be creating “a national security risk” as the United States has become increasingly dependent on foreign countries like China and Japan to buy our debt, he said.
There is also a risk that inflation will rise if the rising deficit leads the Fed to “print more money” to help the government pay off its debt, said Kent Smetters, a professor at the Wharton School of the University of Pennsylvania who studies the budget.
“Politicians love to offer salsa and not spinach,” said Smetters, faculty director of the Penn Wharton Budget Model, a nonpartisan research initiative that forecasts the effects of fiscal policies.
There is also a kind of game of chicken, he said. “Both sides want to get what they have before sacrifices have to be made.” For Republicans, that means locking in more tax cuts; and for Democrats, getting the Government to spend more. But over time, the country risks reaching a point where it can no longer borrow more money to get by, forcing elected officials to make difficult decisions about where to cut spending and raise taxes more. high.
Covid-19 and the Great Recession have also made Americans “desensitized” to thinking about the problems associated with rising debt levels, Smetters told CNN. “In most people’s minds, people are much more likely to see government borrowing as a positive effect if it helped us get through a crisis.”
However, voters fail to recognize that the economy would grow faster and social protection programs would be funded longer if the debt burden were reduced, MacGuineas said.
“If there is deficit denial at the top, what voter is going to say, ‘Please raise my taxes and reduce my spending,’ if their leaders aren’t even saying it’s a problem?”
