Just 17 days from Election Day, it’s clear that neither Hillary Clinton nor Donald Trump has a plan to reverse the growth of our national debt—and Trump would make it much worse.
When Chris Wallace asked both candidates at the third debate why they are ignoring the debt problem, Trump said his policies would create “tremendous jobs” and 4 percent economic growth. “I think you can go to five or six percent,” he said. That’s impractical. The last time the U.S. even had sustained 3.5 percent growth over a ten-year period was during the tech boom of the 1990s. But with our aging population, the retirement of baby boomers, and a mounting debt, Trump’s growth assumptions are simply unachievable. Not to mention the fact that the nonpartisan Congressional Budget Office projects that real economic growth will average 2 percent over the next decade.
Clinton, on the other hand, answered the same question by stating that her polices are paid for and she wouldn’t “add a penny to the national debt.” But as Wallace rightly points out, our analysis shows that Clinton’s policies would allow debt as a share of the economy to continue on its current course to 86 percent of GDP over the next decade. It would increase at a much higher rate, reaching 105 percent under Trump. In dollar terms, Clinton would add $200 billion to the debt over a decade while Trump would increase the debt by $5.3 trillion.
These increases to the debt come on top of current law projections that show our debt growing by $9 trillion over the next decade. As a share of the economy, our debt is currently 77 percent of GDP, higher than at any point since just after World War II and nearly twice the average of the last 50 years. CBO projects that it will exceed the size of our entire economy by 2033 and grow unsustainably thereafter. Just last week, the Treasury Department reported that the federal deficit widened to $587 billion for fiscal year 2016, which is almost a 35 percent increase from last year—a reminder that the era of declining deficits is officially over.
It is clear we are on an unsustainable path and the candidates’ failure to address this issue would have damaging consequences on the future of our economy and the financial well-being of all Americans. Excessive debt levels would squeeze out other national priorities and important investments in education, infrastructure, and basic research that can help grow the economy and improve our standard of living. CBO also estimates that within three decades the growing debt will reduce average income by $4,000 per person compared to what it would be if debt were on a declining path.
When it comes to fixing the long-term finances of our entitlement programs, both candidates offered more of the same old easy fixes. “I’m cutting taxes, we’re going to grow the economy,” Trump said in response to the question on entitlements. But the reality is that making Social Security solvent over the next 75 years would require real growth rates to average nearly 4 percent per year over that time period. Again, that’s unachievable.
Clinton, meanwhile, said “we need to put more money into the Social Security trust fund. That’s part of my commitment to raise taxes on the wealthy.” Yes, raising the taxable maximum cap above the current $118,500—which is scheduled to go up to $127,200 next year — and applying the payroll tax to incomes above $250,000, as Clinton has suggested, would help. But it won’t be enough.
Ultimately, tough choices need to be made and unfortunately both candidates are shying away from that reality. We deserve credible solutions to our fiscal challenges, not wishful thinking on economic growth. Current and future retirees deserve answers on how the next president would shore up our social safety net for generations to come, not easy fixes that kick the can down the road.
More importantly, our children deserve a prosperous future, not one where they are saddled with a debt burden that hinders their ability to reach their full potential.
This is one of the big unanswered issues at stake in this election.