Its been more than a month since the end of the Republican and Democratic national conventions, and if youre anything like me, you feel a mix of both relief and dread as we approach the election.
Thats because these political circuses are far too long on hyperbole and short on substance. The ringmasters make too many promises that have no chance of being kept, and in far too many cases they had no intention of ever keeping them.
We can only guess which proposals are serious and which ones are offered in order to buy the votes of some special interest group that will be jilted later. Nor do we know which proposals have been advanced as negotiating positions and what a candidate is willing to settle for if elected president.
We can, however, get an idea of what would happen if a candidates promises are kept. The Committee for a Responsible Federal Budget has crunched the numbers and determined what Donald Trumps and Hillary Clintons budget proposals would mean for the U.S. governments fiscal situation.
To make a useful assessment of the candidates budgets, first we must establish a baseline for comparison. Based on current law, over the next 10 years federal spending is expected to average 22.1 percent of GDP, whereas federal revenue is expected to average 18.1 percent. That mismatch in growth rates is already a recipe for a worsening fiscal situation.
At first blush, Hillary Clintons proposals dont seem much different. If we look closer, however, we find that over the next 10 years her spending would increase significantly to 22.7 percent of GDP, while she aims to increase federal tax revenues to 18.6 percent of GDP by hiking tax rates on high income earners.
Although the CFRB projects that the U.S. budget deficits will grow only slightly faster under Clintons proposals than under current law, this would nevertheless make the nations fiscal outlook considerably worse.
By loading up on federal spending so that it claims an even larger share of the U.S. economy, and by becoming more reliant upon taxes imposed on high-income earners for revenue, Clinton is proposing making the U.S. governments fiscal system more top-heavy, like the state of Californias.
That kind of system is somewhat sustainable during periods of economic growth, but not during an economic downturn. Because the incomes of top earners are much more volatile than those of middle- and lower-income earners, a greater reliance on top-heavy income taxes to fund increases in federal spending would raise the probability that a recession would precipitate a major fiscal crisis.
By contrast, Republican nominee Donald Trumps proposals initially appeared far scarier for the nations fiscal future.
Going into the Republican National Convention, Trump proposed increasing spending by a little less than Clinton proposed, but he also proposed some very generous tax cuts that would cause the nations annual deficits and total national debt to grow much faster than President Obamas peacetime record.
Since the conventions ended, however, things have changed.
The Wall Street Journal has reported that the Trump tax cut will be reduced to about one-third the size of the previous $10 trillion version, which is a major step toward a more credible fiscal outlook. Without a further reduction of spending growth, it will still cause the nations deficits and national debt to grow faster than projected under current law, however, but nowhere near as quickly as Trumps pre-convention proposals.
Meanwhile, the Daily Wire reports that Hillary Clinton proposed raising taxes on the middle class to a cheering crowd in Omaha, Nebraska. While details of her plan arent yet available, such a change would partly compensate for her higher spending proposals and potentially lower the risk that the U.S. government will face a fiscal crisis during the next recession from her pre-convention proposals.
In truth, however, the similarities between Trumps and Clintons budget proposals probably matter far more than their differences.
Under either scenario, the federal governments annual deficits and its total public debt outstanding are set to grow every year, as far into the future as anyone dares look. Whether quickly or slowly, the nations fiscal ship is headed for the rocks, and neither Trump nor Clinton has a credible plan for changing course.