A $28 trillion problem is only going to get worse. Harris and Trump ignore it

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CNN
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It wasn't that long ago that candidates for the White House were trying to convince voters with their plans to reduce the budget deficit or, better yet, leave the country without a deficit.

But now, as the dangers of a growing deficit and debt mount, former President Donald Trump and his Vice President Kamala Harris are making little effort to address them. Quite the opposite: Several bipartisan groups believe that their two economic policy agendas, if implemented, would add to the ever-growing deficit.

However, this is a big problem and Americans cannot afford to have a president who makes light of the issue, as everything from the ability to afford to buy a home to the government's ability to Dealing with emergencies like Covid, everything is at stake.

A budget deficit occurs when a country's spending exceeds the revenue it collects, primarily through taxes. The government makes up the difference by borrowing money through the sale of securities such as government bonds and notes. The deficit is expected to widen under the status quo and could get even worse under the Harris and Trump proposals, if implemented.

The US is already knee-deep in debt. At $28 trillion, the public debt is worth almost as much as the entire US economy.

Even Federal Reserve Chairman Jerome Powell, who rarely comments on what elected officials should do, is worried.

“It is probably time or time to return to a mature discussion among elected officials about getting the federal government back on a sustainable fiscal path,” Powell said in a “60 Minutes” interview earlier this year.

During the Trump-Harris presidential debate earlier this month, the budget deficit was mentioned only twice, as Harris criticized Trump for his proposals that are expected to increase the deficit significantly more than hers. However, neither she nor Trump spoke about trying to reduce the deficit, and debate moderators didn't ask about it.

No matter who wins the presidential election, there will be a “mandate to make things worse unless something changes,” said Maya MacGuineas, president of the bipartisan Committee for a Responsible Federal Budget. The debt contributions included in both candidates' plans would undermine “every part of their plans to support American families,” she said.

During the third presidential debate leading up to the 2008 election, then-Senator Barack Obama said, “There is no doubt that we have lived beyond our means, and we are going to have to make some adjustments.”

“I was a strong supporter of the pay-as-you-go system,” he added. “For every dollar I proposed (spending), I proposed an additional cut to make it match.”

The government had just completed a fiscal year in which it ran a $450 billion deficit, not taking inflation into account. Still, that's a quarter of the country's $1.9 trillion deficit for the 2024 fiscal year.

When Obama was seeking a second term, now-Senator Mitt Romney, then the Republican presidential candidate, said at one of their debates: “My first principle is that there will be no tax cuts that increase the deficit.” Obama and Romney even spent much of it The debate started with arguing about which plan for the deficit would be better.

In fiscal year 2017, when Obama left office, the country's deficit was $670 billion, about half what it was when he took office in 2009. But that's largely because the government is emerging from the Great Recession left, which meant that the government spent no money. Just as much was spent on social security programs and far less was spent on supporting financial institutions.

In 2016, Trump briefly mentioned the deficit in his second debate with Democratic nominee Hillary Clinton, saying, “I'm going to bring our energy companies back and they're going to be competitive, and they're going to make money and pay down our national debt and budget deficits,” which are enormous .” (The country’s debt is an accumulation of the deficits it has run over time.)

But after Trump took office in 2017, the deficit gradually widened and the national debt grew every year before both soared in 2020 as government spending increased to deal with the health crisis and stimulate the economy. In fiscal year 2021, the year Trump left office, the country posted a deficit of $2.8 trillion.

Larger deficits tend to be associated with owing more money to the people who buy U.S. debt, which poses greater risk to the people who lend us money and likely results in them receiving higher interest income from the U.S. government demand. Since banks and other lenders often base their interest rates on U.S. bond yields, this could make it more expensive for ordinary Americans to take out a mortgage.

Additionally, if the government spends more money to pay the interest on its debt, there will be less money available to invest in things like new infrastructure. Case in point: The government is expected to spend more on interest payments than on national defense, Medicaid and child support programs, according to Congressional Budget Office projections for fiscal year 2024, which ends Sept. 30.

Powell summed it up in his “60 Minutes” interview: “We're borrowing from future generations,” he said, but instead we should “pay for these things and not hand the bills to our children and grandchildren.”

All the borrowing is slowing economic growth, MacGuineas told CNN. It could also pose a “national security risk” as the U.S. increasingly relies on countries like China and Japan to buy our debt, she said.

There is also a risk that inflation will rise if the growing deficit prompts the Fed to “print more money” to help the government pay down its debt, said Kent Smetters, a professor at the U of Wharton School Pennsylvania, which is investigating the budget.

If it's such a big problem, why aren't Trump and Harris addressing it?

“Politicians love to provide gravy, not spinach,” said Smetters, faculty director of the Penn Wharton Budget Model, a nonpartisan research initiative that predicts the effects of fiscal policy.

There was also a game of chicken, he said. “Both sides want to put their efforts through before sacrifices have to be made.” For the Republicans, this means solidifying further tax cuts; and for Democrats to initiate more government spending. But at some point the country risks reaching a point where it can no longer borrow money to make ends meet, which will force elected officials to make difficult decisions about where to cut spending and raise higher taxes.

Covid and the Great Recession have also made Americans “numb” when it comes to thinking about the problems associated with rising debt, Smetters told CNN. “In most people’s minds, people are much more likely to see government borrowing money as having a positive effect if it helps us get through a crisis.”

But voters don't realize that the economy would grow faster and social safety net programs would be funded longer if the debt burden were reduced, MacGuineas said.

“If there is denial at the top about the deficit, what voter is going to say, 'Please raise my taxes and cut my spending,' when their leaders aren't even saying it's a problem?”