Tags: Financial Markets | Money | National Debt | debt | liabilities | spending

Petty Election Snubs the National Debt

Petty Election Snubs the National Debt

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Thursday, 03 November 2016 03:32 PM Current | Bio | Archive

The forgotten issue in this election is the national debt. Yes, it is boring, complicated, and unpleasant — assuring it will not make it into TV news or public consciousness.

So the national debt is $19.3 trillion? No one even knows how much that is. But it is humongous. Actually, this is only the “official” national debt that excludes the largest part of government, its entitlements, which total $127 trillion in unfunded liabilities, an unfathomable amount.

The entire income earned in the U.S. in 2015 was a mere $15 trillion with the full debt including entitlements totaling $146 trillion, almost ten times income. It is a debt of $1.1 million per U.S. taxpayer, and about double the world’s total wealth output last year. Harvard economist Jeffrey Miron calculates U.S. fiscal imbalance over a 75 year period as 797 percent of its wealth (GDP).

Ho-hum?

In their economics debate this past summer Donald Trump and Hillary Clinton did promise to control debt but were not very clear how. Trump criticized Barack Obama for increasing the debt as president and Clinton claimed Trump’s tax decreases for the rich would “explode” the debt.

In fact, both candidates would increase the official debt substantially if their proposals were adopted and neither would trim entitlements, Clinton promising to increase them.

Gallup polls suggest this is fine with voters, with less than ten percent putting reducing the debt as a top priority. It will take 30 years or so before collapse so what is the problem?

That is a long time down the road and America is exceptional. Something will save it. That is what Weimar Germany, the Soviet Union, and British and French colonial empires thought too.

In fact, historian Nail Ferguson’s "Civilization" emphasizes that contrary to Edward Gibbons’ supposedly long decline and fall, it only took 70 years for even the Roman Empire to collapse.

Humor me that decreasing the debt is a serious issue: what candidate would be the better bet?

Hillary Clinton would argue that all of her increased spending would be recovered by higher taxes on the rich so that a vote for her would be more prudent. How high would even a Democratic Congress up taxes on the rich and increase Social Security benefits?

Would they really remove the FICA contributions cap that would substantially increase payroll taxes on the limousine liberal middle class to pay for the new benefits?

But increased taxes have their cost too. And she is only promising about the official debt since entitlement debt would increase even more.

Or, consider a proposal by one of the most reasonable Democratic academics, one who had advised Bill Clinton during his presidency, William A. Galston. He is so reasonable that he understands the benefits of trade for the poor but realizes Hillary had to promise politically to limit it. He proposes a plan to “better balance” trade deals by first adopting two new programs to help workers displaced by free trade.

Before any future trade agreement could be adopted, Congress would have to adopt a “contributory system of wage insurance” to replace a “substantial portion of lost wages” for the “millions” displaced over “a multi-year transition period.”

The second requirement would preserve these displaced workers’ retirement plans by having the government make payments into their personal retirement accounts.

My guess is that this is the minimum Clinton would propose and could obtain from a Democratic Congress, although whether workers would be willing to contribute to it even if phased in is problematical. This would, of course, represent two gigantic new entitlements to support millions of displaced workers and their retirement plans over some substantial period at great cost, when Miron shows entitlement already are the real problem with the debt.

Trump promises not to cut present entitlement programs and would add several additional programs at some cost and cut taxes substantially, all potentially increasing the debt. Even if cutting taxes stimulated the economy, the net would increase debt in the short rum and, of course, the current entitlement debt would continue exploding exponentially.

On the other hand, if Trump is actually elected president, Republicans would certainly maintain control of the House of Representatives. While the House would accommodate Trump to some degree, the same prudence that allowed Trump to defeat their GOP pals for the nomination will assure Trump will not get the large spending increases or tax cuts he proposes, guaranteed with a closely divided Senate.

So Trump likely represents smaller growth in the current debt, without increases in entitlements, and almost certainly not the adoption of two new ones.

It is a close call but Trump wins on debt because a Republican House would limit the damage. Or maybe they won’t since no one seems to care.

Donald Devine is senior scholar at the Fund for American Studies, the author of "America’s Way Back: Reclaiming Freedom, Tradition and Constitution," and was Ronald Reagan’s director of the U.S. Office of Personnel Management during his first term. For more of his reports, Go Here Now.




 

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DonaldDevine
America is exceptional. Something will save it. That is what Weimar Germany, the Soviet Union, and British and French colonial empires thought too. It only took 70 years for even the Roman Empire to collapse.
debt, liabilities, spending
837
2016-32-03
Thursday, 03 November 2016 03:32 PM
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