Former U.S. President Donald Trump’s recent conviction and President Joe Biden’s age and hyperbolic campaign rhetoric often distract voters from the tough challenges the U.S. faces. Those challenges should be the focus of the presidential debates, the first of which is slated for June 27.

The nation’s finances are more troubled than when Trump cut taxes and Biden embarked on industrial policies to promote electric vehicles, green energy, semiconductor production and expanded Obamacare subsidies.

In 2016, before the Trump administration’s Tax Cut and Jobs Act (TCJA), the U.S. federal deficit was 3.1% of GDP. Just before the COVID-19 pandemic, it was 4.6%. The Congressional Budget Office optimistically projects the budget gap will be 6.5% of GDP in 2025. Interest payments on the national debt will soon exceed the annual increases in GDP, casting into sharp relief the unsustainability of federal finances.

At the end of 2025, most of the personal-income-tax cuts in the TCJA will lapse. Permitting this would lower the federal deficit, but the shortfall as a share of GDP would increase again with an aging population, as payments for Social Security and Medicare will surge. In the long term, GDP growth will be around 2%.

Gradually, Congress has erected a social safety net similar to what Europeans enjoy, because of Obamacare, the Earned Income Tax Credit, food stamps and so forth. Such entitlements account for about 43% of federal outlays. Social Security, defense and non-defense discretionary spending and net interest payments are, respectively, about 20%, 13%, 14% and 10%.

Biden wants to boost the corporate tax rate. But the TCJA only put U.S. business taxes on a par with European competitors, and its business-tax cuts increased investment and growth, according to the Tax Foundation, a 501(c)(3) focused on tax policy.

Americans don’t pay taxes like the Europeans do. Households below the 50^th percentile pay 24% of their income in taxes, and those between the 50^th and 99.5^th percentile pay 28%. In France, for example, those figures are twice as high.

U.S. defense spending as projected by the CBO reflects current law and is hardly enough to address the combined challenges posed by China’s military buildup in the Pacific, Iran’s in the Middle East, and Russia’s in Europe.

Trump’s proposed tariffs — 10% across the board and 60% on products from China — could fund renewal of the TCJA but couldn’t also pay for increases in defense spending.

Moreover, taxing imports from our allies would undermine the vital alliances Biden is building in the Pacific, Middle East and Europe.

It’s high time for Trump and Biden to have an adult conversation with Americans about how much safety net we are willing to pay for, what the retirement age should be, and how much taxes we are prepared to pay.

China poses both security and economic challenges. The U.S. must confront how much should be spent to build the military strength needed to secure the South Pacific and our vital source of high-end semiconductors in Taiwan.

China’s subsidized manufactured exports are menacing but as the EV industry demonstrates, it is not all about subsidies. China and South Korea have superior technology up and down their supply chains.

Meanwhile, after the U.S. government bailed out GM and Ford during the Global Financial Crisis — and is now lavishing more subsidies through the Inflation Reduction Act — Americans must ask why Hyundai and Kia can profitably build EVs but Detroit can’t. CEOs and the United Auto Workers saw their pay increase when subsidies went up, and U.S. automakers became less competitive, not more.

Similarly, can Americans afford to sustain a semiconductor industry with such big subsidies as provided by the Chips and Science Act? Again, it’s time for a reasoned conversation about the regulatory barriers to building factories and the cost disadvantages associated with running those, if the U.S. ever hopes to compete with China.

Finally, sustaining economic growth requires more — not fewer — legal immigrants.

Thanks to a generation of declining birth rates and with the limits on immigration that were in place during the Trump administration, the job growth that could be sustained without stoking inflation or enabling illegal immigration would be about 80,000 a month in 2024.

Biden opened the floodgates by repealing his predecessors’ tighter border controls and in 2023, monthly employment growth was about 250,000. Now he is extending legal status to immigrants who entered the country illegally more than 10 years ago, if they are married to U.S. citizens, while attempting to reimpose border enforcement similar to Trump.

Admitting legal immigrants would enable long-term economic growth closer to 3% instead of 2% and greatly ease budget woes.

Immigration has been a key, unacknowledged component of Biden’s economic growth strategy. He should welcome a debate focusing on what we need and how to deal with it.
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Peter Morici is an economist and emeritus business professor at the University of Maryland, and a national columnist.