The Committee for a Responsible Federal Budget has revised its current estimate of the spending blitz envisioned by Sen. Bernie Sanders (I-Vt.) based on new analysis:
Senator Sanders’s proposals would add almost $19 trillion to the debt. As a share of the economy, debt under these policies would grow from roughly 75 percent of Gross Domestic Product (GDP) today to 154 percent of GDP in 2026 (compared to 86 percent of GDP under current law).
Senator Sanders would also increase spending and revenue levels as a share of the economy to well-above historical averages. Spending as a percentage of GDP would average about 37 percent over the next decade, compared to the historical average of about 20 percent. On the revenue side, it would increase to 25 percent over the next decade, while revenue as a share of GDP has averaged about 17.4 percent over the last half-century.
Well, he’s not going to be the Democratic nominee, but what about Hillary Clinton and Donald Trump?
Using independent estimates from the Congressional Budget Office (CBO), the non-partisan Tax Policy Center (TPC), and elsewhere, we estimate that Secretary Clinton’s proposals would cost $1.8 trillion over a decade with interest, and they would be nearly fully paid for with $1.6 trillion of offsets – primarily from taxes on high earners. The $200 billion shortfall from Secretary Clinton’s proposals can be fully explained and would be more than fully covered by the $275 billion of corporate tax revenue that the Clinton campaign has called for but has not yet provided enough detail for us to credit.
You will notice she is not reducing the existing debt, just kicking the can down the road, in large part because she does not intend to limit the growth of entitlement spending. (“Though Secretary Clinton’s policies would not substantially add to current law debt levels, it would keep debt at post-war record-high and rapidly growing levels. Under Secretary Clinton’s proposals, debt held by the public would climb from 74 percent of Gross Domestic Product (GDP) at the end of last year to 86 percent of GDP by 2026.”) How we are supposed to increase growth, jump-start wage growth and diminish under-employment and labor participation dropouts with more taxes, bigger government and continued debt is far from clear.
This, by the way, should serve as a reminder to the balanced budget crowd on the right: If your sole obsession is removing debt, you may wind up with a much bigger government. It matters how one closes the gap between revenue and spending.
Normally in a presidential election you’d have a fiscal conservative who’d put out spending reforms and a pro-growth tax plan with some overly optimistic assumptions. But this time the GOP has Trump, who is nearly as bad as Sanders:
By our very rough and initial estimates, these initiatives together would add anywhere from $10.7 trillion to $15.45 trillion to the debt over the next 10 years, with our central cost estimate being that they would add $12.1 trillion to the debt, including interest.
Under this central cost estimate, debt held by the public would increase from nearly $14 trillion today to $36 trillion by 2026 (compared to about $24 trillion under current law). This means debt would grow from 74 percent of Gross Domestic Product (GDP) at the end of last year (and headed to 86 percent by 2026) to 129 percent by 2026. Under our high cost estimate, debt could reach as high as 141 percent by 2026, or reach as low as 111 percent assuming his plans also lead to significant economic growth.
Moreover, if we take Trump seriously and include his protectionist policies and round-up-and-deport-millions plan, the economy is in all likelihood going to take a beating, further depressing revenue.
It is laughable that conservative fiscal hawks — the same people who want a balanced budget — are now lining up behind Trump. It’s even worse that conservative economists are contributing to drafting plans that are so reckless.
Imagine a candidate who wanted to hold the line on domestic discretionary spending (with some change in priorities, such as dumping farm subsidies and increasing defense and infrastructure spending), reform entitlements (while protecting the poor), reform the corporate tax code, undertake pro-growth policies (including regulatory reform and redesign of legal immigration to favor skilled workers), open foreign markets and push for payroll tax relief that benefits disproportionately non-wealthy Americans. That might be realistic and please a cross section of voters. We don’t have that option or anything like it, unless a third candidate enters the race.