If the next president’s priorities are to help grow the economy, to preserve public investments and important safety net programs or to ensure that we are prepared for the next economic downturn, this is a huge problem.
He or she will face significant fiscal challenges. Annual budget deficits — which had come down in recent years as we climbed out of the recession — are back on the rise. Our national debt stands at 75 percent of gross domestic product — the highest it has been since World War II — and it’s projected to keep growing indefinitely. The baby boomers are retiring, we have failed to update our entitlement programs and interest payments are the fastest growing part of the budget. As debt keeps growing, it will slow wage growth, increase interest costs and crowd out important government investments.
In June, the Committee for a Responsible Federal Budget estimated that Hillary Clinton would keep the debt on its currently unsustainable track — allowing it to rise from 75 percent of GDP today to 87 percent within a decade — while Donald Trump would explode the debt to 127 percent of GDP by 2026.
So, how can both candidates reverse course?
First, agree to stop digging. There should be no spending or tax reductions that are not offset. The next president should make a promise to the American people to stick to pay-as-you-go budgeting and not support any legislation that would make the debt situation worse. (Members of Congress, by the way, should make that promise too.)
At the same time, neither candidate should take policy nor tax reforms off the table. Trump has made counterproductive promises not to touch Social Security while Clinton has made a no-new-tax pledge for families making less than $250,000. But we need to make Social Security solvent to avoid the potentially devastating, across-the-board 21 percent cut that the program is projected to face in 2034. As a starting point, the next president should look to a recent bipartisan Social Security proposal — Save Our Social Security Act — and the recommendations of the Commission on Retirement Security and Personal Savings at the Bipartisan Policy Center. Likewise, we need tax reform that makes us more competitive, grows the economy and raises revenue — but that is not the same as tax cuts that would worsen our fiscal situation.
Political candidates find it difficult not to pander, but presidents have to lead. The more honest a discussion they have with voters now about the types of challenges that lay ahead, the more able they will be to steer the country towards dealing with our fiscal problems as part of a sustainable and comprehensive economic plan.