The analysis, which the nonpartisan Committee for a Responsible Federal Budget published Sunday evening, represents one of the first serious efforts to assess how electing Trump or his chief rival for the presidency, former Secretary of State Hillary Clinton, might affect federal finances over time.
Rather than focusing on individual policy initiatives -- like Trump’s call to abolish the estate tax, or Clinton’s pledge to help working parents pay for child care -- this new analysis takes into account all of the candidates' proposals to date, in order to assess how they would alter the federal budget and, ultimately, the amount of debt that the public holds.
It was not an easy task for the committee’s researchers, because Trump, the presumptive Republican nominee, barely talks about policy. When he does, he's frequently vague or inconsistent. But the few proposals that Trump has actually described publicly made it possible to construct a rough analysis and compare his agenda with the more detailed proposals from Clinton, the presumptive Democratic nominee.
The resulting contrast was stark. As the report demonstrates, the election doesn’t simply present Americans with a choice between a politician who disparages entire ethnic and religious groups and a politician who preaches the virtues of diversity. It also offers a choice between a candidate who'd create vast new deficits for the sake of some highly questionable tax cuts -- and one proposing a more modest agenda of expanded government programs, with added revenue that would cover nearly all of their cost.
The centerpiece of Trump’s agenda is a series of proposed tax cuts, including new breaks for businesses and reductions in individual rates, that past studies have shown would disproportionately benefit wealthy Americans. The committee’s researchers, working from estimates by the (also nonpartisan) Urban-Brookings Tax Policy Center, determined that, taken together, the tax cuts would add something like $9.25 trillion in new debt over the next 10 years. (For these and other projections, committee researchers produced three separate estimates to generate a range of possibilities and then used the one in the middle for their main analysis.)
Other items on Trump’s agenda, including his promises to overhaul veteran services and repeal the Affordable Care Act, would add a few hundred billion dollars to that total. With no significant new revenues or spending cuts to offset these costs, and with the higher interest payments that so much new borrowing would require, the cumulative impact of Trump’s agenda would probably be around $11.5 trillion in additional federal debt over 10 years, the committee’s researchers found.
The number itself doesn’t mean a whole lot. The U.S. has carried significant debt going all the way back to the 1790s -- when, at the urging of Alexander Hamilton, the fledgling federal government assumed liabilities that the states had incurred during the American Revolution and its aftermath.
What matters, instead, is the size of the debt relative to the rest of the economy, measured as Gross Domestic Product. That figure indicates how many resources society must divert from current priorities, like education or defense or retirement programs, in order to pay for past borrowing.
And it’s debt-to-GDP ratio where the impact of Trump’s agenda may be most arresting. According to the committee’s researchers, Trump’s agenda, if enacted, would push the ratio of federal debt to GDP from its current level of 75 percent all the way up to 127 percent.
The previous peak was around 110 percent, and that was during the 1940s -- when the necessities of fighting a world war called for unusually large borrowing. Trump has yet to explain why his agenda would justify so much additional debt.
Of course, Clinton would also add liabilities to the federal ledger. Specifically, she has proposed an array of new programs, including tax credits to offset out-of-pocket medical costs and new federal assistance with college tuition, that would significantly expand the size and scope of the federal government. All told, according to the committee’s analysis, Clinton’s agenda would have the federal government laying out an additional $1.4 trillion in new spending over the next decade.
But the amount of federal money Clinton would commit to these new programs is just a fraction of the amount of federal money that Trump would dump into his tax cuts. Many of Clinton's proposals, including the ones that focus on early childhood, hold out the promise of much greater economic returns in the future. Last but not least, Clinton has actually called for raising taxes on the wealthy -- and has identified enough specific increases to raise $1.25 trillion in revenue and offset most of her new spending initiatives.
As a result, the committee’s analysis finds, Clinton’s agenda would place the ratio of debt-to-GDP at around 87 percent by 2026. This is more or less where that ratio is headed anyway: If current policy stays exactly the same, the debt-to-GDP ratio would reach about 86 percent by 2026, projections suggest.
The committee’s report was careful to point out that at 87 percent, the debt-to-GDP ratio after 10 years would still be higher than its present level of 75 percent. That’s a big problem, the committee says, given that an aging population is likely to push the cost of government services, particularly health care programs, much higher in the future.
Current projections suggest that if the government's fiscal trajectory does not change, debt-to-GDP ratio could exceed 130 percent by 2040 -- a level that would also be well above the previous historic peak.
“To date,” the report says, “neither former Secretary of State Hillary Clinton nor businessman Donald Trump has put forward a plan to address the national debt.”
But fiscal projections beyond the immediate future are notoriously unreliable, and mainstream economists disagree over precisely what constitutes an ideal debt-to-GDP ratio, or whether an ideal ratio even exists. A lot depends on how much of the debt is financing current needs, rather than investments that will (hopefully) yield a more productive economy in the future.
Meanwhile, the report makes clear which of the two major candidates would require vast new borrowing and which one wouldn't. “Mr. Trump’s proposals would massively increase the debt,” the report says.
On that, there isn't much debate among mainstream experts.
“The difference between [Clinton and Trump] is indeed stark,” Henry Aaron, a widely respected Brookings economist who did not work on the committee’s analysis, told The Huffington Post Sunday. “One candidate shows determination to, at least, keep debt under control. The other is utterly indifferent to it."