The Reps' and Dems' Utter Unseriousness About the Major Long-Term Economic Issue
By David Henderson
I watched much of the Republicans’ and Democrats’ conventions, as my long-suffering wife can ruefully attest to, so that you didn’t have to.
What you have may heard about the Republicans’ convention is that it was so negative and dark. With few exceptions, that’s true. What you may have heard about the Democrats’ convention is that it was optimistic. With the exception of their fear of guns and global warming (the two g’s, if I were to put it in Nancy Pelosi’s lingo), that’s true.
But what both conventions should have been negative about is something that was scarcely mentioned: the large and growing U.S. federal government budget deficits ahead and the resulting large and growing U.S. federal government debt, debt that will grow as a percentage of GDP. Both parties were utterly unserious about this–and the unseriousness was most obvious in Hillary Clinton’s pledge to expand Social Security rather than to contract it.
Here’s the Congressional Budget Office, in a recent statement “The 2016 Long-Term Budget Outlook,” July 12:
If current laws governing taxes and spending did not change, the United States would face steadily increasing federal budget deficits and debt over the next 30 years, according to projections by CBO. Federal debt held by the public, which was equal to 39 percent of gross domestic product (GDP) at the end of fiscal year 2008, has already risen to 75 percent of GDP in the wake of a financial crisis and a recession. In CBO’s projections, that debt rises to 86 percent of GDP in 2026 and to 141 percent in 2046–exceeding the historical peak of 106 percent that occurred just after World War II. The prospect of such large debt poses substantial risks for the nation and presents policymakers with significant challenges.
In 2046, according to the CBO, federal spending on major health care programs will be up to 8.9 percent of U.S. GDP, up from 5.5 percent today, and Social Security spending, without Clinton’s proposed expansion, will be up to 6.3 percent of GDP, up from 4.9 percent today. The other big hunk: net interest on the debt, at 5.8 percent of GDP, up from 1.4 percent of GDP today.
I gave a talk at Santa Clara University in the middle of last decade titled: “Social Security: The Nightmare in Your Future.” It was my way of saying to young people that they should pay attention to what their elders are doing.
Both Clinton and Trump would make that situation worse, Clinton by a little, Trump by a lot. There is this main difference: Trump would make it worse mainly with tax cuts; Clinton would make it worse solely with increases in government spending.