Basic pocketbook issues have not exactly been at the heart of this election. But given the destructive path this nation is on—our debt is already 75 percent of GDP, and it’s projected to hit 86 percent in 2026 and 141 percent in 2046—voters should keep in mind how much of their money the candidates plan to take from them, how much the candidates plan to spend, and what programs the candidates would like to spend more on. In this piece I’ll paint that picture.
Don’t forget: these are changes relative to current law, so a candidate whose proposals are “neutral” will still leave us with a big and growing debt. Also important, though, is that presidents do not simply get to impose their tax plans on the public, so the plans are basically opening bids or suggestions to Congress.
Let’s start with Trump’s spending plans. Trump has vowed not to touch entitlements and wants to increase spending on things like defense, veterans, infrastructure, and parental leave. But for the remaining minority of the budget, he has proposed a “Penny Plan,” in which spending would be cut 1 percent every year. This deceptively simple rule could add up to respectable cuts over time, but he has not said which specific programs should stop growing and start shrinking instead. He would also like to shrink the federal workforce through attrition.
The Committee for a Responsible Federal Budget (CRFB)—staffed by self-described “budget hawks”—believes Trump’s spending cuts could save us about $1 trillion over 10 years. To put that in perspective, if you divide $1 trillion by 10 and then divide it by the current U.S. population of 319 million—admittedly a crude calculation—that is about $300 per person per year we’d no longer be spending.
CRFB found his overall spending plans to be neutral, though the fine print is important. For example, the think tank ignored his infrastructure promises entirely “due to current lack of detail,” but added that “if Trump doubled the cost of Clinton’s infrastructure plan as he has said he would, it would cost $500 to $600 billion.”
And then we get to his tax plan.
Under the Trump regime, basically everyone would pay less in taxes, but the rich would benefit disproportionately, even relative to their higher incomes. The poor and middle class would get to keep an extra 1–2 percent of their income; the top 1 percent would get to keep more than an additional 10 percent of their income.
Even accounting for the economic growth the plan will cause, the Tax Foundation—a right-leaning group that tends to be optimistic about the power of tax cuts to increase growth—estimates the ten-year reduction in revenue at $2.6–3.9 trillion, very roughly $1,000 per person per year. The Tax Policy Center (TPC), which leans left, pegs the revenue loss at about double that in its most recent estimates.
This is money we get to keep for now, but that will be added to the debt unless Trump cuts spending far more than outlined above.
As for the broader economic impact, the Tax Foundation says his plan would boost GDP 7–8 percent by 2025 thanks to the magic of tax cuts. The TPC says it would actually reduce GDP, slightly in the first decade and 4 percent by 2036, thanks to the effects of the exploding debt on interest rates.
One thing’s for sure: Clinton has no intention of spending less than we already do. In fact, for Clinton, there isn’t a single spending cut in the entire “Spending Policies” section of the CRFB’s analysis. Meanwhile, she’d like to expand Social Security, provide debt-free college, build more infrastructure, and make sure that child care never costs more than 10 percent of a family’s income.
But at least she has ideas for wringing more money out of the American people to pay for these things. According to the Tax Policy Center, her plan would increase revenue by about $1.5 trillion over a decade, in the vicinity of $450 per person per year—though the Tax Foundation claims that damage to the economy will cut that roughly in half. Both think tanks agree that her individual income-tax hikes would fall almost entirely on the top 1 percent of taxpayers, and she would also boost some business taxes.
In the CRFB’s guesstimate as to how all this adds up, Clinton comes pretty close to paying for all her promised goodies: she would dig us just $200 billion deeper into the hole, assuming she manages to pull in the full $1.5 trillion in new revenue. That’s about $60 per person per year we’d be putting on our kids’ tab. Clinton’s plan could be budget-neutral if some alluded-to business-tax reforms bring in enough revenue—or the damage could be a few times worse if the Tax Foundation is right about revenue.
As for the economy, in the Tax Policy Center’s model, Clinton’s tax and spending plans will shrink GDP 0.5 percent on balance over ten years. The Tax Foundation says Clinton’s tax hikes will reduce GDP by 2.6 percent by 2025.
So, there you have it. Trump’s spending cuts barely cover his spending increases—at best—and yet he also promises enormous tax cuts. Clinton would like to raise taxes but raise spending a bit more. Most importantly, neither would like to stop the debt explosion that’s already programmed into the law.
We are choosing between two wells of red ink.
Robert VerBruggen is managing editor of The American Conservative. Follow @RAVerBruggen