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One Thing To Expect from President Trump: More Debt and Deficits (Forbes.com) November 30, 2016

Posted by daviddavenport in Op/Eds, Politics.

Living in the academic world, I have taken up peer therapy with anguished colleagues over the election of Donald Trump.  My standard refrain is to wait and see what he actually does because his words have run in too many different directions.  Build a wall?  We’re not really sure.   Kill Obamacare dead in its tracks?  Maybe, maybe not.  We just have to see.

But one thing seems fairly certain:  a Donald Trump presidency is likely to have little regard for decreasing the national debt (the cumulative amount owed by the federal government) or the annual budget deficit.  Some of us are shocked that the national debt has nearly doubled (from roughly $10 trillion to nearly $20 trillion) on President Obama’s watch, but that number will likely grow under President Trump, perhaps even on a similar scale.

Why do I say this?  First, consider what Trump himself had to say on the subject during the campaign:  “I’m the king of debt; I understand debt probably better than anybody.  I know how to deal with debt very well.  I love debt.”  I guess that’s one approach to a growing federal debt:  hire the self-proclaimed “king of debt” to oversee it.  His other campaign comment was that if we started to get into real trouble because of our debt, he would go to other countries and renegotiate our debt, persuading them to take less than we owe.  Good luck with that.

Beyond Trump’s rhetoric, two of his key economic programs are also likely to grow the budget deficit, not shrink it.  He seems bound and determined to cut taxes, and the Republicans in Congress largely agree with him.  And everyone—Republicans and Democrats alike—are ready to jump on the infrastructure bandwagon, spending upwards of $1 trillion in the coming decade to, as he said in his victory speech, “fix our inner cities and rebuild our highways, bridges, tunnels, airports, schools, hospitals” so that our infrastructure “will become second to none.”  Reduce revenue by cutting taxes and increase spending on infrastructure—even I can do the math on that.

But under Trump the supply-siders are coming back, arguing that all this will grow our way out of economic difficulty.  But let’s be realistic:  if we’re at 1-2% growth today, even doubling the rate of economic growth only takes us to 3% or maybe at the outside 4%.  The numbers don’t add up.  Moody’s Analytics estimates his infrastructure plan would add just 0.4% in growth.  The nonpartisan Tax Policy Center estimated that his tax cuts will raise the federal debt by $7.2 trillion over the next decade and the Congressional Budget Office sees the annual tab for interest on the debt doubling between now and 2020.

 In some ways, this is scarier than the Reagan supply-side years.  President Reagan achieved a meaningful reduction in taxes, but the Democrats who controlled the House of Representatives prevented a comparable reduction in federal spending.  This time, however, the Republicans control all the branches of government and seem ready to cut taxes and increase spending, especially on infrastructure.

One underlying question is whether Americans really care about government debt anymore.  In several polls leading up to the election, concern about the federal debt ran well behind jobs, health care, education and terrorism (all expensive propositions by the way).  Seemingly gone is the day when we worry, as President Calvin Coolidge did following World War I, about “carelessness” in the “expenditure of public money” as a “condition characteristic of undeveloped people, or of a decadent generation.”  We no longer vote as if we are concerned about transferring the costs of our generation to a future one.  We no longer view debt as a moral concern; rather it is just one more tool of economic policy to deploy when we want more growth.

I know this sounds positively premodern, but I still share the concern of President Herbert Hoover when he said:  “Blessed are the young for they shall inherit the national debt.”  And I would submit that the one thing President Trump and the Congress could do to begin to rebalance the scale would be to address the runaway deficit in our entitlement programs (Social Security, Medicare, Obamacare and the like).  Progress there could compensate for some of their other grandiose spending plans.


To view the column Forbes.com:


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