Conspicuously absent from the 2016 presidential election has been a robust discussion of the American federal debt, and how it is influencing the American economy. The debt has received a few mentions here, but only at most as an aside. In a new Reason Foundation policy brief, Marc Joffe writes that “Given the pernicious nature of this problem, one might imagine that it would be a major issue for presidential candidates.” But as deficits add billions to the national debt every year, the issue is even less important to Americans than during the last election. And for the candidates, the only value of referencing the national debt is in relationship to other policy issues.
During the first presidential debate, the national debt was referenced by Hillary four times, each in reference to studies that find that Trump’s tax plan would add $5 trillion to the debt, and once more in a mocking personal attack. Trump meanwhile mentioned the national debt once in reference to a question about energy policy and a second time in a claim that $20 trillion in debt would be okay if we had a good national infrastructure.
During the second presidential debate the word debt was referenced twice, both times as a throwaway line. The first was by Drumpf in a rambling answer to a question about health care, the second was by Drumpf in an incomprehensible answer to a question about energy policy. Hillary never uttered the word. No question from the moderators or audience was directed at a discussion of the debt.
Ultimately, there are a range of reasons for this ambivalence. One of which is simple ignorance of the scope and causes of the problem. In the new brief Joffe writes, that looking at business cycle trends creates a dark picture for the future of the debt:
Deficits tend to peak during a recession and then fall as the economy grows, reaching a trough several years after the end of the recession. The most recent cyclical trough occurred in 2015, with a deficit of $438 billion, or 2.5% of GDP. This is considerably worse than the cyclical troughs in 2007, when the deficit was 1.1% of GDP, and 2000, when there was a surplus of 2.3% of GDP. The CBO expects year’s deficit to be higher than that of 2015, suggesting that the U.S. is entering a phase of rising deficits once again.
Unfortunately, addressing this problem means doing more than just addressing waste, fraud, and abuse: “Three currently politically untouchable categories—Social Security, Medicare and interest on the debt—account for 47.7% of this year’s budget. In 10 years, the CBO expects these three items to take up 58.7% of federal spending.”
For a picture of what this looks like, check out the interactive layout of the current federal budget we’ve created over at Tableau Public.
The problem is also unlikely to be addressed only with tax cuts, particularly if tax cuts are not paired with comparable spending cuts. The policy brief outlines what such a libertarian approach to cutting spending would look like.
One important change would be to raise the eligibility age for Social Security, Social Security Disability Insurance, and Medicare and index them to life expectancy. In addition, these programs should be subject to more robust and sound means testing; to avoid perverse incentives and outcomes, the test could be based on lifetime earnings. Medicaid should be converted to a block grant program, as recently proposed by House Republicans. And individuals should be incentivized to switch to a system of low-fee personalized retirement savings accounts, which eventually should replace the Social Security program all together. The collective goal of these changes would be to replace, over time, existing open-ended entitlements with programs that have lower and less volatile liabilities.
Spending cuts don’t have to solely appeal to the political right, however. Defense spending could be cut by about 50% without substantially affecting national security; in some cases, cuts—such as the closure of U.S. bases on foreign soil—would likely improve national security. And corporate tax expenditures and subsidies, which amount to “corporate welfare,” should be terminated.
Finally, although domestic discretionary spending is a relatively small component of overall spending, it still contains numerous opportunities for savings. Federal departments without clear, constitutionally enumerated powers—such as the Departments of Education, Energy, and Housing and Urban Development—should be closed, with their functions passed to the states or private organizations. Ending the war on drugs would reduce unnecessary expenditures on enforcement and incarceration, while eliminating the economic harm done by this assault on individual liberty. Other discretionary spending can also be cut through the rigorous implementation of zero-based budgeting, a technique under which all programs are reviewed regularly and eliminated if they are found to be outmoded or ineffective.
Check out the whole policy brief, including analysis of what the candidates have said about the national debt—in the few moments they’ve chosen to say anything at all.