The Disgruntled Republican in Nashville: Trump's Economic Policies Would Increase Debt 2X that of Harris's. Both Plans Would Add Substantially to the Debt.

Monday, October 07, 2024

Trump's Economic Policies Would Increase Debt 2X that of Harris's. Both Plans Would Add Substantially to the Debt.

Committee for a Responsible Federal Budget, Oct. 7, 2024- The next President will face significant fiscal challenges upon taking office, including record debt levels, large structural deficits, surging interest payments, and the looming insolvency of critical trust fund programs. Our large and growing national debt threatens to slow economic growth, boost interest rates and payments, weaken national security, constrain policy choices, and increase the risk of an eventual fiscal crisis.

However, neither major candidate running in the 2024 presidential election has put forward a plan to address this rising debt burden. In fact, our comprehensive analysis of the candidates’ tax and spending plans finds that both Vice President Kamala Harris and former President Donald Trump would likely further increase deficits and debt above levels projected under current law.

Under our central estimate, Vice President Harris’s plan would increase the debt by $3.50 trillion through 2035, while President Trump’s plan would increase the debt by $7.50 trillion.

These estimates come with a wide range of uncertainty, reflecting both different interpretations and estimates of the policies. Under our low- and high-cost estimates, we estimate Vice President Harris’s plan could have no significant fiscal impact or increase debt by $8.10 trillion through 2035, while President Trump’s plan could increase debt by between $1.45 and $15.15 trillion. Our analysis will be updated if additional policies are introduced.

US Budget Watch 2024 is a project of the nonpartisan Committee for a Responsible Federal Budget designed to educate the public on the fiscal impact of presidential candidates’ proposals and platforms. Throughout the election, we will issue policy explainers, fact checks, budget scores, and other analyses. We do not support or oppose any candidate for public office.

What Do the Candidates Propose and How Do the Numbers Add Up?

Vice President Kamala Harris and former President Donald Trump have both called for a number of policy changes with potentially significant fiscal impact.

The Committee for a Responsible Federal Budget has produced a central, low-, and high-cost estimate for each of these policy proposals. Under these estimates, we find:

Vice President Harris would add $3.50 trillion to the projected debt through Fiscal Year (FY) 2035 under our central estimate, as a result of $7.25 trillion of deficit-increasing measures, $4.25 trillion of deficit-reducing measures, and $500 billion of interest costs.

President Trump would add $7.50 trillion to the projected debt through FY 2035 under our central estimate, as a result of $10.20 trillion of deficit-increasing measures, $3.70 trillion of deficit-reducing measures, and $1.00 trillion of interest costs.

Vice President Harris would not add to the debt under our low-cost estimate and would increase projected debt by $8.10 trillion through FY 2035 under our high-cost estimate.

President Trump would increase projected debt by $1.45 trillion through FY 2035 under our low-cost estimate and by $15.15 trillion under our high-cost estimate.

These estimates reflect the expected fiscal impact of policies on the candidates’ campaign websites and of policies that have been proposed through official campaign announcements, white papers, and social media posts. In many cases, we relied on speeches, discussions with campaign staff, and similar proposals in Presidents’ budgets and elsewhere to help clarify policy details.

During the 2024 campaign, Vice President Harris has proposed to significantly expand the Child Tax Credit and other individual tax credits, increase support for housing and health care, lower taxes on tips, and strengthen border security. She has also called for spending and tax breaks for child care, education, long-term care, preschool, paid leave, domestic research and manufacturing, and small businesses; and she has expressed support for extending expiring provisions of the Tax Cuts & Jobs Act (TCJA) for households making under $400,000 per year.

President Trump, meanwhile, has proposed to modify and extend the TCJA, further cut taxes for corporations, increase military spending, strengthen border security, expand deportations and immigration enforcement, and increase support for housing, health care, and long-term care. He has also proposed ending the taxation of tip income, overtime pay, and Social Security benefits.

To help offset the costs of her plan, Vice President Harris has proposed increasing taxes on corporations and high-income households and reducing prescription drug prices. Her campaign also says she supports the revenue-raising provisions in President Biden’s FY 2025 budget, which would further increase taxes on corporations and high-income households.

To help offset the costs of his plan, President Trump would impose new tariffs on imports; repeal energy- and environment-related spending, tax cuts, and regulations; cut fraudulent spending; and end the Department of Education.

Under our central estimate, both plans would add substantially to the debt. Specifically, we find the Harris plan would add $3.50 trillion to the debt over the ten-year period from FY 2026 through 2035 and the Trump plan would add $7.50 trillion to the debt over that same period.

These findings involve a high degree of uncertainty, mostly due to questions about the details of how candidates’ policies are designed. We have therefore relied on candidate statements, campaign feedback, past budget proposals, and other sources for enough detail to credibly estimate the potential costs or savings and in most cases have produced wide-ranging estimates that reflect many different potential policy choices.

Furthermore, even fully detailed and previously analyzed policies have uncertain costs. This is especially true of policies that, if implemented, might significantly alter behavior. In these cases, we look to different scores as well as the available academic literature on behavioral responses.

Where possible, we analyze a wide range of behavioral responses. Our ranges also reflect different estimates from different sources and different estimating methods.

As in past election years, this analysis presents high- and low-cost estimates for each proposal along with our central estimates. The high-cost estimates reflect the upper bound for likely potential costs and the lower bound for potential savings and therefore represent our maximum estimate for the overall budget impact of a candidate’s plan. Our low-cost estimates reflect the inverse and therefore represent our minimum estimate for the overall budget impact of a candidate’s plan. We discuss the specific differences between our estimates in our descriptions of each policy area and provide general discussion of our methodology in Appendix I.

Under our low-cost estimate, we find the Harris plan would be roughly deficit neutral, while the Trump plan would increase the debt by $1.45 trillion. Under our high-cost estimate, we find the Harris plan would increase debt by $8.10 trillion, while the Trump plan would increase debt by $15.15 trillion.

The largest sources of uncertainty in Vice President Harris’s plan are her proposals to extend the TCJA for those earning under $400,000 per year, fund higher education, support paid leave and child care, and raise taxes on corporations. The largest sources of uncertainty in President Trump’s plan are his proposals to extend and modify the TCJA, end taxes on overtime, increase defense spending, address immigration, and increase tariffs.

Our analysis incorporates policies that we understand to be part of each candidate’s campaign platform and that increase or reduce deficits by at least $50 billion over a decade. In Appendix II, we discuss some policies mentioned on the campaign trail that were not included in our analysis – either because we do not understand them to be an official campaign policy or their fiscal effect is not likely to be large enough to incorporate into our analysis.

What Would the Candidates’ Proposals Mean for the National Debt?

The national debt currently stands at 99 percent of Gross Domestic Product (GDP) and is projected to grow from 102 percent of GDP at the start of FY 2026 to 125 percent by the end of 2035 based on the Congressional Budget Office’s (CBO) current law baseline. The debt will exceed its record as a share of the economy – 106 percent set in 1946 – in just three years.

Debt would continue to grow faster than the economy under either candidates’ plans and in most scenarios would grow faster and higher than under current law.

Under our central estimates, we find that Vice President Harris’s plan would push debt to 133 percent of GDP in FY 2035 – an 8 percent of GDP increase. We estimate President Trump’s plan would push debt to 142 percent of GDP in 2035 – a 17 percent of GDP increase.

Debt could be higher or lower under different scenarios. Under our low-cost estimates, debt in FY 2035 would grow to 125 percent of GDP under the Harris plan (as under current law) and would grow to 128 percent under the Trump plan. Under our high-cost estimates, debt would grow to 144 percent of GDP under the Harris plan and 160 percent of GDP under the Trump plan.

Our estimates assume policies are implemented in 2026 – the first year for which the next President will submit a budget proposal – and that lawmakers follow the current law baseline outside of the candidates’ proposals. We do not account for possible changes in GDP resulting from the candidates’ policies, though in some high- and low-cost estimates we account for dynamic feedback effects on revenue and spending.