2016 Presidential Candidates Need To Propose Debt Solutions
The Brookings Institution's Center on Children and Families held an event this week highlighting eight big issues the presidential candidates need to address in the 2016 campaign. Eight papers were prepared on the various issues by scholars in their relevant areas. One of the featured issues included the growing federal debt, which was addressed by Bob Bixby, executive director at the Concord Coalition, and Maya MacGuineas, president of the Committee for a Responsible Federal Budget and head of the Campaign to Fix the Debt. Their paper, "Why the Federal Debt Must Be a Top Priority for the 2016 Presidential Candidates," points out why this issue transcends partisan agendas and why candidates should be putting forth proposals in preparation for becoming the next president.
In the paper, Bixby and MacGuineas noted that Presidents are required to propose a budget, which has often set the tone and agenda for years ahead. Examples include: President Reagan in 1981, President Clinton in 1993, President George W. Bush in 2001, and President Obama in 2009. When the next President begins preparing his or her first budget, deficits will be rising again. The debt is already at the highest it’s been since WWII as a share of Gross Domestic Product (GDP), with interest on the debt quickly becoming the fastest growing part of federal spending. If no changes are made, all federal government revenue will be needed for interest payments and mandatory spending by 2030. For this reason, they emphasize the importance of engaging candidates in New Hampshire and Iowa to propose potential ideas for the next president’s first budget. Bixby and MacGuineas add:
It is therefore important for the 2016 presidential candidates to present not just a vision of new spending or lower taxes, but a vision that fits within a sustainable budget. It is also important for voters and the media to carefully scrutinize the candidates' fiscal proposals. Presidential candidates should craft their campaign promises with a realistic appreciation for the magnitude of the debt problem, its root causes, and the consequences of doing nothing.
Bixby and MacGuineas make the case that candidates need to understand the driving factors of our increasing debt and be willing to explain the facts to voters. They point out the mismatch between projected revenues and the increasing growth of programs such as Medicare, Medicaid, and Social Security. Bixby and MacGuineas add how the solution has to be a combination of growth, cutting spending, and increasing tax revenues. They propose that candidates should at least:
1. Acknowledge that the long-term debt is a serious problem.
2. Make dealing with the debt a top policy priority in their campaign.
3. Put forward a plan for what they would do, not what they wouldn’t do.
4. Explain how they would pay for their policy initiatives.
5. Use their speeches, white papers, press briefings, and party platform to engage and educate the public about the tough choices.
Bixby and MacGuineas suggest candidates commit to the following in their first budget:
1. Achieve declining debt levels with debt (as a percent of the economy) lower at the end of the first term (2021) than when taking office; with debt even lower at the end of a second term (2025); and set on a continuous downward path thereafter.
2. Include policies that grow the economy and address pressures on the budget by:
- Slowing the growth of federal health care spending and improving the health care delivery system so that it is less of a drain on our economy and the budget
- Making Social Security sustainable and secure, strengthening it for future retirees and generations
- Reforming the tax code by eliminating, reducing or reforming tax preferences in order to simplify the code, grow the economy, enhance competitiveness and reduce the deficit
- Protecting or even expanding critical investments (such as education and infrastructure) to promote economic growth and opportunity
3. Work closely with Members of Congress in both parties to enact the budget into law.
In the question and answer session of this panel, the Center's Co-Director Ron Haskins asked if real proposals are likely on tax increases and changes to entitlements. Bixby and Alison Fraser, managing director at the Concord Coalition, were both in agreement that the next President will have to deal with the debt and make compromises. The audience asked about the effects these changes would have on the poor and working class and if there was potential for both sides to work together. Bixby suggested making the benefit formula more progressive and called for lawmakers to compromise before matters got worse. Fraser proposed finding a way for entitlements to work better for those with limited means and pointed out that in a debt crisis, decisions would have to be made very quickly and lawmakers would realize they can't govern, so they should be setting priorities now. In annual federal health spending alone, the next President could see over 70 percent growth, from $1.1 trillion to $1.9 trillion, over two 4-year terms.
The changing demographics of an aging population are not only driving future health care spending, they're also increasing the largest federal program, Social Security. Federal revenues are not keeping up with expenditures. As a result, the rising debt is crowding out the government's ability to invest in programs to help Americans, with spending on children's programs already declining. It is also limiting the options future generations will have to address entitlement program growth with an aging population that is using services that are taking up a larger share of the budget. The increasing debt can also limit the options future generations will have to deal with financial crises and cause interest rates to rise, raising the cost of mortgages rise, car loans, student loans, and credit cards. A worst case scenario could lead to investors not loaning money to the government at affordable rates. While the decisions are not going to be easy, they will be much less difficult if we take action now rather than later.