What Donald Trump Can Do to Improve His Tax and Spending Policies
In a Wall Street Journal op-ed last week, Donald Trump’s economic advisers Andy Puzder and Stephen Moore stated that the campaign will release changes to its tax plan “in the next few weeks.” This is very encouraging.
Last month, we released our analysis, “Promises and Price Tags: A Fiscal Guide to the 2016 Election,” based on the policies listed on Donald Trump’s and Hillary Clinton’s campaign websites as of June 24, 2016. Our analysis shows that neither candidate’s plan comes close to addressing our nation’s unsustainable debt, and Trump would significantly accelerate it.
We found that he would add an additional $11.5 trillion to the debt over the next decade (in addition to the $10 trillion already projected to be added), fueled by huge tax cuts and spending increases, including ballooning interest costs.
If implemented as currently laid out, Trump’s proposals would push the debt – already at its highest point relative to the economy since the end of World War II – to unprecedented levels, which would be dangerous for our nation’s economy. So it is good news that Trump intends to provide modifications to his tax plan.
By our estimate, the significant tax cuts outlined in “The Trump Tax Plan: A Simpler Tax Code For All Americans” will cost $9.25 trillion over a decade. Three other independent organizations – the Citizens for Tax Justice, Tax Foundation, and Tax Policy Center – have similar estimates of between $9.5 trillion and $12 trillion.
This plan could be vastly improved by eliminating many more of the existing tax breaks that produce annual losses of well over $1 trillion. Trump could also reduce the size of his proposed rate reductions or add another revenue source to augment his income tax rate cuts.
In addition to modifying his tax plan, Trump should also identify new ways to reduce spending. Agricultural subsidies, military spending, federal retirement benefits, and overlapping spending programs are a few good places to start.
Trump has also pledged not to touch entitlements, which does a huge disservice to the millions who depend on important programs whose trust funds are slated to go insolvent. If he is committed to the principle of not touching benefits, Trump should consider phasing in changes for younger participants while leaving intact benefits for existing retirees.
Significant health savings can be identified without increasing costs to beneficiaries. For example, savings can be achieved by retaining many of the bipartisan cuts from the Affordable Care Act, pursuing new delivery system reforms, modernizing benefit designs, fixing the malpractice system, and reducing drug prices.
For Social Security, it makes sense to ask younger workers to work longer and those who are well off to accept smaller benefits. But the goal has to be to make the system solvent again for future generations.
Getting control of the debt is a key to growing the economy. This should be a centerpiece of the updated plan the Trump campaign plans to release.