Janice R. Andrews
WASHINGTON A key front in the 2024 presidential contest is shaping out to be economic policy. Fiscal experts are concerned about former President Donald Trump’s planned tax cuts because they believe they might dramatically raise the nation’s debt. The Democratic contender for vice president, Kamala Harris, seems to be closely following President Joe Biden’s budget ideas, which are intended to lower the deficit over the course of the next ten years.
The Effect of Trump’s Tax Proposals
In an effort to ease the financial strain on American families, Donald Trump, who is running for president again, has been promising to slash taxes. Independent assessments, however, indicate that these reductions may have detrimental long-term effects on the country’s financial stability. The independent Committee for a Responsible Federal Budget (CRFB) has estimated that over the next 10 years, the national debt might increase by around $4 trillion as a result of Trump’s tax proposals.
Trump’s proposed tax cuts would free service workers from tip taxes, remove federal income taxes from Social Security payouts for pensioners, and lower the corporate income tax rate from 21% to 15%. He also intends to prolong the tax breaks from his 2017 tax overhaul that are about to expire in the upcoming years.
Voters, especially those who are dealing with growing prices, support these cuts, but they come at a high cost. According to the CRFB, over the course of ten years, the revenue lost as a result of these tax cuts may come to around $7 trillion. The impact can be considerably worse if one accounts for the increased interest expenses associated with the national debt.
In order to make up for some of the lost money, Trump has suggested a number of measures, including as removing the tax breaks for renewable energy projects that were put in place by Biden’s Inflation Reduction Act and putting additional duties on imports, especially those that come from China. Even with the potential $3 trillion in new income from these initiatives, there would still be a $4 trillion net gap.
Biden and Harris: An Emphasis on Deficit Reduction
Unlike Trump, who has made a concerted effort to lower taxes, Vice President Kamala Harris has not yet released her comprehensive economic plan. Nonetheless, representatives of her campaign have stated that she will closely follow President Biden’s budgetary plans. Released in March, Biden’s most recent budget proposal seeks to raise taxes on businesses and rich individuals in order to lower the government deficit by around $3 trillion over the course of the next ten years.
The goal of the Biden administration has been to reverse the upward trend in deficits, which has been made worse by more expenditure on social programs and the response to the epidemic. When Trump became office in 2017, the national debt was $20 trillion; it has now skyrocketed to $35 trillion. During Trump’s administration, the debt soared by $7.8 trillion, and under Biden, it has grown by a another $7.3 trillion.
In order to combat this escalating financial crisis, Biden’s budget proposal combines tax hikes with expenditure cuts. Raising the corporation tax rate and bringing back the increased child tax credit—which was temporarily instituted in 2021—are two of the plan’s main elements. Extensions of the Trump administration’s tax cuts for anyone making less than $400,000 per year are also included in the budget.
Biden’s endorsement allowed Harris to enter the presidential campaign, but she hasn’t yet revealed any specifics about her proposed economic policies. But her campaign has stated that she will base her fiscal policies on Biden’s proposal. Since Harris has made a strong case for the increased child tax credit and other policies meant to lessen economic disparity, it is possible that, should she win, she will work to make these changes permanent.
The Problem of Debt
As the United States experiences growing budgetary strain, the problem of national debt is becoming more pressing. Even in the absence of new spending initiatives or tax cuts, the independent Congressional Budget Office (CBO) predicts that the federal debt would increase by around $22 trillion over the course of the next ten years. Rising interest rates, which raise the cost of debt servicing, and an aging population, which puts more pressure on Social Security and Medicare, are the main causes of this expansion.
The Committee for a Responsible Federal Budget’s senior vice president, Marc Goldwein, voiced worries about how Trump’s tax cuts may affect the country’s financial stability. The general fiscal and economic climate is even worse now than it was before to Trump and Biden taking office, which makes it much more concerning, according to Goldwein. He issued a warning, saying that pushing the debt’s expansion further might result in greater borrowing rates and a never-ending loop of growing deficits.
Trump, however, has played down these worries, stating that his tax cuts will increase revenue and stimulate economic development. In addition, he made the suggestion that he may employ unorthodox techniques, such using cryptocurrencies, to pay off the debt. During a recent interview with Fox Business, Trump conjectured that “handing them a little bitcoin and wiping out our $35 trillion” might be one way to pay down the national debt.
Experts have disregarded this notion as implausible, pointing out that the $35 trillion required to pay off the debt is far less than the value of all bitcoin in circulation, which is slightly over $1 trillion.
A Sobering Option for Castors
Voters in the 2024 election will have to choose between two drastically divergent budgetary plans. While some Americans may get immediate relief from Trump’s tax cuts, there is a chance that the national debt would rise sharply as a result of his ideas. However, Harris offers a more conservative strategy centered on deficit reduction and long-term economic stability by endorsing Biden’s budget.
The result of this discussion will have a significant impact on the US economy since the next president will take office in a tight budgetary climate with little leeway. The nation’s economic destiny will be largely determined by voters’ preferences for either long-term budgetary discipline or short-term tax relief.
