In the complex landscape of American politics, the issue of fiscal health appears to have taken a backseat in the current presidential election cycle. Despite the staggering figures that underscore the nation’s economic predicament, candidates seem more focused on appealing to their bases with populist policies rather than tackling the underlying fiscal challenges. As Carl Tannenbaum, chief economist at North Trust, aptly noted, “Setting a course for improved fiscal health will be challenging.”
The numbers tell a compelling, albeit alarming, story. The national debt has ballooned to an eye-watering $35.324 trillion, marking an increase of nearly $8 trillion since January 2021. If current trends continue, the nonpartisan Congressional Budget Office projects that this figure could soar past $50 trillion within the next decade. Adding to this dire scenario, the federal deficit has reached $1.9 trillion in just the first 11 months of the current fiscal year, with projections indicating it could exceed $2 trillion annually by 2031. Beyond these headline figures lies the issue of long-term unfunded obligations, most notably Social Security, which faces a daunting permanent deficit estimated at $63 trillion.
Despite these staggering statistics, there has been a conspicuous silence on fiscal matters from both Vice President Kamala Harris and former President Donald Trump. Tannenbaum criticized the candidates for proposing “politically appealing but fiscally worrisome” policies, suggesting that their platforms may exacerbate the national debt rather than alleviate it. A recent analysis from economists at the University of Pennsylvania’s Wharton School underscores this concern, estimating that Harris’s proposals could potentially increase the federal deficit by between $1.2 trillion and $2 trillion over the next decade, while Trump’s policies might raise it by an even more significant $4.1 trillion to $5.8 trillion.
Both campaigns assert that their initiatives would either generate additional revenue or offset spending increases and tax cuts. However, fiscal experts like Kent Smetters, a professor at Penn Wharton, argue that these claims lack substance. “Climbing federal debt will eventually cause the U.S. fiscal house to burn down, and both candidates are only arguing over the furniture,” Smetters remarked, highlighting the urgent need for serious fiscal proposals.
Addressing the nation’s fiscal health requires a hard look at the major drivers of spending: defense, health care (including Medicare and Medicaid), interest payments, and Social Security, which collectively account for approximately 80 percent of annual federal expenditures. Alarmingly, data from the Treasury Department reveals that nearly half of the government’s income tax collections are now consumed by interest payments alone, leaving little room for other essential services.
As the election unfolds, the absence of meaningful discourse on government borrowing and debt is troubling. Economists warn that this neglect could lead to dire consequences, including credit downgrades, increased market volatility, and higher borrowing costs. Last year, the U.S. government faced two credit downgrades, a worrying sign of its deteriorating fiscal position. Fitch Ratings, for instance, revised Washington’s credit outlook downward, citing expectations of fiscal deterioration over the next three years.
So why the reticence among candidates to tackle such a crucial issue? Atul Bhatia, an economist at RBC Wealth Management, points to the political risks involved. Discussing entitlements or tax increases is often seen as “political death,” and as a result, the national debt is likely to continue its upward trajectory without shared sacrifice from the electorate. Surveys indicate that voters are acutely aware of the looming debt crisis, with 91 percent expressing a desire for candidates to articulate clear plans to address the national debt and rising deficits.
Moreover, the stakes are high: Congressional Budget Office Director Phillip Swagel has warned that without reforms, Social Security benefits could face a staggering 21 percent cut by 2035. As David Walker, former U.S. comptroller general, pointed out, Americans are increasingly concerned about their financial security, placing it alongside personal safety and national security as a top priority.
Unfortunately, Tannenbaum cautions that even after the election, the challenges surrounding the national debt will persist. The complexities of America’s fiscal health are not likely to dissipate with a change in leadership.
It’s worth noting that the issue of excessive debt is not confined to the United States. The International Monetary Fund (IMF) has warned that America’s deteriorating fiscal conditions represent a “growing risk” to both the U.S. and global economies. The IMF advocates for urgent policy realignment, recommending measures such as raising indirect taxes and reforming entitlement programs.
In sum, as the presidential candidates navigate their platforms, the pressing need for a robust discussion on fiscal responsibility remains glaringly apparent. The current trajectory suggests that without significant reforms, America’s fiscal health will only worsen, posing serious long-term implications for both domestic and global economic stability. It is imperative that voters demand transparency and accountability from their leaders, ensuring that the conversation shifts from mere political rhetoric to actionable policies that safeguard the nation’s financial future.
