As the 2024 U.S. Presidential Election approaches, its impact on fiscal policy and national debt sustainability is profound, demanding strong leadership and decisive action.
At a Glance
- Potential risks of debt downgrades and market volatility remain unaddressed in the campaign.
- The U.S. national debt stands at $35 trillion, with bleak fiscal projections.
- Deficits are projected to rise significantly, impacting future economic stability.
- Tax and spending policies of future leadership will greatly influence debt outcomes.
Elevated Debt Concerns
The 2024 presidential election magnifies concerns about the U.S. national debt, currently standing at a staggering $35.2 trillion. Despite being crucial, these issues are sparingly mentioned in campaign narratives. Moody’s assessment underlines significant risks like potential debt downgrades and market volatility, yet neither candidate has decisively addressed these financial hurdles in their platforms.
Government borrowing accounts for 6% of GDP, further aggravating the national deficit. Key factors contributing to this challenge include pandemic-related expenditures, mandatory spending on healthcare and social security, and historically low discretionary spending.
🧵 (1/8) My new piece in EconPol concerns the fiscal policy stakes in 2024. Trump and Harris are very different re. (a) fiscal responsibility (b) tax fairness (c) key tax priorities (corporate tax, clean energy, and IRS) and (d) the role of tariffs.https://t.co/i5YCKnPezn
— Kimberly Clausing (@KClausing) September 29, 2024
Policy Implications
The fiscal future of America hinges on the policy direction chosen by the next administration. A possible Kamala Harris presidency would likely revoke the 2017 tax cuts, aiming taxation adjustments at businesses and the affluent. This approach prioritizes allocations towards healthcare, childcare, housing, and education, potentially stabilizing the national debt.
Conversely, a Donald Trump-led administration advocates for extending and introducing new tax cuts along with imposing tariffs on imports. While these measures support domestic demand, they could lead to inflationary pressures and increased deficits, affecting long-term economic sustainability.
The Economic Landscape
The Congressional Budget Office forecasts a rise in public debt from 99% to 122% of GDP by 2034, underlining the urgency for sound fiscal strategies. While current markets exhibit complacency towards elevated deficits, higher yields and borrowing costs remain tangible risks. The challenge will be confronting the implications of these deficits on economic stability and growth.
In conclusion, addressing the burgeoning national debt and implementing prudent fiscal policy require immediate attention from the incoming administration. As the election looms, Americans must ponder the long-term fiscal health of the nation and the path forward.
Sources:
- https://think.ing.com/articles/how-the-election-will-impact-deficits-debt-and-the-yield-curve/
- https://think.ing.com/articles/what-the-election-may-mean-for-deficits-debt-and-the-yield-curve/
- https://am.gs.com/en-us/institutions/insights/article/2024/us-debt-sustainability-an-uncertain-fiscal-future
- https://www.imf.org/en/Blogs/Articles/2024/04/17/why-our-world-needs-fiscal-restraint-in-biggest-ever-election-year
- https://www.thecentersquare.com/national/article_9c8614dc-80f7-11ef-9d22-278ecbfb9a6b.html
- https://www.brookings.edu/articles/back-to-the-future-can-the-government-reduce-its-debt-again/
- https://bipartisanpolicy.org/blog/the-bill-is-due-lawmakers-need-to-address-our-growing-public-debt/
- https://www.cfr.org/backgrounder/us-national-debt-dilemma
- https://www.reuters.com/markets/us/how-harris-trumps-tax-spending-plans-affect-us-debt-2024-09-10/
- https://budgetmodel.wharton.upenn.edu/issues/2023/10/6/when-does-federal-debt-reach-unsustainable-levels