What is the definition of insanity? Doing the same thing over and over again and expecting a different result. I can’t believe what I am reading regarding our Presumptive Presidential Candidates – Hillary Clinton and Donald Trump. It is possible to cut taxes to stimulate the economy but economists disagree on how much of the tax cuts would trigger additional spending. There is a propensity by taxpayers to save and possibly pay off some existing debt before spending their “windfall tax cut.” Plus, these stimulus packages that are being put forth have to be paid for with sufficient incoming tax revenue to cover their cost.
The proposals that these two candidates are putting forth boggle the mind. Are we on the same planet? Our Federal Government is broke. It has operated on borrowed money for years. We are in debt to the tune of $19 trillion dollars. We are hardly in a position to offer any type of tax reduction. If anything, there should be a mandatory reduction in federal spending before any tax reductions should ever be considered. For years, our Congress has spent more than it takes in and continues to create deficits that add to a Federal Debt of $19 trillion dollars. Annual interest on existing debt is at the $500 billion dollar level.
Clinton claims that over a ten-year period, she would increase debt by $250 billion dollars pushing it to 87% of GDP. Hillary would spend an additional $1.4 trillion dollars while proposing to pay for this new spending with $1.2 trillion in tax increases. On the other hand, Trump has proposed one of the world’s most costly tax plans. Over a decade, certain economists believe his plan will reduce money flowing into federal coffers by $10.5 trillion dollars while increasing government spending by about $650 billion dollars. In a worst-case scenario, debt would rise by an estimated $11.5 trillion or 127% of GDP. With a 2026 National Debt of $30 trillion dollars financed at 2016 interest rates, interest would amount to about $900 billion dollars!
Regarding repayment of existing debt or reigning in the costs of the big three entitlements (Medicare, Social Security, and the Affordable Care Act) that now comprise 62% of all Federal spending? Neither Clinton or Trump have yet to present a solid and workable plan.
Ultimately, this whole situation is ludicrous and will make even Greece look like an economic giant. Moving forward, with entitlements and interest on the National Debt gobbling up a larger portion of our economic pie, so will demands for increased spending on defense, education, roads, and at dozens of federal agencies. With present day deficits amounting to $500 billion dollars or more, a basic accounting question must be asked of these two politicians: At some point in time, should not debits equal credits?
But with proposals being thrown about like popcorn to build walls, solve immigration, and expand this or that, does it really matter that the money is simply not there?
DONALD WITTMER is a retired business executive who held key roles in the automotive and banking sectors. For a time, he also served as a Fiscal Agency Manager for the Detroit branch of the Federal Reserve Bank of Chicago. He received his undergraduate degree from Cincinnati’s Xavier University, an M.A. in business management from Central Michigan University, and earned certification in bank operations from the School of Banking at the University of Wisconsin-Madison. A husband, father, and grandfather, he teaches part-time at the Kent Place School for Girls in Summit, New Jersey.