Bruce Ledewitz: History’s most fiscally irresponsible presidential election

Bruce Ledewitz

Special to the Post-Gazette

Nov 4, 2024

5:30 AM

I don’t know who will win the pres­i­den­tial elec­tion, but I know who will lose — any­one who re­lies on the full faith and credit of the United States. Un­for­tu­nately, that is all of us.

This may have been the most fis­cally ir­re­spon­si­ble pres­i­den­tial cam­paign in his­tory. Both for­mer pres­i­dent Don­ald Trump and Vice Pres­i­dent Kamala Har­ris have called for tax cuts we can­not af­ford and, to a lesser ex­tent, spend­ing in­creases that are not paid for.

The wrong con­ver­sa­tion

These prom­ises in­cluded no taxes on tips, for­eign in­come, and even so­cial se­cu­rity pay­ments. Plus var­i­ous pro­posed tax cred­its.

The na­tional con­ver­sa­tion should have gone the other way, to­ward how we can get out of the fi­nan­cial hole we are in. Pres­i­dent Joe Biden made no prog­ress on re­duc­ing def­i­cit spend­ing. The fed­eral gov­ern­ment def­i­cit this year is $1.83 tril­lion, slightly more than last year. The an­nual in­ter­est pay­ments on the na­tional debt are es­ti­mated at $1 tril­lion and will likely in­crease.

This neg­a­tive fis­cal con­di­tion means there is no money to bail out So­cial Se­cu­rity, which is pro­jected to run out of money to pay full ben­e­fits in 11 years, in 2035 — or sooner if the tax cuts of ei­ther can­di­date are en­acted.

Like cli­mate change, an­other slow-grow­ing cat­a­strophic threat, you can ig­nore this fi­nan­cial cri­sis for a long time. Un­like cli­mate change, how­ever, Amer­i­cans know that these kinds of def­i­cits can­not go on. Amer­i­cans un­der­stand money bet­ter than sci­ence.

Pol­i­ti­cians are ir­re­spon­si­ble, like the rest of us. If they can ig­nore a prob­lem that it would be un­pop­u­lar to ad­dress, which is more or less the def­i­ni­tion of the word “prob­lem,” they will.

Both Trump and Har­ris have ig­nored the def­i­cit, the debt and the cri­sis in So­cial Se­cu­rity. But it is very likely that ei­ther one of them will have to con­front these is­sues in the next four years.

This is easy to see in Har­ris’s case. In terms of def­i­cits, Re­pub­li­cans are like Pav­lov’s dogs, only in this case it is a Dem­o­crat in the White House rather than a bell that gets them to change their be­hav­ior.

If Har­ris wins, Re­pub­li­cans will be­come def­i­cit hawks. That means there will be a cri­sis on Jan­. 2, 2025, when the debt limit is slated to be re­in­stated af­ter its sus­pen­sion in 2023. Re­pub­li­cans are very likely to refuse to raise the debt limit with­out con­di­tions Dem­o­crats are not likely to ac­cept.

The debt limit is a use­less gim­mick that does not ad­dress the causes of def­i­cits — un­equal tax rev­e­nue and spend­ing. The debt limit sim­ply re­stricts the au­thor­ity of the fed­eral gov­ern­ment to pay bills al­ready in­curred.

Trig­ger­ing a de­fault

That in­cludes pay­ing in­ter­est and prin­ci­ple on gov­ern­ment bonds, which would trig­ger a de­fault — mean­ing that bonds the United States has guar­an­teed with its full faith and credit would not be paid.

No one knows ex­actly what a U.S. de­fault would mean, but pretty clearly ev­ery­one who holds dol­lars would be poorer. The sta­tus of the dol­lar as the world’s re­serve cur­rency would be de­stroyed. Once these con­se­quences oc­curred, the po­lit­i­cal party the pub­lic held re­spon­si­ble for a de­fault might never win an­other na­tional elec­tion.

If Trump is elected, the fis­cal cri­sis will un­fold dif­fer­ently. With a Re­pub­li­can in the White House, Pav­lov’s Re­pub­li­can dogs will go back to sleep con­cern­ing the na­tional debt. Dem­o­crats, who are more con­sis­tent on fis­cal is­sues, do not care about the na­tional debt re­gard­less of who is pres­i­dent.

So, which­ever party wins Con­gress, Trump will prob­a­bly get at least par­tial fur­ther im­ple­men­ta­tion of his 2017 tax cuts, with dire fis­cal re­sults. It is es­ti­mated that if Trump fol­lowed through on all his cam­paign prom­ises, he would add $7.5 tril­lion to the na­tional debt over the next de­cade. (Har­ris’s pro­pos­als would add “only” $3.5 tril­lion.)

The prob­lem for Trump is that, at long last, the bond mar­ket might then wake up to the re­al­ity that the U.S. never in­tends to get its fis­cal house in or­der. In­ter­est rates on U.S. bonds would then have to in­crease sig­nifi­cantly to en­tice a re­luc­tant bond mar­ket to pur­chase U.S. se­cu­ri­ties.

That would prob­a­bly raise in­ter­est rates on ev­ery­thing else. The econ­omy would slow, both be­cause of those higher in­ter­est rates and be­cause of a lack of cap­i­tal avail­able for pri­vate in­vest­ment be­cause the gov­ern­ment was crowd­ing out all other bor­row­ers.

The me­dia would de­vote ex­ten­sive time and space to this new cri­sis. Sud­denly, the na­tional debt, def­i­cit spend­ing and So­cial Se­cu­rity would cry out for a com­pre­hen­sive bi­par­ti­san solu­tion.

We might need a cri­sis

Iron­i­cally, this lat­ter sce­nario holds some prom­ise be­cause Trump is not a con­ven­tional Re­pub­li­can who could never agree to raise taxes. Any solu­tion to our cur­rent prob­lems will re­quire both pain­ful re­duc­tions in spend­ing and tax in­creases.

Any pro­posed solu­tion will be un­pop­u­lar but might be con­sid­ered by the pub­lic to be nec­es­sary. So, the cri­sis might turn out to be for the best.

Who­ever wins the pres­i­den­tial elec­tion would do well to re­mem­ber that no one gets to live be­yond their means for­ever, not even Amer­i­cans.

Bruce Ledewitz is a professor of law at the Thomas R. Kline School of Law of Duquesne University. His previous article was “How to stop campaign spending from corrupting elections.” The views expressed do not represent those of Duquesne University.

First Published: November 4, 2024, 5:30 a.m.