Friday I wrote a piece taking St. Louis Post-Dispatch columnist Chuck Raasch to task for reviving the deficit doom and gloom BS that has crippled economic growth over the past several years. The post referenced only Raasch’s criticisms of the 2016 presidential candidates’ economic positions and did not elaborate on their positions beyond that level of description. It strikes me that it might be useful, in case my earlier post left anyone feeling confused, to enlarge on the points I tried to make about potential impact of Clinton’s economic proposals on the the federal debt
In (very) short, Clinton’s response to the deficit is to create an environment for economic growth which should, over the long-term, increase tax revenues and lower debt. In the short-term, she aims for a neutral equilibrium between revenue and spending that does not generate deficits. She does not address these issues under the rubric of debt reduction since that goal is implicit in developing a strong economy. Brookings Institute economist Henry Aaron has said that when it come to reducing the federal debt, “how we achieve that goal is at least as important as whether we achieve it.” This concern for addressing debt in a way that does not destroy but rather enhances social support systems is evident in Clinton’s proposed policies:
Clinton has taken a two-pronged approach to economic growth:
(1) Clinton proposes several progressive tax reforms that will generate more revenue (see this factsheet for details).
(2) Clinton is also proposing to invest in growth by using the new revenue generated by her tax reforms to pay for a suite of initiatives involving physical infrastructure renewal, small business supports, health care, education and research (see her position papers).
Neil Erwin at The New York Times summarizes Clinton’s proposals, and notes that her tax plan would generate $1.1 trillion dollars in additional revenue over the decade and, when combined with her new spending, would be revenue neutral. His evaluation does not address the viability of the spending proposals to promote growth. However, the steps outlined by Clinton to promote growth and short and long-term fiscal stability have earned high marks from many financial analysts (see here, here and here (pdf)) .
Clinton did not satisfy Chuck Raasch’s preconception that politicians who engage in “serious” discussion of federal debt must serve up the bitter medicine that, because of our supposed past profligacy, we now require . She instead outlined an approach to debt that utilizes growth rather than retrenchment. Her plan involves promoting greater fairness in the tax code, less income inequality – a major growth inhibitor – along with spending initiatives that are, based on reliable research, designed to spur growth. Given the caveat that economic prediction is a mug’s game, her plan does not necessarily entail deficit spending and, arguably, will lower the long-term debt burden.
This approach can be criticized – and reputable analysts have done so – but, unlike Raasch’s casual dismissal, the criticism should be based on the merits of the proposal itself rather than a narrowly preconceived, popular idea of what it “should” propose to do. It should also include a fair assessment of the severity of the debt problem rather than the “the end is coming” hysteria that Raasch seems to endorse. As I noted in my earlier post referenced above, many economists do not consider our current and projected national debt to be the looming horror that is portrayed by deficit alarmists. And many of those economists and financial experts agree that the Clinton proposals, unlike those of Donald Trump , if they were to be enacted, would have a good chance to insure that our long-term debt does not mushroom into just that type of problem.