Less than a week from today, those Americans who did not vote early will go to the polls to vote to decide who will be the next President of the United States. Hopefully, a week from today, we will know who that person will be, either current Vice President (VP) Kamala D. Harris or former President Donald J. Trump. While I am often critical of others who vote primarily based on a single issue, I just might fit into that category for this presidential election; and that issue is the reason I am unlikely to vote for either candidate. However, I justify my focus on a single issue since it is an extremely broad issue which affects all our lives and affects many other issues important to our country. My single issue focus is on our country’s economy, and if we are to believe what the two candidates indicate they hope to do relative to economic policy, no matter who wins the election, there will be no winners in the United States and we will be a diminished country on the international stage.
Both VP Harris and former President Trump are running on populist economic plans that might sound attractive to the average voter due to their promised tax cuts and giveaways, but each plan would result in significant inflation and potentially double our national debt in the next ten years. We are at a critical juncture in our country’s economic future; a time in which the cost to service our debt is larger than any line item in our country’s budget other than Social Security, including national defense. We are currently running an annual budget deficit of approximately $2T(trillion), currently resulting in servicing a debt of $35T. In the last 25 years, our country’s debt has grown from 40% of its Gross Domestic Product (GDP) to 100% of its GDP, and both the Trump and the Biden-Harris administrations are in large part to blame for the particularly rapid growth the last eight years. The amount of money it takes to service our debt takes away from what we can spend on other things such as national defense and domestic services, but also as it grows, makes our debt riskier, which will increase the rates we will have to pay to finance it. Finally, it adds further risk depending on who owns it. Fortunately, our ally, Japan, is our largest global creditor, but China is not far behind.
In addition to the debt, in the past four years we have learned the hard way how inflation can affect us. Fortunately, the Federal Reserve has done a good job of managing rates to tame inflation and maintain employment levels, thus, avoiding a recession (so far) and giving us a so-called “soft landing.” However, much of the policies proposed by VP Harris and President Trump are highly inflationary. For instance, Harris’ $25,000 grant to first-time home buyers is likely to have the unintended consequences of raising housing prices, while Trump’s universal tariff plan is likely to not only raise prices in the United States, but undermine the competitiveness of the companies he aims to protect. Not to be outdone, Harris’ price control policies have been proven to be non-starters from the U.S. in the early 1970’s to Venezuela. Interestingly, the candidates’ proxies often show that the candidates would not actually do what they say they are going to do. I’ll let you decide whether that is good or bad.
While many have mocked those of us who are undecided voters; the choice is between two diametrically opposed candidates. However, economically, that is not true. Economically, it is a populist race to the proverbial bottom. Who can promise the people the most and bankrupt the country the quickest? Both candidates have at times mentioned not taxing tips. Neither candidate wants to take the necessary actions to address Social Security and both candidates have tariff plans intended to protect American workers and companies, which will likely have the opposite effect while also raising prices.
Each candidate has lined up economists to indicate that his or her economic plan is better. However, looking closely at each candidate’s plan shows that each will likely increase the deficit by another $500B to $1T annually beyond our current deficit levels. At that rate, our national debt will reach at least 125% of GDP in the next ten years, moving ever closer to unsustainability. While I see no magic bullet to solving our deficit issues, I do believe that it will take a mix of economic growth, government spending cuts, and tax increases. The unfortunate thing is that our two Presidential candidates are promising economic programs that do not address the problems at hand and the winner of the election will probably be the ultimate loser who must deal with fiscal dangers ahead.
