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Trillion-dollar debt looms, but candidates lack clear plans
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WASHINGTON – The ambitious spending and tax cut plans Barack Obama and John McCain are promising make no fiscal sense, experts say.
“Does either candidate have a realistic budget plan? Absolutely not,” Maya MacGuineas, president of the Committee for a Responsible Federal Budget, a nonpartisan research group said.
The new president could face an annual deficit approaching a trillion dollars, warns David Walker, president of the Peterson Foundation, which tries to educate consumers about the nation’s growing fiscal crisis.
High federal budget deficits can help spur the economy out of recession and can have short-term benefits. But if they persist over time, their interest alone costs taxpayers hundreds of billions of dollars each year. They increase U.S. dependence upon loans from abroad, particularly from China. And they absorb limited capital that otherwise might finance more productive investment that generates jobs and prosperity.
The deficit for fiscal 2008, which ended Sept. 30, was a record $455 billion, the White House announced last week. The director of the nonpartisan Congressional Budget Office recently said the 2009 deficit could hit $750 billion, given the impact of the expected recession and financial market problems. Some private analysts put it at $1 trillion.
While Obama and McCain have suggested in general terms that they may have to adjust their spending and tax cut plans, they’ve offered few specifics. Instead, they continue to promote what they see as the most popular, and often costly, parts of their programs.
Obama, for instance, continues to run ads promoting his plan to cut taxes for 95 percent of America’s wage earners. The Democratic nominee would raise income taxes for individuals earning more than $200,000 and families making more than $250,000.
He would also provide a “Making Work Pay” tax credit of $500 per person and $1,000 per working family.
The price tag to the Treasury, according to the nonpartisan Tax Policy Center run by the Brookings Institution and the Urban Institute, could be $2.9 trillion over 10 years.
McCain would retain all of the tax cuts from the Bush era rather than let them expire in 2011, as they’re currently scheduled to do. That would cost the Treasury $4.2 trillion over 10 years, the Tax Policy Center said.
McCain maintains he can still balance the budget by 2013 and Obama vows he won’t increase the deficit. But it’s impossible to find an independent analyst who shares their optimism.
“You can’t say either candidate is coming up with a credible plan,” MacGuineas said.
As a result, Alice Rivlin, a Democrat and former Federal Reserve Board vice chairman said, “We could, in a worst case, get to a trillion dollar deficit.”
Both candidates promise to cut spending overall, while differing sharply on details and to reduce the national debt, which hit $10 trillion recently. In the last year alone, the debt has grown by an average of $3.15 billion per day, leaving each citizen with an average share of more than $33,000.
But neither candidate’s plan is likely to significantly reduce the deficit, independent analysts said.
“A lot of members of Congress are ready to work together,” MacGuineas said. “They’re tired of not being able to do the job.”
Rivlin, the former Federal vice chairman, think what’s needed is an economic stimulus plan.
But handing out another stimulus could stifle efforts to make the harder choices skeptics think are needed.
“It satisfies political needs rather than economic needs,” Panetta, professor of politics at Santa Clara said. “And there’s always this need to look like you’re doing something.”
David Lightman
McClatchy Newspapers
