Trump’s Economic Proposals Could Add Over $4 Trillion to Deficits Over a Decade

[Social Media]

 

A recent analysis by the Penn Wharton Budget Model estimates that former President Donald Trump’s proposed economic plans, including major tax cuts and spending initiatives, could add over $4 trillion to the U.S. national deficit over the next decade. The analysis, released on Monday, provides a detailed look at the potential impact of Trump’s proposed extensions of his 2017 tax reforms, elimination of taxes on Social Security benefits, and reductions in corporate income tax rates. These proposals, if implemented, are projected to significantly widen the nation’s budget deficits from 2025 to 2034.

 

According to the analysis, Trump’s proposals could increase primary deficits by $5.8 trillion on a conventional basis over the ten-year period. When factoring in economic feedback effects—adjustments that consider how the proposals might influence overall economic performance—the projected increase is slightly lower, at $4.1 trillion. The report underscores the substantial fiscal impact of the proposed measures, which seek to expand the tax cuts that were central to Trump’s economic policies during his presidency.

 

A major contributor to the projected deficit increase is the proposal to extend expiring individual income tax provisions from Trump’s 2017 Tax Cuts and Jobs Act (TCJA). This extension alone is estimated to add $3.4 trillion to the deficit before accounting for interest costs over the next decade. The analysis explains that this figure represents the single largest cost among Trump’s proposals, reflecting the high expense of maintaining the lower tax rates and other benefits introduced in 2017.

 

Additionally, the report points to another significant cost arising from the proposed restoration of the original TCJA regime for taxing business investments. This move is expected to add an additional $623 billion to the deficit, bringing the total cost of the TCJA extension to over $4 trillion. This estimate highlights the long-term fiscal impact of the tax reforms, which were initially designed to be temporary but are now being positioned as permanent features of Trump’s economic platform.

 

The elimination of taxes on Social Security benefits is another key component of Trump’s economic agenda, with analysts projecting that this policy could cost as much as $1.2 trillion over the next ten years. This proposal is particularly targeted at easing the financial burden on retirees, but its implementation would significantly reduce federal revenue, adding further strain to the national budget.

 

Trump’s plan to reduce the corporate income tax rate to 15 percent—a sharp drop from the current rate—also features prominently in the analysis. This reduction is estimated to cost $595 billion over the same period. While the move is intended to stimulate business investment and economic growth, it would also lead to substantial revenue losses, adding to the overall deficit impact of Trump’s proposals.

 

Despite the staggering costs associated with these measures, the analysis indicates that households across all income levels—low, middle, and high—would generally benefit from the proposed tax changes on a conventional basis in the years 2026 and 2034. However, the report cautions that these apparent gains do not factor in the additional debt burden that future generations will face as a result of the increased deficits. The analysis warns that the benefits seen in the short term may be outweighed by the long-term fiscal challenges posed by rising national debt.

 

The Penn Wharton Budget Model’s findings also include an evaluation of economic proposals put forward by Vice President Kamala Harris. In a separate analysis, the group assessed Harris’s plans to expand social welfare programs, such as the Child Tax Credit and the Earned Income Tax Credit, and to provide increased support for first-time homebuyers. Harris also proposes raising the corporate tax rate to 28 percent, a stark contrast to Trump’s plan to lower it. The analysis projects that Harris’s proposals would lead to a spending increase of $2.3 trillion over ten years, with tax revenue rising by $1.1 trillion, resulting in a net increase in primary deficits of $1.2 trillion. When accounting for economic feedback effects, the projected deficit increase rises to $2 trillion.

 

However, the analysts noted some uncertainties regarding Harris’s proposals, particularly concerning her stance on tax provisions outlined in President Joe Biden’s fiscal 2025 budget request. While Harris’s campaign confirmed to NBC News that she supports Biden’s revenue proposals aimed at reducing the deficit by $3 trillion over the next decade through tax increases on the wealthy, it remains unclear whether she endorses all the spending measures included in the FY 2025 budget.

 

Notably, both Trump’s and Harris’s plans include proposals that involve the non-taxation of tips earned by service workers, a controversial issue with potentially significant fiscal implications. The analysis highlights the complexities of this policy, noting that reclassifying income as tips could lead to substantial changes in revenue collection. “The ability to reclassify income is often a major source of revenue response in conventional tax scoring,” the report stated, emphasizing that a more detailed examination would be necessary to accurately estimate the budgetary impact of this provision.

 

As the 2024 presidential campaign season progresses, these competing economic visions underscore the divergent approaches to fiscal policy and deficit management between the candidates. Trump’s proposals largely continue the tax-cutting and deregulatory themes of his first term, emphasizing immediate economic growth and household benefits, while critics argue they risk ballooning the national debt. On the other hand, Harris’s plans focus on bolstering social safety nets and increasing taxes on corporations and high earners to finance new spending initiatives, though her proposals are not without their own deficit concerns.

 

The Penn Wharton Budget Model’s analysis serves as a critical tool for voters and policymakers alike, providing a clearer picture of the potential economic and fiscal consequences of these contrasting agendas. As debates over the future of U.S. economic policy continue to unfold, the findings underscore the complex trade-offs inherent in shaping a sustainable and equitable fiscal future for the country.

 

Credit: The Hill 2024-08-29

 

 

 

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[Tug]

Most of this is above my pay grade but as a simple lay person it looks to me to be welfare for the rich lower their taxes and charge tarreffs.the big corporations don’t pay their share their business model gets a healthy padding with the tarreffs we consumers will be forced to pay…..great deal for the wealthy but us regular folk and the services the government provides not so much.but then again it’s trump what did you expect…..

[spidermike007]

His plan for increasing tariffs are an absolute economic abomination. I understand the desire to bring manufacturing back to the US, but you can't penalize American companies that are operating in China, and the plan would make more sense if you gave them a realistic window within which they could relocate manufacturing.

 

The secondary aspect of this is that there's a reason why a lot of manufacturing is not being done in the US, the costs are prohibitive, and the unions are very difficult to deal with. 

 

Just another unrealistic Trump proposal that would not only sabotage the economy, but would penalize Americans and add to economic deterioration and unemployment. 

[Presto]

Remarkably, neither party has shown much interest in the national debt, the past decades. And that includes Biden, who can't achieve a balanced budget even in a booming economy.

National debt to GDP is about 130% I believe, and no end in sight. 

Annual interest is 900 billion in 2024, apparently not a problem for the American taxpayer.

Note that 130% won't allow a country to become an EU member ...

[Presto]

1 hour ago, spidermike007 said:

His plan for increasing tariffs are an absolute economic abomination. I understand the desire to bring manufacturing back to the US, but you can't penalize American companies that are operating in China, and the plan would make more sense if you gave them a realistic window within which they could relocate manufacturing.

 

The secondary aspect of this is that there's a reason why a lot of manufacturing is not being done in the US, the costs are prohibitive, and the unions are very difficult to deal with. 

 

Just another unrealistic Trump proposal that would not only sabotage the economy, but would penalize Americans and add to economic deterioration and unemployment. 

The very stable genius keeps repeating that tariffs are paid by the country exporting goods to the US. 

And, as the polls show, half of American voters believe that nonsense.

It says a lot about America.

[candide]

9 hours ago, Tug said:

Most of this is above my pay grade but as a simple lay person it looks to me to be welfare for the rich lower their taxes and charge tarreffs.the big corporations don’t pay their share their business model gets a healthy padding with the tarreffs we consumers will be forced to pay…..great deal for the wealthy but us regular folk and the services the government provides not so much.but then again it’s trump what did you expect…..

I guess the 'non-rich' will get at least some crumbs from the tax cuts, but will also experience higher prices from tariffs.

Edited August 29 by candide

[candide]

1 hour ago, Presto said:

The very stable genius keeps repeating that tariffs are paid by the country exporting goods to the US. 

And, as the polls show, half of American voters believe that nonsense.

It says a lot about America.

Of course, he's lying, as usual!

Tariffs are something simple enough for Trump and his fans to understand, that's why he's fond of this policy.

 

Of course, he's not able to understand anything more complex, I.e. which would require reading technico-economic reports.

Edited August 29 by candide

[Cameroni]

Americans don't care about their deficit for one good reason. They don't need to. America is rich beyond imagination.

 

If America wanted to, they could pass corporate tax tomorrow that would wipe out the deficit. But why would they do such a thing?

 

Many economists think the budget deficit doesn't matter, apart from generational inequality. Whilst America is still the most powerful ecnonomy in the world its debt ratings are not endangered and the Dollar is still the undisputed King. Why worry about the deficit at all?

 

https://press.uchicago.edu/Misc/Chicago/751120.html

[TedG]

Raise your hand if you support a balanced budget. 

[TedG]

8 minutes ago, Cameroni said:

Americans don't care about their deficit for one good reason. They don't need to. America is rich beyond imagination.

 

If America wanted to, they could pass corporate tax tomorrow that would wipe out the deficit. But why would they do such a thing?

 

 

 

This require a 60% rate. 

[TedG]

3 hours ago, Presto said:

Remarkably, neither party has shown much interest in the national debt, the past decades. And that includes Biden, who can't achieve a balanced budget even in a booming economy.

National debt to GDP is about 130% I believe, and no end in sight. 

Annual interest is 900 billion in 2024, apparently not a problem for the American taxpayer.

Note that 130% won't allow a country to become an EU member ...

Biden had record revenue in 2022 and managed a 1.3 trillion dollar deficit. 

[Presto]

16 minutes ago, Cameroni said:

Americans don't care about their deficit for one good reason. They don't need to. America is rich beyond imagination.

 

If America wanted to, they could pass corporate tax tomorrow that would wipe out the deficit. But why would they do such a thing?

 

Many economists think the budget deficit doesn't matter, apart from generational inequality. Whilst America is still the most powerful ecnonomy in the world its debt ratings are not endangered and the Dollar is still the undisputed King. Why worry about the deficit at all?

 

https://press.uchicago.edu/Misc/Chicago/751120.html

It's debt ratings are endangered. S&P downgraded treasuries about 10 years ago, Fitch did it last year.

You should look up the yield of government bonds by country.

[Cameroni]

1 minute ago, Presto said:

It's debt ratings are endangered. S&P downgraded treasuries about 10 years ago, Fitch did it last year.

You should look up the yield of government bonds by country.

Yes, I know but not in a serious way. By "endangered" I mean, the debt rating are so bad that no country wants to buy American debt. That's nowhere near happening. 

 

https://www.statista.com/statistics/246420/major-foreign-holders-of-us-treasury-debt/

 

If foreign countries keep funding the American lifestyle of excess, all is well.

[Cameroni]

13 minutes ago, TedG said:

 

This require a 60% rate. 

 

First, we’re an outlier in how small our fiscal footprint is. Compared with the rest of the world, we don’t tax and spend much. 

 

Second, raising U.S. revenue levels to the average level of our peer countries would raise the equivalent of $2.61 trillion, roughly five times the amount needed to close the fiscal gap. Importantly, places like France and the Nordic countries collect this level of high revenue while still delivering reliable growth in living standards. These rich, high-functioning countries don’t seem hampered by excess taxation.

 

https://www.epi.org/blog/could-tax-increases-alone-close-the-long-run-fiscal-gap/

[Presto]

15 minutes ago, TedG said:

Biden had record revenue in 2022 and managed a 1.3 trillion dollar deficit. 

You should read this article. There's no difference between Trump and Biden with regard to borrowing and adding to the national debt.

https://www.forbes.com/sites/bobhaber/2024/08/21/americas-currency-crisis-declining-global-confidence-in-the-dollar/

Edited August 29 by Presto

[Presto]

3 minutes ago, Cameroni said:

 

First, we’re an outlier in how small our fiscal footprint is. Compared with the rest of the world, we don’t tax and spend much. 

 

Second, raising U.S. revenue levels to the average level of our peer countries would raise the equivalent of $2.61 trillion, roughly five times the amount needed to close the fiscal gap. Importantly, places like France and the Nordic countries collect this level of high revenue while still delivering reliable growth in living standards. These rich, high-functioning countries don’t seem hampered by excess taxation.

 

https://www.epi.org/blog/could-tax-increases-alone-close-the-long-run-fiscal-gap/

I've occasionally thought about how much tax would I, or anyone else, be willing to accept. And I mean income tax and VAT. 50%? Maybe that's a psychological limit?

[Cameroni]

5 minutes ago, Presto said:

You should read this article. There's no difference between Trump and Biden with regard to borrowing and adding to the national debt.

https://www.forbes.com/sites/bobhaber/2024/08/21/americas-currency-crisis-declining-global-confidence-in-the-dollar/

Of course there's no difference. In fact the gigantic borrowing is what makes big government possible, if it stopped Democrats' policies would be impossible to implement. But then with the increasing number of old people, who can solve this issue without borrowing? Can't be done. All nations are going to the capital markets to finance their spending.

 

The alternative would be to let old people die. Or force them all to emigrate to Thailand. 

Edited August 29 by Cameroni

[Presto]

9 minutes ago, Cameroni said:

Yes, I know but not in a serious way. By "endangered" I mean, the debt rating are so bad that no country wants to buy American debt. That's nowhere near happening. 

 

https://www.statista.com/statistics/246420/major-foreign-holders-of-us-treasury-debt/

 

If foreign countries keep funding the American lifestyle of excess, all is well.

The thing about those downgrades is that they are for a large part unnecessary.

They are in part, caused by silly political processes like the debt ceiling and funding the government.

Processes unique to America, and politicians from whatever side have never expressed a willingness to get something sensible in place. I guess they love the annual circus, and maybe it gives them a sense of power and competence.

[Cameroni]

10 minutes ago, Presto said:

You should read this article. There's no difference between Trump and Biden with regard to borrowing and adding to the national debt.

https://www.forbes.com/sites/bobhaber/2024/08/21/americas-currency-crisis-declining-global-confidence-in-the-dollar/

 

Sure, countries like Russia, China, and even Germany, are taking steps to be less exposed to American use of the dollar as a political tool. However, they can only achieve minor success in this. There is no way in human imagination that the dollar will be knocked of its top spot by China or Russia or the Euro any time soon. I trade Forex, and I can tell you even now, if the Dollar sneezes the rest of the world catches a cold. All currencies are basically derived of how the Dollar is doing. 

 

There may be less influence for the dollar, but it will still be the undisputed King for a very long time.

Edited August 29 by Cameroni

[TedG]

11 minutes ago, Presto said:

You should read this article. There's no difference between Trump and Biden with regard to borrowing and adding to the national debt.

https://www.forbes.com/sites/bobhaber/2024/08/21/americas-currency-crisis-declining-global-confidence-in-the-dollar/

 

Biden had revenues at 19% of the GDP in 2022 with a 1.3 trillion dollar deficit.   This proves the federal budget is a train wreck.  Yet, everyone one wants to add new programs and keep on spending. 

[simple1]

22 minutes ago, TedG said:

Biden had record revenue in 2022 and managed a 1.3 trillion dollar deficit. 

 

Biden had inherited debt in the trillions from prior Administrations, a large component from trump's tax reductions for corporates, plus increased debt to stimulate the economy after Covid e.g. infrastructure spending etc. Current US national debt is approx 34 trillion dollars, around 120% of GDP; forecast to increase to $54 trillion in coming decade. However what percentage of current GDP is required to service the debt annually? 

 

Debt service amounted to 2.4% of the economy last year, CBO said, and is poised to rise to 3.1% this year and 3.9% in 2034.

 

https://www.axios.com/2024/02/08/us-government-debt-gdp-interest-costs

[TedG]

32 minutes ago, Cameroni said:

 

First, we’re an outlier in how small our fiscal footprint is. Compared with the rest of the world, we don’t tax and spend much. 

 

Second, raising U.S. revenue levels to the average level of our peer countries would raise the equivalent of $2.61 trillion, roughly five times the amount needed to close the fiscal gap. Importantly, places like France and the Nordic countries collect this level of high revenue while still delivering reliable growth in living standards. These rich, high-functioning countries don’t seem hampered by excess taxation.

 

https://www.epi.org/blog/could-tax-increases-alone-close-the-long-run-fiscal-gap/

Federal state and local taxes consume 32% of the GDP (2022 numbers).  That’s plenty.   

 

 

If you look at trends since WW2, the US has never collected more than 20% of the GDP in revenue despite high higher tax rates in the past.  Yet, federal spending is since 2010 has been over 20% of the GDP. 

 

 

[TedG]

22 minutes ago, simple1 said:

 

Biden had inherited debt in the trillions from prior Administrations, a large component from trump's tax reductions for corporates, plus increased debt to stimulate the economy after Covid e.g. infrastructure spending etc. Current US national debt is approx 34 trillion dollars, around 120% of GDP; forecast to increase to $54 trillion in coming decade. However what percentage of current GDP is required to service the debt annually? 

 

Debt service amounted to 2.4% of the economy last year, CBO said, and is poised to rise to 3.1% this year and 3.9% in 2034.

 

https://www.axios.com/2024/02/08/us-government-debt-gdp-interest-costs

 

The high interest rates are pushing up the cost to service the debt. 

[TedG]

23 minutes ago, simple1 said:

 

Biden had inherited debt in the trillions from prior Administrations, a large component from trump's tax reductions for corporates, plus increased debt to stimulate the economy after Covid e.g. infrastructure spending etc. Current US national debt is approx 34 trillion dollars, around 120% of GDP; forecast to increase to $54 trillion in coming decade. However what percentage of current GDP is required to service the debt annually? 

 

Debt service amounted to 2.4% of the economy last year, CBO said, and is poised to rise to 3.1% this year and 3.9% in 2034.

 

https://www.axios.com/2024/02/08/us-government-debt-gdp-interest-costs

 

Biden’s solution to high debt was to spend more.  stop trying to paint Biden as a victim.  

[TedG]

I’d love to see the Harris proposal to reduce the future deficits.  LOL

[Presto]

31 minutes ago, Cameroni said:

 

Sure, countries like Russia, China, and even Germany, are taking steps to be less exposed to American use of the dollar as a political tool. However, they can only achieve minor success in this. There is no way in human imagination that the dollar will be knocked of its top spot by China or Russia or the Euro any time soon. I trade Forex, and I can tell you even now, if the Dollar sneezes the rest of the world catches a cold. All currencies are basically derived of how the Dollar is doing. 

 

There may be less influence for the dollar, but it will still be the undisputed King for a very long time.

All fine with me, my points were, that despite the cheering about Biden, with regard to the national debt, there is no difference with Trump.  We could have a discussion about how all that borrowed is spend of course, and I could go into a diatribe about the Infrastructure bill. But I won't.

Plus, it doesn't seem to bother Americans that they're paying 900 billion this year on interest, about the same as the defense budget. That interest sum is only rising, at some point American will wake up and ask themselves: for what? Interest? Nothing tangible?

How long this situation can go on, I don't know. Common sense tells me, not long, but common sense doesn't matter here I guess.

[Presto]

8 minutes ago, TedG said:

 

The high interest rates are pushing up the cost to service the debt. 

First inflation rises, fuelled (at least in part) by the trillions of borrowed money pumped into the economy by Biden. Then the Fed steps in and raises interest rates, from the extremely low level it was. Than people get angry, first because it hurts their insatiable credit card use, and second because it hurts mortgages.

Make a comparison between mortgage interest in America and Western Europe, and you'll see the difference.

[Cameroni]

9 minutes ago, Presto said:

All fine with me, my points were, that despite the cheering about Biden, with regard to the national debt, there is no difference with Trump.  We could have a discussion about how all that borrowed is spend of course, and I could go into a diatribe about the Infrastructure bill. But I won't.

Plus, it doesn't seem to bother Americans that they're paying 900 billion this year on interest, about the same as the defense budget. That interest sum is only rising, at some point American will wake up and ask themselves: for what? Interest? Nothing tangible?

How long this situation can go on, I don't know. Common sense tells me, not long, but common sense doesn't matter here I guess.

 

It's a very particular issue the deficit, because it's not the same as a deficit in your personal budget. In the end the US is borrowing to countries, who can never enforce, but they keep coming back for more IOUs.

 

i totally agree there's no difference between Harris, Biden or Trump in terms of the deficit, they all NEED it to finance their grandiose plans. And in fact just to keep the country going and to service the old people.

 

Interest, yes, there is a price for living on other people's money, but ultimately it's a sweet deal, the US is living a life of excesss on other people's money.

[Cameroni]

19 minutes ago, TedG said:

 

The high interest rates are pushing up the cost to service the debt. 

Yes, that's true, but in the end there is a price for living off the largesse of others. As long as the US can live a life of excess and get others to finance it, they will continue to do so. Interest is a small price to pay for the benefits.

[TedG]

2 minutes ago, Presto said:

First inflation rises, fuelled (at least in part) by the trillions of borrowed money pumped into the economy by Biden. Then the Fed steps in and raises interest rates, from the extremely low level it was. Than people get angry, first because it hurts their insatiable credit card use, and second because it hurts mortgages.

Make a comparison between mortgage interest in America and Western Europe, and you'll see the difference.

I do feel interest rates were too low since the 2010’s.  The low rates pushed up the cost of housing and we all know cheap money causes bubbles.