Trump's Proposals Could Nearly Double US Debt Burden Compared To Harris', But Both Candidates Lack Fiscal Discipline, Policy Watchdog Says

The U.S. is currently struggling under the burden of a huge debt pile and economists see no reprieve, given a lack of meaningful nonpartisan efforts to tackle the crisis at hand. Against the backdrop, a report released on Monday indicated that former President Donald Trump‘s proposals could worsen the debt crisis more than those of his Democratic rival, Kamala Harris.

What Happened: Estimates by the Committee for a Responsible Federal Budget, or CRFB, show Harris’ plan would increase debt by $3.50 trillion through 2035, and Trump’s proposals would beef it up by $7.50 trillion, the Washington D.C.-based nonpartisan, non-profit organization said in a report.

Both candidates do not currently have a plan to address this pressing issue and a government under either of the candidates will push up the debt and deficits beyond what is currently projected, the organization said.

Using a low-cost estimate, CRFB sees the Harris administration causing no significant fiscal impact, while taking the high-cost route, debt could increase by $8.10 trillion. Considering Trump’s plan, these two scenarios would result in debt levels augmented by $1.45 trillion and $15.15 trillion, respectively.

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The Proposals: Among the major policy proposals of Harris are:

• extension of the Tax Cuts and Jobs Act, or TCJA, for households making less than $400,000
• expansion of Child Tax Credit and Earned Income Tax Credit
• extension and expansion of enhanced ACA premium subsidies
• supporting affordable housing
• exempt tips from income taxes and raising the minimum wage

On the income side, the vice president is looking to increase the corporate tax rate from 21% to 28%, taxes on capital income, and NIIT/Medicare taxes, reform international tax rules, and reduce prescription drug costs, among others. Under CRFB’s central estimate, the deficit-increasing measures of the Democratic presidential nominee’s policies will amount to $7.25 trillion, while $4.25 trillion will be added through her deficit-reducing measures. Interest costs will total $500 million.

Trump’s major policy proposals include:

• extension and modification of the TCJA
• exempting overtime income from taxes
• ending taxation of Social security benefits
• lowering the corporate tax rate to 15% for domestic manufacturers
• exempting tip income from taxes
• strengthening and modernizing the military
• securing borders and modernizing unauthorized immigrants

The former president is seeking additional revenue by establishing baseline tariffs and additional tariffs, reversing current energy, and environment policies and expanding production, and ending the Department of Education and supporting school choice.

Deficit-increasing measures amounting to $10.2 trillion, deficit-reducing measures totaling $3.7 trillion and $1 trillion of interest costs would result in an added deficit of $7.5 trillion under the organization’s central estimate.

Why It’s Important: The U.S. debt currently stands at a staggering $35.68 trillion. The Republicans and the Democrats are at loggerheads over their respective approaches to steer the economy out of the fiscal mess, with the former clamoring for spending cuts, while the latter bets on increasing revenue sources through taxation of the rich, among other things.

Apart from rising debt servicing costs, another undesirable offshoot of the higher debt is the interest-rate burden the country is left to shoulder. Every day, the U.S. spends $2.4 billion on interest, according to the policy think tank Peter G. Peterson Foundation. "Rapidly growing interest payments are a burden that hinders our future economy," it said.

The SPDR S&P 500 ETF Trust SPY, an exchange-traded fund that tracks the S&P 500 Index, fell 0.45% to $570.40 in premarket trading on Monday, according to Benzinga Pro data.

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