‘Totally unrealistic’: Trump, Harris bust budget with their tax and spending plans

Former President Donald Trump and Vice President Kamala Harris are in a bidding war to bust the budget.

Mr. Trump has proposed mountains of new tax cuts and miles more spending while promising not to trim benefits for Social Security or Medicare. Ms. Harris has proposed much the same, with just a few less tax cuts and a stardust sprinkling of tax hikes that please the left but get panned by economists.

It makes for the least serious campaign conversation on debt and spending in decades.

“Both candidates are taking the Santa Claus approach of just throwing out random populist tax cuts and spending hikes to voters, with no coherent program or consistency,” said Brian Riedl, a budget expert and senior fellow at the Manhattan Institute.

Robert Bixby, executive director of the watchdog Concord Coalition, agreed.

“The math isn’t realistic,” he said. “The politics of it all aren’t realistic.”

Mr. Trump’s proposals include extending and deepening the provisions of his 2017 tax cuts, rescinding a Biden-era green energy tax break and slapping major new tariffs on imports.

He has a tangle of other new tax cuts, including exempting tips, overtime pay and Social Security benefits as taxable income.

He supported the idea of an efficiency commission, run by billionaire Elon Musk, to conduct a full audit of the federal government.

Ms. Harris has matched Mr. Trump’s tipped wages tax cut and wants to expand existing breaks, such as the child tax credit and the earned income tax, but would let tax rates rise on households with annual incomes of $400,000 or more.

She fills out her plans with calls to raise the corporate income tax from 21% — the rate set by Mr. Trump’s 2017 law — to 28%, to ramp up a corporate alternative minimum tax and to quadruple the stock buyback tax to 4%. On the spending side, she has called for government support for first-time homebuyers.

At times, the two seem to be competing to outbid each other on what they can give away to key constituencies.

Mr. Trump in June suggested the tax cut on tipped wages, seemingly aiming at voters in the tourist-dominant swing state of Nevada. Ms. Harris rushed to match his promise in August.

Before a rally in New York in September, Mr. Trump proposed revoking part of his 2017 tax cuts by repealing the $10,000 limit on the state and local tax deduction. The limit mainly affects those in high-tax states such as New York.

Analysts said the proposals would punch a deeper hole in the budget.

“From the looks of things, they would both cause a significant deterioration in the fiscal situation, though given the details we have, former President Trump would be significantly worse than Vice President Harris,” said Maya MacGuineas, president of the Committee for a Responsible Federal Budget.

She said Ms. Harris deserves credit for saying she wants to find ways to pay for her new spending and tax breaks so they don’t deepen the deficit. Those pay-fors, as they are known inside the Beltway, aren’t detailed right now.

Mr. Trump did not find pay-fors to cover the cost of his 2017 tax cuts, though he argues the economic boost has more than made up for the lost revenue.

President Biden did find pay-fors, albeit with gimmicks, to cover the cost of his 2022 climate and tax law.

Last month, Mr. Riedl released a blueprint for stabilizing debt at about 100% of gross domestic product. In short, it means finding a way, through revenue increases and spending cuts, to keep deficits below $1 trillion a year for the foreseeable future.

Instead, the Congressional Budget Office projects that the government is on pace for a $1.9 trillion deficit this year that will rise to nearly $3 trillion within a decade.

Mr. Riedl said Mr. Trump and Ms. Harris make that even worse.

Scholars at Penn Wharton Budget Model looked at Ms. Harris’ plan in late August and calculated that it would increase spending by $2.3 trillion over a decade and raise taxes by a net $1.2 trillion, resulting in a deficit of $1.1 trillion. Her tax increases would also dampen the economy, sapping another $900 billion from federal revenue, resulting in a total deficit of $2 trillion beyond what is already projected.

Penn Wharton rated Mr. Trump’s plan even worse. They said his tax cuts and spending proposals total $5.8 trillion in more deficits. Factoring in a little more revenue from a faster economy, and the result is $4.1 trillion, the scholars said.

Neither Mr. Trump nor Ms. Harris has offered plans to deal with the looming insolvency of the Social Security and Medicare trust funds, which are slated to run out of money in the 2030s. Both have said they won’t entertain anything that could be seen as lowering expected benefits.

“It is just an abdication of leadership that they are running on not fixing the two most important programs to seniors,” Ms. MacGuineas said.

Mr. Bixby said the next administration will face other make-or-break issues as interest payments swallow up more of the budget and debt reaches an all-time high when measured against the size of the economy.

The previous record was set during World War II when the U.S. spent money to defeat the Axis powers and then went on a postwar surge that quickly erased the debt.

The deterioration has been building for more than two decades, fueled by the global war on terror, an aging population, more spending from Congress, the 2008 Wall Street collapse and the COVID-19 pandemic.

Experts said no quick fix is on the horizon, but that doesn’t mean the two candidates aren’t hoping for one.

“They’ve both got a magic bullet,” Mr. Bixby said. “For Harris, it’s the rich have to pay their fair share. For Trump, it’s tariffs. He has just these very exaggerated claims about what the United States would bring in in terms of tariffs. It’s totally unrealistic.”

The analysts said the trend is troubling.

“I can remember doing these campaigns back in the late ’90s, and even through 2012, candidates would put out relatively detailed budgets with scoring,” Mr. Bixby said.

Now, not so much.

“The grand paradox is the bigger budget deficits grow, the less voters and politicians seem to care,” Mr. Riedl said.