crfb promises and price tags: a fiscal guide to the 2016 election

CRFB.org

CRFB.org

Current Law Debt Projections (Percent of GDP)

0%

20%

40%

60%

80%

100%

120%

140%

160%

180%

1960 1970 1980 1990 2000 2010 2020 2030 2040 2050 2060

Historical Projected

Sources: CBO and OMB

2

CRFB.org

The Consequences of Rising Debt

• Slower Growth: The non-partisan Congressional Budget Office (CBO) projects the economy will be 4 to 6 percent larger by 2040 if we fix the debt instead of continuing to let it grow

• Higher Interest Rates: Growing federal debt causes higher interest rates throughout the economy, increasing payments for mortgages, car and student loans, and credit card debt

• Crowds Out Other Government Priorities: By 2027, mandatory spending and interest on the debt will consume all revenue, leaving little room for important discretionary investments

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CRFB.org

The Consequences of Rising Debt (cont’d)

• Inability to Respond to Next Crisis: Since the Great Recession began, we have increased debt levels from 35 to 75 percent of GDP through automatic stabilizers, stimulus, and rescue measures. Little fiscal space is available for the next recession

• Endangered Entitlements: The SSDI trust fund will run out in 2022-2023, the Medicare HI trust fund in 2026-2028, and the Social Security retirement trust fund in 2030-2035

• Unsustainability: Debt is at record levels, other than around WWII, and continuing to rise higher each year. CBO describes this as “a trend that would ultimately be unsustainable”

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CRFB.org

Real Per Capita GNP Rises as Debt Falls

Sources: CBO, CRFB Calculations

$57,600

$67,800

$77,400

$57,600

$69,350

$81,350

$0

$10,000

$20,000

$30,000

$40,000

$50,000

$60,000

$70,000

$80,000

$90,000

2016 2030 2040

Debt Continuing Upward

Debt On a Downward Path

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CRFB.org

Social Security Beneficiaries Face Steep Cuts in 2034add

$30,700

$24,200

$49,200

$38,800

$0

$10,000

$20,000

$30,000

$40,000

$50,000

$60,000

2033 2034 2033 2034Annual Benefit Cut

Typical Couple Newly Retired Age 62 in 2016

(Age 80 in 2034)

Typical Couple Age 50 in 2016

(Retiring in 2033 at age 67)

$10,300 per year loss

$6,500 per year loss

2016 CPI-Adjusted Dollars

Sources: Social Security Administration, CRFB CalculationsNote: We define a “typical couple” as one with two “scaled medium earners” each earning roughlythe average wage over their lifetimes. The actual median couple might differ from this illustration.

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CRFB.org

What Would Clinton and Trump Do to the Debt?

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CRFB.org

$1.20 $1.40$0.05

-$0.25

-$10.50

-$0.65

$1.70

-$11.50

-$14

-$12

-$10

-$8

-$6

-$4

-$2

$0

$2

$4Revenue Primary Spending Interest Surplus/Deficit (-)

Clinton Trump

Ten-Year Change in Fiscal Metrics Under Our Central Estimates (Trillions)

Source: Committee for a Responsible Federal Budget

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CRFB.org

18.1% 18.6%

13.6%

4.0% 4.1%

9.0%

0%

5%

10%

15%

20%

25%

Revenue Spending Interest Deficit

Current Law Clinton’s Proposals Trump’s Proposals

Ten-Year Spending, Revenue, and Deficits Under Our Central Estimates (Percent of GDP)

Source: CRFB calculations, CBO projections.Note: Spending and revenue calculations are based on CBO’s 10-year projection of cumulative GDP between 2017-2026

22.1% 22.5%22.7%

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CRFB.org

Debt Under Candidates’ Proposals (Percent of GDP)

60%

70%

80%

90%

100%

110%

120%

130%

140%

150%

2010 2012 2014 2016 2018 2020 2022 2024 2026

Trump Range

Clinton Range

Clinton Central Estimate

Trump Central Estimate

Current Law

127%

87%


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CRFB.org

Key Findings Under Central Estimates for Each Candidate (2017-2026)

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CRFB.org

Details of Their Plans

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CRFB.org

Summary of Candidates’ Policy Proposals (Cost/ Savings (-))

+<0.5%

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CRFB.org

Summary of Hillary Clinton’s

Major Campaign Proposals

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CRFB.org

College Education

$350 billion

Early Ed & Child Care$200 billion

OtherSpending

$250 billion

Infrastructure$300 billion

Paid Leave$300 billion

Composition of Clinton’s New Spending Under Our Central Estimate (Billions)


15

CRFB.org

Summary of Donald Trump’s Major

Campaign Proposals

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CRFB.org

Individual Statutory Tax Rates Under Candidates’ Plans

Statutory marginal ordinary income tax rates for a married couple filing jointly. Includes the standard deduction and personal exemption. Sources: IRS, Trump campaign, Clinton campaign, CRFB calculations

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

50%

$0 $50k $100k $150k $200k $250k $300k $350k $400k $450k $500k $5M $5.05M

Current Law

Clinton's Tax Plan

Trump's Tax Plan

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CRFB.org

The Candidates, Side by Side

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CRFB.org

Remember: Interest is the Fastest Growing Part of the Budget

22%44%

84% 93%

276% 280%

0%

50%

100%

150%

200%

250%

300%

350%

400%

450%

DiscretionarySpending

All OtherMandatory

SocialSecurity

Health Care Interest ClintonInterest

TrumpInterest

Source: CRFB calculations based on Congressional Budget Office projections.

445%Percent Change 2015 to 2026

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CRFB.org

What Would It Take to Get Debt Under Control?

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CRFB.org

What Would It Take to Fix the Debt?

• Under current law, it would require $2.9 trillion over a decade to stabilize the debt at its current record-high levels

• Under current law, it would require about $7.8 trillion over a decade (depending on details) to balance the budget by 2026

• A reasonable fiscal goal would fall between these bookends

• For Secretary Clinton, this suggests savings of $3.2 to $8 trillion

• Donald Trump need $14.4 to $19.3 trillion of savings

• Achieving these savings would require aggressive changes

21

CRFB.org

Real Economic Growth Rate Needed Under Our Central Estimates (Annual Average Real GDP Growth)

2.3%

4.6%

2.9%

5.4%4.7%

10.3%

0%

2%

4%

6%

8%

10%

Clinton Trump Clinton Trump Clinton Trump

Current Projected Growth: 2.1%

Source: CRFB calculations based on dynamic feedback projections from Tax Foundation for revenue and CBO for immigration reform and ACA repeal. | *We assumed growth sufficient to maintain currently law debt-to-GDP ratio of 86 percent by 2026, although nominal debt levels will still increase. | Note: For stabilize the debt, we assumed $2.6 trillion of non-interest savings relative to current law (the equivalent of $2.9 trillion with interest), enough based on current GDP projections to achieve a debt-to-GDP ratio of 75 percent by 2026. For balance the budget, we assumed $7.8 trillion of deficit reduction over 10 years to account for interest.

Pay for Proposals* Stabilize the Debt Balance the Budget

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CRFB.org

Spending Cuts Needed Under Our Central Estimates(Percent of All 10-Year Primary Spending)

< 1%

22%

6%

27%

15%

37%

0%

5%

10%

15%

20%

25%

30%

35%

40%


Pay for Proposals Stabilize the Debt Balance the Budget

Source: CRFB calculations based on Congressional Budget Office projections. For stabilize the debt, we assumed $2.6 trillion of non-interest savings relative to current law (the equivalent of $2.9 trillion with interest), enough based on current GDP projections to achieve a debt-to-GDP ratio of 75 percent by 2026. For balance the budget, we assumed $6.8 trillion of non-interest savings over a decade relative to current law (the equivalent of $7.8 trillion with interest), enough to balance the budget using the path from the 2015 House Budget Resolution. The actual 10-year savings to balance could differ substantially based on how policies are implemented.

CRFB.org

Spending Cuts Needed, Exempting Social Security & Medicare, Under Our Central Estimates

(Percent of 10-Year Primary Spending, Excluding Social Security & Medicare)

< 1%

39%

11%

50%

28%

67%

0%

15%

30%

45%

60%

75%


Pay for Proposals Stabilize the Debt Balance the Budget

Source: CRFB calculations based on Congressional Budget Office projections. For stabilize the debt, we assumed $2.6 trillion of non-interest savings relative to current law (the equivalent of $2.9 trillion with interest), enough based on current GDP projections to achieve a debt-to-GDP ratio of 75 percent by 2026. For balance the budget, we assumed $6.8 trillion of non-interest savings over a decade relative to current law (the equivalent of $7.8 trillion with interest), enough to balance the budget using the path from the 2015 House Budget Resolution. The actual 10-year savings to balance could differ substantially based on how policies are implemented.

CRFB.org

<25.5%22.5%

28.5% 27.5%

33.5%30.5%

0%

5%

10%

15%

20%

25%

30%

35%

40%


Tax Rate Needed Assuming Across-the-Board Hikes Under Our Central Estimates (Percentage Point Tax Rate, Individual Making $50,000)

Pay For Proposals Stabilize the Debt Balance the Budget

Source: CRFB calculations of statutory marginal income tax rate for an individual with $50,000 in adjusted gross income. Option assumes equal percentage point increase in every tax bracket, but no change in liability for Trump’s “zero tax bracket” (individuals making under $25k, couples under $50k).

Candidate Policy Increasing Rates Across the Board to Hit Target

+17.5%

+8.5%

+20.5%

+12.5%+<0.5%

+3.5%

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CRFB.org

Tax Increases on High Earners Needed Under Our Central Estimates (Percentage Point Tax Rate, Individuals Making over $5 million)

Pay For Proposals Stabilize the Debt Balance the Budget

Source: CRFB calculations of statutory marginal income tax rate for an individual with $5 million in adjusted gross income. Note: “high earners” includes all those making above $250,000. Option assumes equal percentage point increase in tax brackets above 33 percent (roughly $231,000 for a couple in 2016).

0%

10%

20%

30%

40%

50%

60%

70%

80%


45%

64%

IMP

OSS

IBLE

IMP

OSS

IBLE

IMP

OSS

IBLE

IMP

OSS

IBLE

Candidate Policy Increasing Rate on High Earners to Hit Target

+1%

+20%

CRFB.org

Additional Information

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CRFB.org

Uninsured Almost Double Under TrumpCare

27 million

49 million48 million

0

10

20

30

40

50

60

Currently Projected Obamacare Repeal Replacement Plan

22 million rise in

uninsured

Only 1.1 million newly covered

Source: CRFB calculations based on Congressional Budget Office estimates of the coverage estimates of the elements of Trump’s plan.

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CRFB.org

Trump’s Drug Negotiation Savings Estimate Doesn’t Add Up

Billions of Dollars Per Year

$111 billion

$0

$50

$100

$150

$200

$250

$300

Trump's ClaimedSavings on Drugs

Medicare Part DSpending

President's BudgetAnnual Drug Savings

Actual Savings FromDrug Negotiations

$300 billion

$111 billion

$15 billionNegligible

Sources: Trump Campaign, Congressional Budget Office.

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CRFB.org

Reducing Fraud Is Not Enough To Save Social Security

*Amount needed for Social Security solvency represents the 21% cut in benefits that would be needed if solvency were avoided solely by reducing payments. The 21 percent cut would occur the year of insolvency (2034, according to the Social Security Trustees).

Sources: Social Security Administration, Committee for a Responsible Federal Budget

Stop Payments to 112-yearolds Stop Payments to Deceased Stop All Improper Payments

Needed for Social SecuritySolvency*

$15 million $5 billion

$190 billion

$200,000

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CRFB.org

Broad Social Security Expansions Cost As MuchAs Most of Clinton’s Agenda

Source: Committee for a Responsible Federal Budget,

$1.2 T

$350$300 $300

$200

$0

$200

$400

$600

$800

$1,000

$1,200

$1,400

Increase All SocialSecurity Benefitsby $100/Month

Make CollegeDebt Free

ExpandInfrastructure

Enact Paid FamilyLeave

Enact UniversalPre-K and Child

Care

Just under $1.2 trillion

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CRFB.org

Taxing the Rich Helps a Lot, But Has Its Limits

Sources: CRFB calculations from Sanders campaign descriptions, Diamond/Saez estimated average of state & local tax rate. Revenue maximizing rates have been estimated at 73% by Diamond & Saez and 63% by Trabandt and Uhlig.

Current Income Tax39.6%

Current Income Tax39.6%

Added Income Tax12.4%

HI Tax: 3.8%

HI Tax: 3.8%

Single Payer Taxes8.4%

Social Security Tax12.4%

State/Local Taxes8.2%

State/Local Taxes8.2%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

Current Law Sanders Policy Sanders Policy withInteractions

52%

85%

73%

Potential Revenue-Maximizing Rates

Top Marginal Tax Rate for Sanders’s Policies

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CRFB.org

$15.25

$31.25

$2.80

-$18.80

-$30

-$20

-$10

$0

$10

$20

$30

$40

Revenue Primary Spending Interest Surplus/Deficit (-)

Ten-Year Change in Fiscal Metrics Under Sanders’s Plan (Trillions)


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CRFB.org

60%

80%

100%

120%

140%

160%

2010 2014 2018 2022 2026

Sanders Campaign Estimate

CRFB Estimate

Current Law

Debt-to-GDP Under Senator Sanders’s Proposals

Percent of GDP

Source: Committee for a Responsible Federal Budget, CBO

154%

86%

75%

34

crfb promises and price tags: a fiscal guide to the 2016 election

Economy & Finance