President Joe Biden and former President Donald Trump are just a couple of hours away from their high-stakes CNN showdown in Atlanta. Neither man is officially their party’s presidential nominee yet, but this could still be a crucial turning point in the 2024 election. Will the 90-minute debate inform and educate viewers about the choice we all face? Will it change anyone’s mind or reach voters who have yet to decide? Both men reportedly hope to score points on the economy, inflation and immigration, among other issues — and to avoid a disastrous flub that torpedoes their chances in what appears to be a tight race.
Nearly three-quarters of voters, 73%, told Quinnipiac University pollsters in recent days that they are likely to watch tonight’s debate, while 25% said they probably won’t watch. Of voters who have already made their choice for president, just 16% said they are open to changing their mind, while 82% said they’re locked into their pick.
As for the expectations game involved in the debate, a separate poll by The New York Times and Siena College found that 60% of registered voters thought Trump would perform “very” or “somewhat” well tonight, compared with 46% who said the same for Biden. That poll also found that about three-quarters of registered voters intend to watch the debate.
We’ll be watching to see how much focus is placed on fiscal issues, including the looming 2025 tax fight and the national debt.
IMF Warns of ‘Pressing Need’ to Address U.S. Debt
The International Monetary Fund said in a report Thursday that the U.S. economy “has turned in a remarkable performance over the past few years,” but added that there is now “a pressing need to reverse the ongoing increase in public debt-GDP ratio.”
“The U.S. is only the G-20 economy whose GDP level now exceeds the pre-pandemic level. This is good for the U.S. and it is good for the global economy,” IMF Managing Director Kristalina Georgieva told reporters at a news conference Thursday.
She also praised the fiscal legislation enacted in 2021 and 2022. “This legislation will have a lasting positive impact in reshaping the U.S. economy,” she said. “It needs to be complemented, however, with actions to put public debt-to-GDP on a decisive downward path through a broad range of policies that include raising tax revenues, addressing structural imbalances in the entitlement programs and looking for savings in non-entitlement spending.”
The IMF report warns that U.S. deficits and debt now present “a growing risk to the U.S. and global economy” and should be “urgently addressed.” It called for the government to run a surplus excluding interest costs of about 1% of GDP, compared with a current baseline deficit of about 3 percent of GDP.
To accomplish that shift over the course of several years, the IMF report said that the U.S. has a number of tax and spending options. “However,” the report said, “policies will need to go beyond finding efficiencies in discretionary, non-defense federal spending. Policymakers will need to carefully consider raising indirect taxes, progressively increasing income taxes (including for those earning less than US$400,000 per year), eliminating a range of tax expenditures, and reforming entitlement programs. Putting these measures in place will necessitate taking difficult political decisions over the course of multiple years.”
The report added that some of the savings from these changes should be spent on anti-poverty programs, including the reinstatement of Democrats’ enhanced Child Tax Credit and an expansion of the Earned Income Tax Credit for workers without children.
The report also called for lawmakers to take steps to avoid the annual spending fights and debt-limit showdowns that have become so common in recent years, saying that they “create systemic risks to the U.S. and global economy that are entirely avoidable.”
At her press conference, Georgieva acknowledged that there may be reasons for the United States to be concerned about global fair trade, but she urged American policymakers to consider negotiations and options other than imposing tariffs, which she said would be costly to both the U.S. and the global economy and lead to retaliation.
A 30-Year Plan to Stabilize the National Debt
On the heels of new projections from the Congressional Budget Office showing that the federal budget deficit and national debt will continue to rise for years to come, with the debt reaching record levels relative to the size of the economy in less than a decade, a conservative budget expert has released a plan to stabilize the debt near current levels.
The detailed proposal from Brian Riedl of the right-leaning Manhattan Institute would hold the debt-to-GDP ratio near 100%, which is about the same level as it is now and below the record 106% ratio recorded in the aftermath of World War II — and far below the 236% ratio projected by the CBO in 30 years.
Riedl says his plan is intended to help the U.S. avoid a debt crisis, which will come “at some point” when “the federal government will not be able to pay its bills” due to the sheer size of the debt and related interest payments.
The plan is meant to be realistic, avoiding what Riedl calls “fantasy scenarios” put out by some conservative and liberal policymakers, while respecting the values of both. Accordingly, the proposal “has something for everyone to hate, because everything is on the table,” he writes. Taxes would increase, while spending would be reduced — a combination Rield says “is what it actually takes to stabilize the long-term debt.”
Overall, the plan leans a bit more heavily on spending cuts than it does revenue increases, settling on a roughly 60/40 ratio between the two, similar to previous efforts to establish debt reduction over the long term.
Cutting spending: Riedl’s proposal focuses on cutting spending in the major social welfare programs, reducing outlays by the equivalent of 4.4% of GDP by 2054 overall, relative to the current baseline.
The Social Security retirement age would gradually rise, reaching 69 by 2037, and benefits would be reduced for the top 60% of households by income. These and other reforms in the retirement program would save the equivalent of 1.4% of GDP by 2054.
Medicare and Medicaid would also see cuts, reducing spending by about 2% of GDP relative to the baseline. Riedl proposes a mix of efficiency reforms and benefit cuts for higher-income households for Medicare, and reduced reimbursements and spending caps for Medicaid.
Additional cuts would be produced by spending caps and reforms in both mandatory and discretionary programs.
Raising taxes: Tax hikes would boost revenues by 2.9% of GDP by 2054, relative to the baseline. The dozen or so tax changes in the plan include raising the top income tax rate to 39.6%, repealing the 20% pass-through business deduction that was part of the 2017 Tax Cuts and Jobs Act, raising the Medicare payroll tax by 1%, and extending additional funding for the IRS provided by the Inflation Reduction Act beyond 2031.
The bottom line: Riedl offers a comprehensive plan for stabilizing federal debt levels, though, as he notes, there is little chance it will be adopted in the current political climate. “Instead, this blueprint is designed for a moment in which Republicans and Democrats finally agree to sit down and together build a sustainable, bipartisan, debt stabilization blueprint,” he writes.
Fiscal News Roundup
- Supreme Court Blocks Purdue Pharma Opioid Settlement, Threatening Billions of Dollars for Victims – NBC News
- Supreme Court Blocks Biden Plan on Air Pollution – New York Times
- Liberal Justice Sotomayor Bemoans 'Dismantling' of Federal Agency Power as Supreme Court Curbs SEC – NBC News
- House Republicans Are Setting up a Government Funding Fight – Washington Post
- House Overwhelmingly Rejects Greene, Gosar Efforts to Cut Off Aid to Ukraine – The Hill
- U.S. War Aid of $6.5 Billion Discussed During ‘Productive’ Gallant Visit – Washington Post
- US Economy Shows Further Signs of Slowing Under High Rates – Bloomberg
- IMF Blasts US for Risky Deficits, Debt, Trade and Bank Rules – Bloomberg
- Justice Department Charges Nearly 200 People in $2.7 Billion Health Care Fraud Schemes Crackdown – Associated Press
- Trump Tells Wealthy Donors He Wants to Extend His 2017 Tax Cuts. Here’s Why They’d Benefit the Most – CNN
- Biden’s Plans for the Economy: Lower Costs, Help for Student Debt – Washington Post
- Trump’s Plans for the Economy: Higher Tariffs, Pressure on the Fed – Washington Post
- House Committee Passes Bill That Would Allow Medicare to Cover Weight Loss Drugs – NBC News
Views and Analysis
- Why Tonight’s Debate Could Upend the 2024 Campaign – Adam Wren, Politico
- Hey, Jake and Dana: Here’s What to Ask About the Economy – Victoria Guida, Politico
- Health Care Just as Important as Economy. What Experts Want Biden and Trump to Address – Berkeley Lovelace Jr., NBC News
- 4 Reasons the Biden-Trump Debate Could Actually Matter – Eric Levitz, Vox
- The Winners and Losers of the Biden Economy – Eric Levitz, Vox
- Trump and Biden Share a Legacy of Outsized, Ill-Timed Debt Accumulation – Jon Hilsenrath, Semafor
- Trump’s Debate Chance on Drug Prices – Grace-Marie Turner, Wall Street Journal
- Centrist Politics Are Failing in the U.S. And Europe – Perry Bacon Jr., Washington Post
- To Raise Revenue, Tax the Nonprofits – Scott Hodge, Wall Street Journal
- Another Biden Loan Forgiveness Gift – Wall Street Editorial Board
- Can We Spare Children the Tax Roller Coaster? – C. Eugene Steuerle and Cary Lou, Tax Policy Center
- What Are the Main Causes of the Huge Growth in Deficits – Eugene Steuerle, Government We Deserve
- A Comprehensive Federal Budget Plan to Avert a Debt Crisis – Brian Riedl, Manhattan Institute
- The Fertility Crisis Is Here and It Will Permanently Alter the Economy – Nicole Goodkind, CNN