10 Things Trump Should Do to Secure Our Fiscal Future
President-elect Donald Trump will take office with the highest national debt as a share of the economy of any new president since Harry Truman. Mr. Trump constantly railed against the debt during the campaign. Now, he faces the tall order of confronting the debt while pursuing his other policy priorities.
The co-chairs of the non-partisan Committee for a Responsible Federal Budget — Governor Mitch Daniels, Secretary Leon Panetta, and Congressman Tim Penny — have come forward with sound advice on how the incoming president can start off on the right foot. In a new memo, they recommend 10 steps for the president-elect to take early in his administration:
1. Use the power of the presidency to elevate the importance of fiscal responsibility.
2. Set fiscal goals, and meet them in the first budget.
3. Pursue principled, bipartisan compromise, including negotiating with Congress on a multi-year budget agreement.
4. Promote strong economic growth, without relying solely on growth to fix the debt.
5. Work with Congress to advance pro-growth, fiscally responsible tax reform.
6. Pay for proposed initiatives and veto legislation that adds to the debt.
7. Task federal agencies to identify waste and inefficiencies.
8. Implement health-care reform focused on cost containment.
9. Take initial steps to save Social Security.
10. Appoint a strong and experienced economic team.
Early action on these issues will be critical given the difficult fiscal situation awaiting the new president. The debt will be at 77 percent of the economy when Mr. Trump is sworn in — double our historical average — and is on course to grow continuously for the foreseeable future. Furthermore, the federal-budget deficit is back on the rise and is expected to exceed $1 trillion by the end of Trump’s hypothetical second term.
Eighty-five percent of federal revenue over the next four years will already be committed to auto-pilot government spending programs such as Social Security, Medicare, and interest on the national debt. This locked-in spending will constrain President-elect Trump, regardless of his priorities, leaving little room for important investments that can help grow the economy, particularly if taxes are cut.
No economic plan will be successful without getting the nation’s finances under control. High and rising debt levels may slow economic growth; curb the rise of incomes; make it harder for families, businesses, and the government to invest; and limit our ability to respond to unforeseen emergencies.
The co-chairs of the Committee for a Responsible Federal Budget also warn against being tempted by low interest rates in order to add to the debt. They point out that “the United States currently faces a low cost of borrowing but a high cost of waiting, and should leverage these realities by gradually phasing in measures that simultaneously slow the growth of the debt and accelerate the growth of the economy.” Ignoring the problem now will just make it more difficult to fix later.
One of the first things that Mr. Trump should do as president is begin a national conversation about the seriousness of our fiscal challenge and the difficult decisions necessary to address it. Mr. Trump started this process on the campaign trail by warning about the size of the national debt, but he also put forth policy proposals that would substantially increase it. As president, he must take a leading role in educating Americans on the importance of fiscal responsibility. His inaugural address and State of the Union message to Congress would be good places to start.
Soon after he takes office, President Trump will have to submit a budget request to Congress. His first budget will be an excellent opportunity to demonstrate leadership by setting fiscal goals that will put the country on the right track and offering specific policy proposals to meet them. While there is no single right goal, any target should aim to ensure that debt isn’t going to grow faster than the economy.
The first step to getting out of a hole is to stop digging. As president, Mr. Trump should pay for his proposals with spending cuts or revenue increases elsewhere in the budget. And he should promise to veto any non-emergency legislation that adds to the debt under current law.
With tax and health-care reform high on the agenda, there will be opportunities to make important strides in improving the fiscal situation. Mr. Trump should take a leading role in ensuring fiscally responsible tax reform that increases revenue collection and is more efficient than the current system. Meanwhile, health-care reform should include cost-control measures that slow the growth of health-care spending.
President-elect Trump will not be able to ignore mounting national debt and deficits, and his economic agenda will not be successful if our fiscal problems remain unaddressed. Three respected and seasoned public servants have offered sound advice to address this challenge. We hope he will heed it.
Mike Murphy is the Chief of Staff and Director of Strategic Initiatives at the Committee for a Responsible Federal Budget, a non-partisan organization committed to educating the public on issues with significant fiscal policy impact.