Final stretch to elect the next tenant of the White House and the economic programs of Donald Trump (Republican Party) like that of Kamala Harris (Democratic Party) have tiptoed through the campaign. This is because both projects suggest a worsening of the country’s public accounts but, according to the Budget Model panel of the Penn Wharton Business School, at the University of Pennsylvania, Donald Trump’s economic program would increase the primary fiscal deficit ( which includes debt payments) up to 5.8 trillion dollars (5.3 trillion euros) in a decade.
The United States deficit closed 2023 at 7.1% of GDP and forecasts suggest that this year it will grow to 7.6%. In fact, the International Monetary Fund recently warned of the debt problem facing the world. Something to which the US is no stranger, although it was not even mentioned in the campaign.
“The US fiscal deficit will only be cut marginally and will remain at around 6.1% in 2029, and about half of this deficit will reflect interest rate expenditures. Under current policies, public debt of the United States will not stabilize and will reach almost 134% of GDP in 2029,” the organization advanced.
Trump’s economic plan proposes another second wave of tax cuts, plus a permanent extension of the Tax Cuts and Jobs Act of 2017 (TCJA). This is a tax relief for companies and citizens that, according to the Committee for a Responsible Federal Budget, a non-profit association that is dedicated to analyzing candidates’ proposals, “would be a costly mistake,” specifically 1.2 trillions of dollars in a decade.
To this we must add the taxes on Social Security benefits and the reduction of the rate on corporations (the equivalent of our Corporate tax) from 21% to 15%.
“Permanently extending the TCJA’s expiring personal income tax provisions would add $3.4 trillion to deficits (before interest costs) for the next ten years. Restoring the TCJA’s original regime for taxing business investment adds another $623 billion, bringing the total cost of the TCJA extension to more than $4 trillion,” the Penn Wharton experts said.
As he assured in the campaign, Trump intends to pay for this huge tax reduction with a universal tariff of 10%. That is, tax any merchandise from anywhere in the world, which would be added to new tariffs on Chinese products above the 60% that the Joe Biden administration already imposed, also including 100% for electric vehicles.
ING economists James Kinghtley, Dimitri Dolgin and Padhrai Garvey also agree with Pnn Wharton. They said in a note that the extension of the 2017 tax cuts ($4 trillion alone), plus additional tax cuts offset by revenue from tariffs, will result in increased deficits of perhaps $5.5 trillion. dollars relative to the Congressional Budget Office (CBO) baseline.”
Tax Foundation Senior Policy Analyst and Modeling Manager Garett Watson explained to elEconomista.es at the time in the US there is room to lower taxes, but this “would require broadening the tax base by eliminating individual and commercial tax deductions, credits and other expenses that deviate from an efficient and growth-friendly tax base.”
Harris will raise the ‘red numbers’ less than half that of the Republican
Far from solving the pressing problem of the dark fiscal future that the country will face between now and 2030, it seems that the candidates want to exacerbate it since, although less so, Harris’ economic program would also imply an increase in the public deficit by 2.1%, less half that of the Republican, but it would still be worrying.
Building on Joe Biden’s 2025 budget, the Democrat seeks to establish tax benefits for middle and lower-income households within the US tax system. At the same time, it is studying subsidizing the acquisition of the first home. Of course, to pay for all this, I would use an increase in corporate tax from 21% to 28%.
Among the measures proposed to families is the expansion of the tax credit per child, from $1,700 set in 2024 (with a forecast that it would fall to $1,000 in 2026) to $3,600 per child five years old or younger and 3,000 dollars for those older than five years up to 17. In addition, families with newborn children would receive a credit of 2,400 dollars in the first year of life. Thus, the maximum value would be $6,000 in total.
In the case of those buying their first home, Harris proposes a $25,000 down payment subsidy.
“The Harris campaign’s proposed expansions of tax credits would cost more than $2.1 trillion over the next ten years. Down payment assistance for first-time homes would add another $140 billion, which, according to our Estimates would help 1.4 million home buyers a year. Raising the corporate tax rate to 28 percent would generate about $1.1 trillion in new revenue, offsetting a little less than half the cost of housing. other provisions,” they say at Penn Wharton.
Bloomberg warns that each delay in the solution “makes it more difficult to stabilize” and that makes it more likely that financial markets “will question the government’s solvency.”
