National Debt and Debt

The 2016 Presidential Campaign and the National Debt

The presidential race between Hillary Clinton and Donald Trump has had more than its fair share of scandals -- from Clinton's email server, the "rigged elections" as reported by undercover agents of Project Veritas, and the Clinton Foundation's pay-to-play controversies -- to Trump's lewd comments on women, his own reluctance to publish his taxes, and the nearly $1 billion loss deducted from his 1995 statement. The fact of the matter is that both candidates have been taken through the ringer in the media, both mainstream and alternative. One important issue that each candidate has attempted to address is the national debt, which is growing exponentially under the Obama Administration. Both Clinton and Trump have offered plans on what to do about the national debt. This paper will attempt to discern the facts about each candidate as they relate to the issue of the national debt and strive to assess whether one or the other is more likely to efficiently tackle this problem, based on personal accountability, financial prowess, and logic.

Donald Trump's plan to lower the national debt is a combination of leveraging debt and lowering corporate taxes. This is a significantly different and essentially opposite approach from that of Hillary Clinton, whose plan to lower the debt is to raise taxes on the wealthy.

While each of these plans might help in the end to reduce the debt -- if it were not to grow -- the fact that both candidates plan to increase spending means that the national debt is more than likely to rise under both. However, because Trump's plan is not is designed to grow businesses in America, it is possible that stimulus occurs in the U.S. that will more than cover the costs associated with his spending on infrastructure plans (rebuilding roads, bridges, airports). Indeed, as the Aerospace Industry Report indicates, most of the leading high-density airports in the country are not large enough to accommodate projected traffic in the coming two decades and will require major expansion (Materna, Mansfield, Walton 136). This is just one example of the economic reality that both candidates must face.

To understand the nature of the issue, it is important to know why the national debt is increasing at such a rapid pace. The simple answer is that the national debt is increasing so rapidly because the federal government is spending far more than it takes in year-over-year. Because U.S. Treasury bills (the I.O.U.s that the U.S. issues to investors, who collect a percentage of interest on their "loan" to the federal government) are still in relatively high demand, the federal government is able to spend more than it actually has. (Recent geopolitical indicators, however, may point to a sudden shift away from U.S. T-bills on the part of major world powers (Durden) -- especially as China and Russia begin to emerge as powerful players in the East, attracting former allies of the U.S. -- such as the Philippines and threatening the hegemony of the petrodollar) (Hunt, Rivers, Shoichet). Thus, the economic climate in which the national debt is rising is one that suggests an also just as equally rapid rise in instability on both geopolitical and social terms (England's vote to leave the EU is one such example).

The two candidate's financial management may be a good indicator of whether or not either can be trusted to address effectively the issue of the national debt. Trump's finances remain somewhat unknown, as he has not published his taxes -- though he has published a financial statement, which indicates what he is doing with his money. The "scandal" associated with Trump's taxes is the 1995 write-down of nearly $1 billion dollars -- which he has told the public he did use to avoid paying taxes (legally) over the following years. While the loss surely indicates a bad business move, the ability to write it off and deduct it from future tax payments over the years shows sound business sense: knowing when to cut a loss and what to do with it so that you live to see another day is something every businessman must know. Clinton's financial management is even murkier. Her Clinton Foundation has been labeled a "pay-to-play" fake charity (illegal) and her rise from middle class to 1%-er over the years has been described in books like Clinton Cash by Peter Schweizer, which traces Clinton's financial activities and provides much evidence of unethical activity. Moreover, Charles Ortel's analysis of the Clinton Foundation indicates massive fraud on numerous levels (Ortel). Thus, of the two, Clinton's financial activity appears to be highly suspicious, while Trump's -- from what is known -- is at least apparently legal.

So while Clinton claims that she "will not add a penny to the debt" analysts show that her spending will surely increase the debt because she does not plan on reducing government expenditure -- and that her taxation of the 1% will not do nearly enough to offset costs associated with entitlements and more (Gandel). The problem with Clinton's plan to reduce the debt is that it does not effectively tackle the issue of growth.

Clinton's plan as depicted on her campaign website is to close tax loopholes for the wealthy, increase taxes on the same class, and reduce taxes for small businesses. This plan is not likely to make a dent in the federal debt, however, because while small business is important to main street America, this is not a significant source of income for the federal government and neither do these plans address the issue of excessive spending. Moreover the likelihood of Clinton actually closing loopholes as she proposes is suspect, as she has a reputation for lying -- as even she admits, according to the Wikileaks email releases in which she tells Wall Street that she has a "private face" and a "public face" and that it is important to maintain these two identities. Thus, what she says to the public on her website or in a debate is only one side of Hillary Clinton and does not mean that privately she holds the same opinion or plan.

Trump's plan, on the other hand, is aimed less at penalizing the wealthy and more at requiring them to grow domestically rather than in foreign countries via off-shoring. This is a point worth discussing in detail, as it really is the crux of Trump's plan, which is widely criticized in the media. However, Trump's plan is essentially no different from what Sir James Goldsmith championed in the 1990s when NAFTA and GATT undermined working class communities at home by allowing corporations to export jobs in pursuit of cheaper labor and higher profit margins. Goldsmith asserted that "the economy is there to serve the fundamental needs of society, which are prosperity, stability and contentment... If you have a situation whereby the economy grows but you create poverty and unemployment and you destabilise society, you're in trouble" (Publius). Trump plans to end off-sharing by taxing companies that produce overseas and then sell in America: essentially, he plans to put a high tariff on such activity. This is penalty of course, but it is offset by the incentive which Trump also plans, which is to reduce the corporate tax rate substantially. This would take the current tax rate which is among the highest in the world (around 38%) to a much more competitive rate (15%), which would incentivize corporations to produce in the U.S. rather than abroad. This would also follow the Goldsmith idea that corporations that produce in their own nations show a responsibility towards their citizens, help to create jobs, which helps to build the economy and put more money into the system. The more real growth that is realized at home, the less likely a nation is to be crippled by debt.

Of course, if spending still eclipses income, the debt will never go down -- and this is the problem with Trump's plan as well. He wants to build up the military so that it once again is a leader in the world (currently Russia's armaments and missile defense shields are superior to any in the world). This will cost a significant amount of money -- much more than can be provided via taxes. In fact, if growth occurs more slowly than Trump anticipates, funding expansion and upgrading of the military could swell the national debt -- especially if entitlements are not reduced. Funds like Social Security are already dwindling and the government is essentially in debt to itself as it has been dipping into coffers reserved for the public for year.

As the New American reports, reducing the national debt may be beyond anyone's ability at this point ("National Debt Increases $100 Million Every Hour"). Neither Clinton's nor Trump's plan could curb such increases if neither plans to significantly reduce the federal government's spending.