The Penn Wharton Budget Model, a think tank based at the University of Pennsylvania, recently released a study arguing that former President Donald Trump's economic plan would increase the national deficit by about $4 trillion over 10 years, while Vice President Kamala Harris' economic plan would increase it by about $2 trillion.
VP Harris would increase the deficit primarily by expanding refundable tax credits such as the Child Tax Credit. Low-income Americans qualify for refundable tax credits even if they have a low federal tax burden. Thus, the proposal includes welfare programs disguised as tax credits. VP Harris also proposes spending $40 billion on an “Innovation Fund” to increase the supply of “affordable” housing. Another of the VP's proposals is to provide up to $25,000 in down payment assistance to first-time home buyers.
Harris' proposal could encourage a new housing bubble that will inevitably burst and lead to an economic crisis worse than the Great Recession that followed the last housing bubble. One reason it could get even worse is that it could be accompanied by the collapse of several other bubbles and the denial of the dollar's status as the global reserve currency.
According to the study, President Trump would increase the deficit by cutting taxes without cutting spending. President Trump has promised to extend the 2017 tax cuts and has also promised to end taxation on Social Security benefits. President Trump's tax cuts would spur economic growth, job creation, and increased tax revenues. The study notes that the pro-growth effect of President Trump's tax cuts is why it projects that President Trump's tax policy would “only” increase the federal deficit by $4.1 trillion over 10 years, instead of $5.8 trillion.
It is often said that tax cuts “cost” governments. Saying that tax cuts cost governments assumes that governments have a moral right to individuals' incomes, and therefore that whenever those who run the government enable individuals to keep more money, the rulers are being generous. The truth is that income belongs to the people who earn it, and saying that tax cuts cost governments is like saying that burglar alarms cost burglars. Thus, the enactment of tax cuts is a victory for freedom.
We should never allow concerns about government debt to stymie our support for tax cuts. Instead, we should focus on the real cause of the debt crisis: increased spending in a wasteful effort to run the world, the economy, and our lives. Increasing federal deficits lead to higher taxes, either directly through Congress and the IRS, or indirectly through a Fed-imposed inflation tax on the federal debt.
If the federal government doesn't cut spending and start paying down its debt, America will face an unprecedented economic crisis. Yet neither Donald Trump nor Kamala Harris will talk about this issue, and rather than offering any serious plans to roll back the welfare war state, cut spending, and start paying off the debt, both candidates are more likely to spend more. This is one of the reasons it's hard to take seriously claims that this is the most important election in history.
Ron Paul is a former U.S. Congressman from Texas. This article originally appeared on the Ron Paul Institute for Peace and Prosperity and is reprinted here with permission.
