Current Law Debt Projections (Percent of GDP)

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2 Current Law Debt Projections (Percent of GDP) 180% 160% Historical Projected 140% 120% 100% 80% 60% 40% 20% 0% Sources: CBO and OMB 2

3 The Consequences of Rising Debt Slower Growth: The non-partisan Congressional Budget Office (CBO) projects the economy will be 4 to 6 percent larger by 2040 if we fix the debt instead of continuing to let it grow Higher Interest Rates: Growing federal debt causes higher interest rates throughout the economy, increasing payments for mortgages, car and student loans, and credit card debt Crowds Out Other Government Priorities: By 2027, mandatory spending and interest on the debt will consume all revenue, leaving little room for important discretionary investments 3

4 The Consequences of Rising Debt (cont d) Inability to Respond to Next Crisis: Since the Great Recession began, we have increased debt levels from 35 to 75 percent of GDP through automatic stabilizers, stimulus, and rescue measures. Little fiscal space is available for the next recession Endangered Entitlements: The SSDI trust fund will run out in , the Medicare HI trust fund in , and the Social Security retirement trust fund in Unsustainability: Debt is at record levels, other than around WWII, and continuing to rise higher each year. CBO describes this as a trend that would ultimately be unsustainable 4

5 Real Per Capita GNP Rises as Debt Falls $90,000 $80,000 $70,000 Debt Continuing Upward Debt On a Downward Path $67,800 $69,350 $77,400 $81,350 $60,000 $57,600 $57,600 $50,000 $40,000 $30,000 $20,000 $10,000 $ Sources: CBO, CRFB Calculations 5

6 Social Security Beneficiaries Face Steep Cuts in 2034 add $60,000 $50,000 $40, CPI-Adjusted Dollars Typical Couple Newly Retired Age 62 in 2016 (Age 80 in 2034) Typical Couple Age 50 in 2016 (Retiring in 2033 at age 67) $49,200 $10,300 per year loss $30,000 $30,700 $6,500 per year loss $20,000 $38,800 $10,000 $24,200 $ Annual Benefit Cut Sources: Social Security Administration, CRFB Calculations Note: We define a typical couple as one with two scaled medium earners each earning roughly the average wage over their lifetimes. The actual median couple might differ from this illustration. 6

7 What Would Clinton and Trump Do to the Debt? 7

8 Ten-Year Change in Fiscal Metrics Under Our Central Estimates (Trillions) $4 Revenue Primary Spending Interest Surplus/Deficit (-) $2 $0 -$2 $1.20 $1.40 -$0.65 $0.05 $1.70 -$0.25 -$4 -$6 -$8 Clinton Trump -$10 -$12 -$ $ $14 Source: Committee for a Responsible Federal Budget 8

9 Ten-Year Spending, Revenue, and Deficits Under Our Central Estimates (Percent of GDP) 25% 20% 22.1% 22.7% 22.5% 4.0% 4.1% 18.1% 18.6% 9.0% 15% 13.6% 10% 5% 0% Current Law Clinton s Proposals Trump s Proposals Revenue Spending Interest Deficit Source: CRFB calculations, CBO projections. Note: Spending and revenue calculations are based on CBO s 10-year projection of cumulative GDP between

10 Debt Under Candidates Proposals (Percent of GDP) 150% 140% 130% 120% 110% 100% 90% 80% 70% Trump Range Clinton Range Clinton Central Estimate Trump Central Estimate Current Law 127% 87% 60% Source: Committee for a Responsible Federal Budget 10

11 Key Findings Under Central Estimates for Each Candidate ( ) 11

12 Details of Their Plans 12

13 Summary of Candidates Policy Proposals (Cost/ Savings (-)) +<0.5% 13

14 Summary of Hillary Clinton s Major Campaign Proposals 14

15 Composition of Clinton s New Spending Under Our Central Estimate (Billions) Paid Leave $300 billion College Education $350 billion Infrastructure $300 billion Early Ed & Child Care $200 billion Other Spending $250 billion Source: Committee for a Responsible Federal Budget 15

16 Summary of Donald Trump s Major Campaign Proposals 16

17 Individual Statutory Tax Rates Under Candidates Plans 50% 45% 40% 35% Current Law Clinton's Tax Plan Trump's Tax Plan 30% 25% 20% 15% 10% 5% 0% $0 $50k $100k $150k $200k $250k $300k $350k $400k $450k $500k $5M $5.05M Statutory marginal ordinary income tax rates for a married couple filing jointly. Includes the standard deduction and personal exemption. Sources: IRS, Trump campaign, Clinton campaign, CRFB calculations 17

18 The Candidates, Side by Side 18

19 Remember: Interest is the Fastest Growing Part of the Budget 450% Percent Change 2015 to % 400% 350% 300% 250% 276% 280% 200% 150% 100% 50% 22% 44% 84% 93% 0% Discretionary Spending All Other Mandatory Social Security Health Care Interest Clinton Interest Trump Interest Source: CRFB calculations based on Congressional Budget Office projections. 19

20 What Would It Take to Get Debt Under Control? 20

21 What Would It Take to Fix the Debt? Under current law, it would require $2.9 trillion over a decade to stabilize the debt at its current record-high levels Under current law, it would require about $7.8 trillion over a decade (depending on details) to balance the budget by 2026 A reasonable fiscal goal would fall between these bookends For Secretary Clinton, this suggests savings of $3.2 to $8 trillion Donald Trump need $14.4 to $19.3 trillion of savings Achieving these savings would require aggressive changes 21

22 Real Economic Growth Rate Needed Under Our Central Estimates (Annual Average Real GDP Growth) 10% Pay for Proposals* Stabilize the Debt Balance the Budget 10.3% 8% Current Projected Growth: 2.1% 6% 4% 2% 2.3% 4.6% 2.9% 5.4% 4.7% 0% Clinton Trump Clinton Trump Clinton Trump Source: CRFB calculations based on dynamic feedback projections from Tax Foundation for revenue and CBO for immigration reform and ACA repeal. *We assumed growth sufficient to maintain currently law debt-to-gdp ratio of 86 percent by 2026, although nominal debt levels will still increase. Note: For stabilize the debt, we assumed $2.6 trillion of non-interest savings relative to current law (the equivalent of $2.9 trillion with interest), enough based on current GDP projections to achieve a debt-to-gdp ratio of 75 percent by For balance the budget, we assumed $7.8 trillion of deficit reduction over 10 years to account for interest. 22

23 Spending Cuts Needed Under Our Central Estimates (Percent of All 10-Year Primary Spending) 40% 35% 30% 25% 20% 15% Pay for Proposals Stabilize the Debt Balance the Budget 37% 27% 22% 15% 10% 5% 0% < 1% 6% Clinton Trump Clinton Trump Clinton Trump Source: CRFB calculations based on Congressional Budget Office projections. For stabilize the debt, we assumed $2.6 trillion of non-interest savings relative to current law (the equivalent of $2.9 trillion with interest), enough based on current GDP projections to achieve a debt-to-gdp ratio of 75 percent by For balance the budget, we assumed $6.8 trillion of noninterest savings over a decade relative to current law (the equivalent of $7.8 trillion with interest), enough to balance the budget using the path from the 2015 House Budget Resolution. The actual 10-year savings to balance could differ substantially based on how policies are implemented.

24 Spending Cuts Needed, Exempting Social Security & Medicare, Under Our Central Estimates (Percent of 10-Year Primary Spending, Excluding Social Security & Medicare) 75% 60% 45% Pay for Proposals Stabilize the Debt Balance the Budget 67% 50% 39% 30% 28% 15% 11% 0% < 1% Clinton Trump Clinton Trump Clinton Trump Source: CRFB calculations based on Congressional Budget Office projections. For stabilize the debt, we assumed $2.6 trillion of non-interest savings relative to current law (the equivalent of $2.9 trillion with interest), enough based on current GDP projections to achieve a debt-to-gdp ratio of 75 percent by For balance the budget, we assumed $6.8 trillion of noninterest savings over a decade relative to current law (the equivalent of $7.8 trillion with interest), enough to balance the budget using the path from the 2015 House Budget Resolution. The actual 10-year savings to balance could differ substantially based on how policies are implemented.

25 Tax Rate Needed Assuming Across-the-Board Hikes Under Our Central Estimates (Percentage Point Tax Rate, Individual Making $50,000) 40% Pay For Proposals Stabilize the Debt Balance the Budget 35% 30% 25% 20% <25.5% 22.5% +3.5% 28.5% 27.5% +<0.5% +12.5% +17.5% 33.5% +8.5% 30.5% +20.5% 15% 10% 5% 0% Clinton Trump Clinton Trump Clinton Trump Candidate Policy Increasing Rates Across the Board to Hit Target Source: CRFB calculations of statutory marginal income tax rate for an individual with $50,000 in adjusted gross income. Option assumes equal percentage point increase in every tax bracket, but no change in liability for Trump s zero tax bracket (individuals making under $25k, couples under $50k). 25

26 Tax Increases on High Earners Needed Under Our Central Estimates (Percentage Point Tax Rate, Individuals Making over $5 million) IMPOSSIBLE IMPOSSIBLE IMPOSSIBLE IMPOSSIBLE 80% Pay For Proposals Stabilize the Debt Balance the Budget 70% 60% 64% +20% 50% 40% 45% +1% 30% 20% 10% 0% Clinton Trump Clinton Trump Clinton Trump Candidate Policy Increasing Rate on High Earners to Hit Target Source: CRFB calculations of statutory marginal income tax rate for an individual with $5 million in adjusted gross income. Note: high earners includes all those making above $250,000. Option assumes equal percentage point increase in tax brackets above 33 percent (roughly $231,000 for a couple in 2016).

27 Additional Information 27

28 Uninsured Almost Double Under TrumpCare million Only 1.1 million newly covered 48 million million 22 million rise in uninsured Currently Projected Obamacare Repeal Replacement Plan Source: CRFB calculations based on Congressional Budget Office estimates of the coverage estimates of the elements of Trump s plan. 28

29 Trump s Drug Negotiation Savings Estimate Doesn t Add Up $300 Billions of Dollars Per Year $250 $200 $150 $300 billion $100 $50 $111 billion $111 billion $0 Trump's Claimed Savings on Drugs Medicare Part D Spending $15 billion President's Budget Annual Drug Savings Negligible Actual Savings From Drug Negotiations Sources: Trump Campaign, Congressional Budget Office. 29

30 Reducing Fraud Is Not Enough To Save Social Security Stop Payments to 112-year olds Stop Payments to Deceased Stop All Improper Payments Needed for Social Security Solvency* $200,000 $15 million $5 billion *Amount needed for Social Security solvency represents the 21% cut in benefits that would be needed if solvency were avoided solely by reducing payments. The 21 percent cut would occur the year of insolvency (2034, according to the Social Security Trustees). Sources: Social Security Administration, Committee for a Responsible Federal Budget 30 $190 billion

31 Broad Social Security Expansions Cost As Much As Most of Clinton s Agenda $1,400 $1,200 $1.2 T Just under $1.2 trillion $1,000 $800 $600 $400 $350 $300 $300 $200 $200 $0 Increase All Social Security Benefits by $100/Month Make College Debt Free Source: Committee for a Responsible Federal Budget, 31 Expand Infrastructure Enact Paid Family Leave Enact Universal Pre-K and Child Care

32 Taxing the Rich Helps a Lot, But Has Its Limits Top Marginal Tax Rate for Sanders s Policies 90% 80% 70% 60% 50% 40% Potential Revenue-Maximizing Rates 52% State/Local Taxes 8.2% HI Tax: 3.8% 85% State/Local Taxes 8.2% Social Security Tax 12.4% Single Payer Taxes 8.4% HI Tax: 3.8% Added Income Tax 12.4% 73% 30% 20% 10% Current Income Tax 39.6% Current Income Tax 39.6% 0% Current Law Sanders Policy Sanders Policy with Interactions Sources: CRFB calculations from Sanders campaign descriptions, Diamond/Saez estimated average of state & local tax rate. Revenue maximizing rates have been estimated at 73% by Diamond & Saez and 63% by Trabandt and Uhlig. 32

33 Ten-Year Change in Fiscal Metrics Under Sanders s Plan (Trillions) $40 $30 $20 $10 $0 Revenue Primary Spending Interest Surplus/Deficit (-) $31.25 $15.25 $2.80 -$10 -$20 -$ $30 Source: Committee for a Responsible Federal Budget 33

34 160% Debt-to-GDP Under Senator Sanders s Proposals Percent of GDP 154% 140% 120% Sanders Campaign Estimate CRFB Estimate Current Law 100% 80% 86% 75% 60% Source: Committee for a Responsible Federal Budget, CBO 34