Can Anyone Halve the Deficit?

As a research initiative, this week, the Penn Wharton Budget Model (PWBM) gave us election insight. Focusing on the implications of the Trump and Harris budget proposals, they projected the impact. Their one warning was that they had to depend on the facts. As a result, their scoring topics for each candidate diverged somewhat.

Candidate Budget Proposals

Deficits, the Economy, and Distribution

Comparing Trump and Harris, we see a whopping difference in the deficits they would create.

According to PWBM, the Trump plan increases primary deficits by $5.8 trillion during the next decade. However, if we include the economic feedback impact, then the deficit total goes down to $4.1 trillion. These results primarily come from continuing the 2017 Tax cuts and Jobs Act with a 15% corporate tax rate and eliminating the Social Security income tax. Consequently, the revenue loss initially gooses the economy and favors all income groups but then future generations are worse off. Needing more substance, the Trump tariffs were not in PWBM’s calculations.

Meanwhile, the Harris plan adds much less to the nation’s deficits. Over ten years, the total is $1.2 trillion and $2 trillion. Requiring congressional approval, the Harris proposals optimize the benefits to low and middle income households. Her proposals included elevating the Child Tax Credit and providing home buyers that qualify a down payment. At the same time the corporate income tax would rise to 28% from 21% (after having gone down from 35%).

In a series of tables, PWBM quantifies the deficit impact, the economic effect, and how incomes change.

For Trump, the individual tax reductions have the largest deficit impact. Then, moving from 2034 to 2054, they have GDP, capital stock, hours worked, and average wages all declining. At the same time, consumption is up as income for every quintile rises from 2026 to 2034. Correspondingly, the national debt held by the public soars.

For Harris but by much less,  individuals have the greatest impact on the ascent of deficits. Similar to the Trump plan, they nudge GDP, capital stock, hours worked, and average wages downward. One big difference from the Trump plan is the boost in lower quintile income from Harris between 2026 and 2034.

Our Bottom Line: The Deficit and the Debt

Clarifying our vocabulary, we should conclude with the difference between the deficit and the debt. The deficit, usually a minus but occasionally a surplus compares annual revenue to spending. Meanwhile, the debt is an aggregate number. It totals how much borrowing the deficits necessitated.

Here, the U.S Treasury has a wonderful sequence of graphics that explains deficits and the debt. To show the difference between the deficit and the debt, I’ve copied just one image:

And finally, returning to today’s title, the answer is, “No, not if you are a presidential candidate.”

My sources and more: With so much misinformation in the media, I was delighted to look at Penn Wharton’s budget models

and then the U.S. Treasury’s graphics.