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The Democratic National Convention is going on this week, and much like the Republican National Convention last week, I’m once again planning to avoid watching any part of it. Life is simply too short to waste valuable leisure time on the empty promises of politicians who either won’t keep their grandiose promises or worse, who will get everything they ask and still produce an ever expanding train wreck-like fiscal disaster.
What I am doing, however, is paying attention to the Committee for a Responsible Federal Budget’s analysis of what each 2016 major party presidential candidate’s budget proposals would mean for the future of the U.S. government’s fiscal situation. That situation is already not good, and with the DNC happening this week, it’s a good time to consider what the future would look like under a Hillary Clinton presidential administration.
At this point of the 2016 political campaign, we find that the amount of spending that Hillary Clinton has proposed over the next 10 years would increase significantly from 22.1% to 22.7% of GDP. At the same time, federal tax revenues increase from 18.1% to 18.6% of GDP, as candidate Clinton has also proposed hiking income taxes on high income earners by a significant margin.
If Clinton’s fiscal plans were to go forward as currently outlined, the U.S. government’s budget deficits over the next 10 years will grow from a 4.0% gap to a 4.1% gap, which would cause the size of the national debt to grow at a rate that is slightly faster than is previously being projected based on current law.
While the CFRB predicts that the U.S. government’s budget deficits over the next 10 years will grow only slightly faster than under current law, Hillary Clinton’s proposals to date would nevertheless make the nation’s fiscal outlook considerably worse.
By loading up on federal spending so that it claims an even larger share of the U.S. economy and by becoming more reliant upon taxes imposed on high income earners for revenue, Clinton is proposing making the U.S. government’s fiscal system more like the state of California’s.
That kind of system is somewhat sustainable during periods of economic growth, but because the incomes of top income earners are much more volatile than those of typical income earners, the combination of higher government spending that is funded by top-heavy income taxes will increase the probability that the U.S. government will experience a major fiscal crisis during periods of recession because of plunging income tax revenues, just like California experienced during the Great Recession.
That toxic combination is a major contributing factor to why California today ranks among the bottom 10 of all states for fiscal health, even though it has the largest economy of all states, which would rank as the eighth largest economy in the world if California were an independent nation.
Like the future of the U.S. budget under a Trump administration, the potential future of the U.S. budget under a Clinton administration at this point of time should only be considered a first take of whatever proposals will be made during this 2016 election year. Between now and the elections in November, the main thing Americans should expect are even more promises and proposals that will bear little relationship to fiscal realities.