As Joe Biden took office, he wanted to emulate Franklin Roosevelt by becoming the kind of president who would react to an unprecedented crisis by spending freely. For the most part, he succeeded. But the two candidates running to succeed him are now paying the price when added to the spending of previous governments.
The initial debate between Democratic nominee for US Vice President Kamala Harris and Republican nominee and former President Donald Trump demonstrated how little appetite there is for large-scale spending. Tuesday saw them argue on a wide range of topics, such as the Middle East, abortion, and even conspiracy theories about Haitian immigrants eating other people's pets. But there were no ambitious financial plans.
In terms of the economy, Harris focused on bringing down living expenses after unusually high inflation, which for US consumers slowed to a 2.5% 12-month rate in August. She wants to offer tax breaks to developers who construct new housing, a $25,000 credit to first-time homebuyers, and an increased $6,000 allowance for new parents during the first year of a child's life. These policies, while beneficial to the intended targets, are relatively small in scope, and related costs are comparatively affordable.
Trump has been less specific, but he has also refrained from recommending any large new expenditures. Rather, his priority is to prolong the tax reductions that were implemented in his first term. Regarding childcare expenses, for instance, he has presented muddled justifications for how high tariffs on imports — he has suggested a rate that is as high as 20% — will cover the costs. Similar to a sales tax, these charges are almost invariably passed on to customers in the nation imposing them.
Despite the fact that neither presidential candidate has mentioned fiscal responsibility or austerity, there seems to be an understanding of how strapped the nation is. In addition to the more than $8 trillion that Trump had already authorized, Biden added over $4 trillion in new debt to promote local semiconductor manufacturing, renewable energy initiatives, pandemic relief, and bridge maintenance. Furthermore, Democrats will have a difficult time maintaining control of both chambers of Congress even if Harris prevails, which is a requirement for any big new spending.
Any more actions are certain to reawaken long-dormant concerns about the nation's $1.5 trillion budget deficit and growing debt, of which the Congressional Budget Office projects that interest payments alone will surpass $1 trillion in 2025. There is no doubt about one issue: government spending is going to be a difficult sell this election.