America′s massive debt load a no-show on the campaign trail | Business| Economy and finance news from a German perspective | DW | 25.02.2020
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America's massive debt load a no-show on the campaign trail

Public health care, education and gun laws are the hottest issues in the US election campaign. But neither Democratic nor Republican hopefuls are eager to discuss the burning question of the country's financial future.

US President Donald Trump is not exactly known for being humble when it comes to describing his leadership credentials. Already in the run-up to the 2016 elections that swept him to power, the then Republican candidate pledged to "eliminate" the $19 trillion (€17.4 trillion) of US debts within a period of eight years.

Now, almost four years later, a look at Trump's debt reduction record is sobering by all counts. Instead of lowering America's debt load, figures recently released by the Congressional Budget Office (CBO) show the upward trajectory of the country's financial problems.

Since assuming office, the Trump administration has added a net total of $2.5 trillion in fresh debt, with the US budget deficit in the first four months of 2020 alone rising by 25%. This means that Trump has already spent close to 40% of the entire deficit last year.

The primary reason for the budget gap is Trump's 2017 package of tax cuts, which he once described as a "great Christmas gift to the middle class."

With overall US debts spiraling to $22.5 trillion, the CBO now has warned that such a high and rising debt load could pose a severe financial risk to the United States. The nonpartisan agency has estimated that state spending could surpass revenue by $1 trillion in 2020.

Symbolbild Staatsverschuldung der USA (picture-alliance/chromorange)

The US dollar. Is it as strong as it looks?

Conspicuous silence

Surprisingly though, neither the Democrats nor the Republicans have made this an issue in their campaigns for the US presidency.

Trump didn't waste a word on the debt problem in his latest State of the Union address and failed to chart out a clear reduction strategy. All he came up with was the lofty promise of trimming state expenditure by $4.4 trillion over the next decade. At the same time, however, Trump plans to increase spending for the military, the space industry and for the wall he wants to building along the border with Mexico.

Among the Democratic hopefuls, too, the US's dire financial straits seem to be on the backburner of their campaigns. In their first televised debate, all of the candidates conspicuously ignored the debt issue, with the ugly "deficit" word not being mentioned once in the 4-hour road show. Public debts were only once briefly touched upon.

Costly promises

Political observers believe the Democrats have many reasons to keep America's miserable finances flying under the radar during the presidential primaries.

"The average American has no interest in US debt at all," says G. William Hoagland, senior vice president at the Washington-based think tank Bipartisan Policy Center. He told DW that the booming US economy of the past years, including low interest rates and unemployment, had Americans feeling less worried about the mounting deficit.  

"So why should Democrats address such a sensitive topic and stick their neck out for it," he says, and notes that most of the voters are satisfied overall with their current financial situation.

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And indeed, about 70% of Americans consider maintaining the US's economic strength as their main priority in the US presidential election, national pollster Pew Research Center found in a survey carried out at the end of last year. That is followed by issues such as education, health costs and the fight against terrorism. At the bottom of the list of priorities come climate change, the military situation — and not even half of the constituency is concerned about the deficit.

As a matter of fact, Democratic frontrunners can score political points more easily with social programs and their health care reform under the slogan "Medicare for All."  Yet, when it comes to discussing the $35-trillion price tag attached to the Democrats' 10-year reform proposal, the party's left-leaning hopefuls, Elizabeth Warren and Bernie Sanders, quickly fall silent.

According to the Urban Institute think tank, financing the Democratic programs would require more than is currently being spent on social welfare, Medicare and Medicaid together. A newly introduced wealth tax as proposed by Warren would soften the financial impact, stresses Hoagland, and adds: "But that makes it still the status quo."

No visions on the horizon

Nevertheless, six of the 11 Democratic hopefuls running for president appear, at least to some extent, willing to touch the hot potato issue of debt reduction, as they've announced to stabilize or even reduce America's debt-to-GDP quota. None of them, however, has unveiled a plan about how to do that.

Former Obama administration vice president, Joe Biden, has vowed to tackle the deficit problem, but at the same time wants to invest "boldly" in jobs and low-income communities. Another contender for the Democratic nomination, Michael Bloomberg, is running on the promise of greater financial responsibility and wants to boost investment, while taxing the wealthiest Americans more.

Just as little has been heard from moderate Democratic Senator Amy Klobuchar, who only plans to stabilize the debt quota, and from moderate candidate Pete Buttigieg, who wants to reduce the deficit without saying exactly how.

And yet Buttigieg, the former mayor of South Bend, Indiana, could be successful, says Hoagland, who has advised a number of US senators on budget issues for the past 30 years. Buttigieg wouldn't scare away voters with demands for higher taxes, he argues, and — at just 38 — stands for a generation that could one day find itself having to repay America's huge debt burden. 

"Trump, Biden und Sanders: their generation won't be around to worry anymore," he told DW.

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