Wall Street is often concerned about the US national debt, which is set to surpass $35 trillion in the coming months and could represent 166% of GDP by 2054.
But weeks can go by on the presidential campaign trail without the topic coming up.
That dissonance was in particularly stark relief this week at the Milken Institute Global Conference in California. The historic debt load was repeatedly cited as a potential economic stumbling block for the next presidential administration amid a flurry of otherwise bullish economic sentiment.
Why the debt isn’t a bigger issue on the 2024 campaign trail is “the best question you can ask,” said one Milken attendee, former House Speaker Paul Ryan, during a Yahoo Finance appearance Tuesday on the sidelines of the conference.
Both President Joe Biden and former President Donald Trump, meanwhile, are offering only scarce plans that few expect to significantly impact the issue — alongside other priorities that could make deficits worse. Both candidates also oversaw an explosion of new red ink during their terms in office.
“What frustrates me about this is that both of these guys running for president, Trump and Biden, are both promising they’re not going to do anything about this,” said Ryan, a former Trump ally who has fallen out with him in recent years.
During his time in Washington, Ryan often focused on the debt but, in perhaps a demonstration of the difficult issues at play, also championed the 2017 Trump tax cuts that are projected to add $1.9 trillion to the debt this decade.
A worry across the political spectrum
Gallup recently found that federal spending and the budget deficit are collectively something 51% of respondents worry “a great deal” about, the sixth highest issue on the list.
But that issue hasn’t translated into campaign focus.
Trump, when asked, often talks about drilling for oil and natural gas. He says tapping “liquid gold” represents his plan for paying off the debt. It’s a notion that experts and fact checkers say is fantastical at best.
Biden, meanwhile, offers a more concrete plan around his push to raise taxes on the richest Americans. His recently released budget proposal offers a plan that would trim deficits but debt levels would be projected to continue to rise over the coming decade.
It remains to be seen if voter decisions are swayed by the issue, but debt appears to be weighing on close watchers of the economy, even potential allies of candidates like Trump.
One is Citadel CEO Ken Griffin, who has already given nearly $60 million to Republicans this election but has kept his distance from Trump and declined to endorse him so far.
In comments to a roomful of investors at this week’s conference, the GOP megadonor highlighted debts and deficits as a key cloud on the horizon.
He says that the bond market has been able to absorb the new debt but that could change quickly if the economy slows.
“So far, so good but the problem with markets is when they change their mind they tend to change them in a very profound way very quickly,” Griffin said.
He added that addressing the underlying issues, like Social Security, “is going to involve a legislative branch and a president willing to make some pretty tough choices” — but quickly agreed that at the moment that conversation isn’t really happening.
Debt was an issue that came up repeatedly at the conference this week as attendees discussed various “warning signs” for the economy and also when the subject was the outlook for global markets.
And Warren Buffet brought it up last weekend at Berkshire Hathaway’s annual shareholder meeting in Omaha, saying widening government deficits could lead to higher taxes in the years ahead.
A series of difficult issues
Part of the reason for the lack of concrete plans from both the Biden and Trump campaigns is a lack of easy options.
In recent years — even as deficits have fallen from COVID-era highs as Biden often points out — debt levels have remained on an unsustainable path, many experts say.
Compounding the issue is that both parties are focused on policies that could further inflate deficits in the years ahead.
One of Trump’s top economic priorities if he wins in November would be an extension of his 2017 tax cuts that, contrary to promises at the time, have proven to be a key driver of the ballooning debt in recent years.
Biden, meanwhile, also promises increased spending on social programs in a potential second term that could be offset by increased taxes on the rich. By how much remains to be seen.
And neither candidate is running on his debt record. The debt increased by more than $7.7 billion during Trump’s time in office and has jumped another $6.2 billion so far under Biden, according to data from the Treasury Department.
Deficit hawks often bemoan how political incentives in both parties appear to be pushing in the direction of ever-higher deficits for the time being, leading some to wonder if an external warning sign is what could be needed to focus policymakers on the issue.
“Washington only responds to crises these days so any of these kinds of warning signals coming from the markets could be just the wake-up call that pushes lawmakers closer to actually starting to make reforms,” Maya MacGuineas, president of the Committee for a Responsible Federal Budget, said in a recent interview.
She added that tremors in the markets themselves or warnings from outside experts might be what is needed to “start that response.”
For his part, former Speaker Ryan focused on entitlement programs during Tuesday’s interview. He notes that programs like Social Security and Medicare are key drivers of government spending but are often seen as politically untouchable.
New government reports released just this week found that Social Security’s key reserve could reach insolvency by 2033 while Medicare’s key fund could meet a similar fate in 2036.
“The smart thing to do is, knowing bankruptcy is coming, get over this” political paralysis, Ryan added.
But he doesn’t seem optimistic about that happening anytime soon. The former Trump ally also revealed in Tuesday’s conversation that he’d be writing in a Republican candidate for president this November — but that candidate wouldn’t be Trump.
Ben Werschkul is Washington correspondent for Yahoo Finance.
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