By Paula Dwyer
Hillary Clinton often boasts that her policies wouldn’t add a penny to the national debt. She says that’s because she offsets every new spending proposal and tax break with a budget cut or tax increase.
Her fiscal rectitude contrasts with Donald Trump’s fiscal craziness. He ignores accounting niceties to slash taxes and protect entitlement programs. In doing so, he would add at least $4 trillion to the national debt over 10 years.
Here’s a heretical thought: Clinton could be a little crazier. She could even steal a page from Trump and propose more deficit spending to rev up the economy in her first few years in office, if she wins.
This somewhat surprising recommendation draws from a new economic model that mimics the effects of tax cuts on behavior. The model, unveiled this week by the University of Pennsylvania’s Wharton School with an assist from the Tax Policy Center, seeks to explain how much individuals and corporations work, save, invest and spend when taxes go up or down.
It shows that Trump’s tax plan would produce faster economic growth in the short term while Clinton’s would dampen growth. After 10 years, though, the reverse would be true: Gross domestic product would be slightly lower under Trump and slightly bigger under Clinton, compared with current law.
In today’s environment of slow growth, minimal inflation and too many labor-force dropouts, Clinton could do more to jolt the economy with short-term tax cuts or more spending increases than she has proposed. And she shouldn’t be looking for budget cuts, which would erase the stimulative effect.
Why not go for the best of both worlds— short-term stimulus a la Trump, combined with long-term fiscal probity, a la Clinton?
Clinton seemed to be on the verge of suggesting something like that when her campaign whispered over the summer that she would soon unveil a middle-class tax cut. It never appeared, possibly because she ran out of offsetting tax increases elsewhere.
Spending more now to help everyone become more efficient—better roads and airports, faster trains, smarter electric grids—translates into a more robust economy in the future, one that will generate higher tax revenue to pay down debt.
Hillary Clinton, if elected, can heed the numbers and go a little crazy.