Letter to Presidential Candidates Regarding US Fiscal Health

Dear Vice President Harris and former President Trump,

The United States is at a fiscal tipping point. The total public debt outstanding has reached $35 trillion and the cost of servicing that debt through interest payments is set to exceed defense spending this year of $886 billion. The Congressional Budget Office projects debt held by the public as a share of GDP will rise to 109% in 2028 – a record level – and will continue to grow to 122% by the end of 2034. Attention is growing on this vital issue for the health of our nation. The Wall Street Journal recently published the article “Federal Debt is Soaring” and The Committee for Economic Development has delivered a Solutions Brief to US policy-makers entitled “Debt Matters: A Road Map for Reducing the Outsized US Debt Burden”.

Yet at the same time, despite the severity of this issue, proposals to address this dire fiscal situation have been absent from both Presidential campaigns. For many business leaders, who are increasingly concerned about the impact of debt, deficits, and the debt ceiling debate on our economy, this has been deeply disappointing, and the campaigns continue to avoid serious discussion of the issue. Both Presidential candidates have claimed that your proposed spending on new initiatives and promises of tax cuts will be paid for by new revenue sources and economic growth. While this is certainly good, so far, our country’s poor overall fiscal health has been ignored. The annual deficit is projected to average $2 trillion for the next ten years unless difficult choices are made to stem this tide of red ink.

Our nation’s fiscal predicament is unsustainable. High national debt threatens business growth by crowding out private investment, diverting investment away from the private sector, raising borrowing costs and eroding the standard of living, particularly impacting the most vulnerable in our communities. The rapidly increasing cost of servicing this debt is draining resources and adversely affecting the nation’s ability to address its national priorities. A broken budget process and the repeated threats of government shutdowns lead to the erosion of confidence, threatening the US dollar’s role as the world’s leading reserve currency. Importantly, the US faces the risk of sovereign debt ratings downgrades if investors lose confidence that the government can continue to finance the debt. Lower ratings mean higher borrowing costs and even more debt service – compounding the debt problem and the burden on the government to service it. While it is difficult to know when and how a fiscal crisis may erupt from excessive debt, the negative reaction of financial markets to the United Kingdom’s proposed budget in the Fall of 2022 and the country’s subsequent pronounced recession is a stark warning that a collapse of confidence may come suddenly at a time when the US may not be prepared.

National debt will only continue to grow as interest costs rise and long-term demographic trends threaten the solvency of Social Security and Medicare. While stronger-than-expected economic growth in 2023 slightly improved the financial projections for these programs, extending the projected date that the Trust Funds will be able to fully pay scheduled benefits by one year for Social Security and five years for Medicare, long-term demographic changes pose structural challenges for vital retirement and health care benefits for seniors and the disabled.

For over 80 years, starting with our legacy founders’ role in the Marshall Plan and the Bretton Woods agreement, the Committee for Economic Development (CED), the business-led non-profit, nonpartisan public policy center of The Conference Board, has been dedicated to promoting nonpartisan solutions in the nation’s interest. In this spirit, we believe that solutions to the debt and deficits should be a prominent feature of this year’s campaign. To that end, we offer the following considerations and recommendations to achieve fiscal stability and promote a more resilient, sustainable economy providing equal opportunity for all Americans.

The Need for Comprehensive Solutions

1. Each Presidential candidate needs to propose a comprehensive policy to address our debt crisis and set the Nation on an improved fiscal path. We urge each candidate to commit to working with Congress to address these structural issues after the election, particularly as the current debt ceiling expires on January 2, 2025, just prior to the Inauguration.
2. A national strategic goal should be to reduce the US debt-to-GDP ratio from its currently high level of 99% to a more sustainable 70%. In this regard, a Bipartisan Congressional Committee on Fiscal Responsibility should be established to address this challenge. 87% of CED Trustee CEOs and Board Directors polled in September 2023 believe a commission on fiscal responsibility could help reduce the national debt. The Commission should consider the biggest drivers of deficits and the long-term debt: Medicare and Social Security, whose Trust Funds are becoming insolvent. While this is politically difficult, the costs of inaction – including potential cuts for beneficiaries – are far greater.
3. The Commission should also undertake tax reform, based on the principles of fairness, efficiency, and simplicity. The pending expiration of many important provisions of the Tax Cuts and Jobs Act offers a unique opportunity for consideration of comprehensive tax reform.

It is vital to discuss these issues now, during the election, to provide a mandate to address them in office next year. A credible commitment to work with Congress on this fiscal situation will reassure the American people and inform voters who are worried about the long-term fiscal future of the country. Making fiscal health a priority will send a signal to US businesses and to the world that financial stability is an important goal, providing the environment for continued economic growth and prosperity for all Americans and continued US leadership of the global economy.

We must act now before it’s too late.

Respectfully,

David K. Young
President
Committee for Economic Development (CED), the public policy center of The Conference Board

David L. Finkelstein
Chief Executive Officer and Chief Investment Officer at Annaly Capital Management
Trustee and Co-Chair of the Fiscal Health Committee at CED

Joseph E. Kasputys
Chief Executive Officer of Economic Ventures
Trustee and Co-Chair of the Fiscal Health Committee at CED