Subject: Adding Up Secretary Clinton’s Campaign Proposals So Far
From: Committee for a Responsible Federal Budget <[email-masked]>
To: Jordan Kaplan <[email-masked]>
Date: Mon, 2 May 2016 14:48:36 -0400

Adding Up Secretary Clinton’s Campaign Proposals So Far 

May 2, 2016

Read the analysis.

Democratic presidential candidate and former Secretary of State Hillary Clinton has proposed numerous new policies that would increase spending and expand tax breaks along with other policies that would increase taxes and reduce certain spending.

Using independent estimates from the Congressional Budget Office (CBO), the non-partisan Tax Policy Center (TPC), and others, we estimate that Secretary Clinton’s proposals would cost $1.8 trillion over a decade with interest, and they would be nearly fully paid for with $1.6 trillion of offsets – primarily from taxes on high earners. The $200 billion shortfall from Secretary Clinton’s proposals would be more than fully covered by the $275 billion of revenue from business tax reform that the Clinton campaign has called for but has not yet provided enough detail for us to credit.

Though Secretary Clinton’s policies would not substantially add to current law debt levels, it would keep debt at post-war record-high and rapidly growing levels. Under Secretary Clinton’s proposals, debt held by the public would climb from 74 percent of Gross Domestic Product (GDP) at the end of last year to 86 percent of GDP by 2026.

Since the 2016 presidential campaign began, the Committee for a Responsible Federal Budget has analyzed several campaign proposals through our Fiscal FactCheck project. This analysis of Secretary Clinton’s policies is our fourth full assessment of a candidate’s proposals available on their campaign’s website (Read our analysis of the policies put forth by Senator Ted Cruz, Donald Trump, and Senator Bernie Sanders). We aimed to assess all major policy proposals on www.HillaryClinton.com as of May 2, 2016, incorporating comments and details provided by representatives of the campaign. We excluded smaller initiatives and those with too little detail to assess. Secretary Clinton may support additional policy changes that are not listed on her website or have only been alluded to but not specified. We intend to follow up with further analyses of the candidate's plans, including updates to our analysis of Secretary Clinton’s proposals, as more details are added to all the candidates' websites. Estimates provided in this analysis are both rough and rounded.

It is encouraging that Secretary Clinton has outlined specific offsets for her new proposals. By our estimates, these savings would cover nearly all the new costs (and may more than fully cover the costs once the campaign releases specifics for business tax reform). Paying for new initiatives is an important and necessary step to ensuring the nation’s fiscal health does not further deteriorate.

While Secretary Clinton would not worsen the fiscal situation, she also unfortunately does not offer concrete proposals for improving it. As under current law, under Secretary Clinton’s proposals the national debt would ascend from 74 percent of GDP at the end of last year – already a record high other than the period around World War II – to 86 percent of GDP by 2026. Secretary Clinton also has not set aside money for sequester relief, even though the campaign has put forward the goal of reversing both the automatic defense and non-defense cuts, known as "sequester." If full discretionary sequester relief were enacted without offsetting the cost, the debt would climb even higher to about 90 percent of GDP.

In order to pay for sequester relief and put debt on a more sustainable path, Secretary Clinton would need to propose significant additional tax increases and/or spending cuts. By ruling out many changes to Social Security as well as tax increases on those making less than $250,000, Secretary Clinton has made this task far more difficult. Even so, given that her proposals are largely paid for, it remains possible for Secretary Clinton to offer a viable deficit reduction plan, and we encourage her to do so.

The Budgetary Impact of Secretary Clinton's Proposals

Secretary Clinton’s campaign website includes a long list of new policy proposals, factsheets, briefings, and backgrounders. The recommendations with significant costs or revenue loss include:

Enact “New College Compact.” Read our explainer here.

Expand the Affordable Care Act (“Obamacare”).

Repeal the Cadillac Tax on high-cost health insurance plans.

Expand early childhood education.

Increase infrastructure spending. Read our explainer here.

Expand paid family leave and enact related policies.

Invest in energy and research.

Support economic revitalization and increase funding for veterans.

Meanwhile, the recommendations with significant savings or revenue include:

Limit the value of tax breaks to the 28 percent bracket.

Reform capital gains taxation.

Enact a minimum tax, surtax, and other tax increases on high earners. Read our explainer here.

Increase various business taxes.

Impose a fee on financial institutions.

Reduce prescription drug costs and allow for a “public option.” Read our explainer on her prescription drug plan here.

Enact immigration reform.

Each of these policies is described in detail in Appendix I.

In addition to these policies, Secretary Clinton has called for ending the automatic discretionary sequester in conjunction with “smart reforms in both defense and non-defense spending." She has also called for expanding Social Security benefits for “those who need it most and who are treated unfairly by the current system,” including widows and caretakers, while extending the program’s solvency through tax increases on higher earners. Neither recommendation includes policy detail. In our assessment based on the campaign website and discussions with campaign representatives, these represent goals rather than proposals. Full proposals may be released at some future time, at which point we will assess their fiscal impact.

By our estimate, Secretary Clinton’s new costs will total roughly $1.8 trillion over a decade – including nearly $1.55 trillion of new spending, less than $0.2 trillion of tax breaks, and $0.05 trillion in interest. These costs would be largely offset by about $1.3 trillion of tax increases, $0.2 trillion of spending reforms, and $0.1 trillion of savings from immigration reform. In total, this would increase the debt by about $200 billion over the next decade, an increase that would be more than offset by the $275 billion of revenue the campaign has called for generated from business tax reform but not yet specified enough details to count.

A full explanation of our cost estimates, including a discussion of several policies we were unable to incorporate into our analysis, is available in Appendix II.

Attaining Fiscal Sustainability under Secretary Clinton's Plans

Secretary Clinton deserves credit for not only committing to pay for all new initiatives, but largely meeting this goal. However, by not setting aside any substantial savings for deficit reduction, Secretary Clinton would still allow debt to grow significantly as a share of the economy, from about 74 percent of GDP at the end of last year – already the highest in U.S. history other than around World War II – to 86 percent of GDP by 2026. In only a few years, under Secretary Clinton’s policies and under current law, debt would grow to twice its average over the last half-century of roughly 40 percent of GDP; and it would continue to grow unsustainably after that.

Were Secretary Clinton to repeal the discretionary spending sequester without offsets (she has set forth the goal of repealing sequester but not yet identified offsets), debt would grow even higher – to about 90 percent of GDP by 2026.

 

In order to meet her goal of fully reversing the discretionary sequester while also stabilizing the debt-to-GDP ratio, Secretary Clinton would need to identify over $4 trillion in additional budget savings (including interest) over 10 years. Achieving this level of savings on top of the offsets Secretary Clinton has already proposed would require aggressive tax increases or spending cuts, particularly since she has ruled out increasing taxes on households making less than $250,000 as well as a variety of potential Social Security changes. For example, to stabilize the debt and repeal the sequester, Secretary Clinton could:

Increase tax rates on households above $250,000 by about 23 percentage points, pushing the top combined federal tax rate to 70 percent on incomes above $5 million (which would be close to or above the revenue maximizing level).

Adopt all the tax increases and mandatory savings in President Obama’s budget (including those like oil and cigarette taxes that impact households making less than $250,000 per year), while raising tax rates by 12 percentage points on households making more than $250,000, which would move the top rate to 59 percent on incomes above $5 million.

Apply an across-the-board 5 point tax increase on all households, including households making less than $250,000.

Reduce mandatory spending on programs such as Social Security, Medicare, Medicaid, and food stamps with an 11 percent across-the-board cut.

Reduce mandatory spending while exempting Social Security with a 19 percent across-the-board cut.

Adopt all the tax increases and mandatory savings in President Obama’s budget and then reduce mandatory spending other than Social Security by 9 percent across the board.

Faster economic growth could also make it easier for Secretary Clinton to stabilize the debt and pay for the sequester. Based on CBO's estimates of the effect of the 2013 Senate-passed immigration bill and the macroeconomic feedback analysis from the Tax Foundation (which estimates that Secretary Clinton’s tax increases would reduce the size of the economy by 1 percent over a decade),we determined that annual real economic growth of about 3.1 percent would be sufficient to pay for sequester repeal and stabilize the debt at last year’s level (74 percent of GDP). This is significantly higher than the 2.1 percent growth projected under current law, and would be unlikely to materialize given historical precedent, productivity trends, the aging population, and the impact Secretary Clinton’s tax increases would have on long-term economic growth.

Conclusion

Secretary Clinton should be commended for not only committing to pay for her new initiatives but for offering serious and specific proposals that would more or less achieve this goal. However, with debt at post-war record high levels and projected to grow unsustainably, simply remaining on our current course is not enough. Secretary Clinton would need over $4 trillion of deficit reduction to simply replace the sequester and stabilize the debt at its current high levels. So far she has proposed over $1.5 trillion of savings, and yet does not dedicate even a fraction of it to putting the debt on a more sustainable path.

Ultimately, a mixture of spending cuts, tax increases, and entitlement reform is likely to be necessary in order to grow the economy and fix the debt for future generations. We hope Secretary Clinton will pursue these policies going forward, putting new ideas on the table rather than simply taking ideas off. Paying for new initiatives is a good start, but much more must be done.

Read the analysis.

For more information, contact Patrick Newton, press secretary, at [email-masked].

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