Deficits could stand in the way of Trump’s agenda

Republican lawmakers warn that there could be a major obstacle to enacting President-elect Donald Trump’s agenda: the national debt.

{mosads}Trump called during the campaign for a $1 trillion infrastructure package, $5 trillion in tax cuts, increases in military spending and the repeal ObamaCare, which could cost more than $350 billion over 10 years.

At the same time, the president-elect has promised “not to touch” Social Security or make cuts to Medicare.

The cost of Trump’s plans and the lack of concrete details on how to pay for them could become a problem for congressional Republicans next year, especially when they are faced with raising the nation’s $20 trillion borrowing limit sometime after March.

“I was disappointed that it wasn’t brought up in the campaign — anybody’s campaign really — it really wasn’t mentioned,” Sen. Jeff Flake (R-Ariz.) said of deficits and debt.

“So I’m very concerned about it. It’s going to be tough to address if there’s no push from outside of the Congress,” he added. “I’m very concerned about it. It’s the biggest problem we face, by far.”

Conservative groups are worried as well. They say Republicans must not lose sight of fiscal restraint now that they are set to control the White House and Congress.

“We did not hear anything about entitlement reform from either of the candidates, and that’s a serious issue,” said Michael Sargent, a research associate at The Heritage Foundation. “You cannot address the growth in spending without addressing entitlement issues.”

Compounding the problem is the expected action by the Federal Reserve to raise interest rates, which would increase the cost of the nation’s debt.

Flake noted on the Senate floor in September that for every quarter point that interest rates rise, the federal government would have to spend an additional $50 billion annually to service the debt.

Congressional Republicans assailed President Obama early in his tenure over soaring federal deficits, which exceeded $1 trillion dollars during his first four years in office. Debt reduction was the main focus of GOP leaders after they took back control of the House in 2010.

“It is a problem and going to be a problem. Don’t forget that Obama has doubled the debt and if interest rates were at their historic norms, the deficit would be $612 billion bigger,” said former Sen. Phil Gramm (R-Texas).

Yet deficits barely gained any notice on the campaign trail. Trump focused on immigration, trade and economic renewal while Hillary Clinton talked about infrastructure, immigration reform and campaign finance reform. The media largely focused on the personal attacks the candidates leveled against each other.

Trump advisers have suggested the new administration will be able to trigger massive private sector investments in infrastructure without a huge increase in spending. They say federal expenditures in the form of tax credits could be enough to get projects underway.

In the absence of a specific plan, what has garnered more attention is the overall number attached to his infrastructure plan: $1 trillion.

“In regard to infrastructure and the things that have been talked about, nobody really knows the details. As we talk about them, our conference will be very concerned about how they affect both the debt and the deficit,” said Sen. John Boozman (R-Ark.), a member of the Environment and Public Works Committee, which has jurisdiction over infrastructure.

Sargent, of the Heritage Foundation, said he’s seen as many as four different iterations of Trump’s infrastructure plan, all of which he says would raise the deficit.

“I’ve seen everything ranging from direct stimulus to a $1 trillion in tax credits, both of which would obviously raise the deficit. The tax credits, he claims, would pay for themselves. I do not see that at all. The assumptions that are built into it I think are wildly optimistic,” he said.

Lawmakers spent months negotiating ways to pay for a six-year, $300 million highway bill that passed last year. It was the first multi-year highway bill to pass in years, and Senate Majority Leader Mitch McConnell (R-Ky.) lauded it as a major, hard-won accomplishment.

Conservatives, however, complained that many of the offsets used to pay for the highway bill were “gimmicks.”

Many Republicans in Washington are also skeptical that additional infrastructure spending will provide a boost to the economy. They would prefer to focus on tax reform that closes loopholes and lowers rates.

“I know of no case in the post-war era where infrastructure has proved to be an effective stimulus in any country in the world,” said Gramm, a former chairman of the Banking Committee and member of the Budget panel.

Trump could alleviate some of the concerns brewing in the Republican conferences by pushing new proposals to curb spending.

Already he has modified his stance on Medicare, adopting language favored by Speaker Paul Ryan (R-Wis.) that Democrats are interpreting as a sign Trump will embrace Ryan’s vision for a dramatic overhaul of the entitlement program.

The transition website states the incoming administration will act to “modernize Medicare so that it will be ready for the challenges of the coming retirement of the Baby Boom generation — and beyond.”

In addition, many Republicans believe that repealing ObamaCare will have a positive fiscal impact beyond the 10-year window scored last year by the Congressional Budget Office.

Several Republicans said Trump’s plan to replace ObamaCare with healthcare reforms could open the door to overhauling Medicaid, which was expanded in 31 states under the healthcare law.

“One of the things Donald Trump emphasized in his campaign was the risks of a $20 trillion debt and at the same time he put forth proposals that would increase the debt by another $5 trillion,” said Maya MacGuineas, president of Committee for a Responsible Federal Budget.

“Some changes are definitely going to have to be made. The good news is he’s shown a willingness to do that,” she added, noting that Trump downsized his tax proposal, which initially stood at $10 trillion.

Boozman said he hopes Trump will seek to stimulate the economy through regulatory reform, which won’t add to the deficit.

“The real excitement is in the regulatory phase, getting rid of some of the unnecessary regulation that we have that’s really putting a wet blanket on the economy,” he said. “That’s going to save money.”