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Almost all analyses of national politics recently have centered on why the Democrats lost, Republicans won, and whether Republicans will successfully seize control over the government and its workers. Yet if one looks closely at budget numbers rather than political rhetoric, neither party has put forward a viable long-term agenda or suggested ways such an agenda could succeed. Nor is it clear either intends to do so as they gear up for the next election.
I don’t mean to discount the importance of the debate over President-elect Trump’s main budget policy proposals, the largest of which involve extending the tax cuts in the Tax Cuts and Jobs Act of 2017 and removing the environmental and energy-related subsidies provided under the misnamed Inflation Reduction Act of 2022. But neither of those actions will reverse—along many dimensions; they will further lock in—the long-term and unsustainable course we have been on for some time.
In recent decades, the dominant policy thrust and success of Republicans has been to cut the marginal tax rate on capital income—not the average tax rate from all taxes on all income, which is not far from its highest level. With tax cuts at the beginning of every Republican recapture of the White House, that capital income tax rate has been cut roughly in half since 1980. For those who hold most of the nation’s wealth, Congress has provided substantial reductions in the top individual tax rate, the corporate tax rate, and tax rates on estates, dividends, and capital gains.
Democratic party efforts and success, meanwhile, have centered on substantial increases in spending on Social Security and healthcare, which have comprised about three-quarters of real, inflation-adjusted domestic spending growth over the same period. And more than 100 percent of the increase in domestic spending as a share of national income. Little else has mattered.
Historically, a decent case could be made for prioritizing cuts in the once high capital tax rate, adding to retirement benefits for the elderly when they were among the poorer groups in the population, and expanding access to healthcare. However, each party has continually doubled down on these priorities no matter what other needs or opportunities have arisen or what their cost is
Today, each taxpayer faces a significantly higher tax rate on a dollar of wages than on a dollar of capital income. Republican and Democratic Congresses continue to channel most increases in spending to the elderly, who now are less likely than the nonelderly, with or without children, to be among the poorer groups [ [link removed] ] in the population. Those two priorities now squeeze out almost every other significant federal government effort.
One prominent proof of the lack of any new or different long-term agenda is that neither presidential candidate attempted to make the resources available to finance such a shift. With deficits far above anything seen in times of peace and low unemployment, and with debt as a share of our GDP approaching new heights, traditional campaign promises to engage in yet more giveaways, whether tax cuts or spending increases, only suggested that hypothetical money trees in Fort Knox vaults needed to yield more fruit.
The recent past serves as a prologue. Excluding pandemic-related spending, President Trump’s [ [link removed] ] and even President Biden’s most expansive budget requests [ [link removed] ] in recent years continued to provide for Social Security and healthcare to dominate spending growth. Meanwhile, revenues increasingly fell relative to spending, and deficits grew.
Nothing in President-elect Trump’s economic agenda, as declared in 2024, moves us off this path. Almost all economic analyses suggest that reductions in immigration and tax increases through tariffs would reduce the growth in national income. Consider the combination of more tax cuts, including the extension of expiring provisions in the 2017 Tax Cuts and Jobs Act, cuts in overall spending, and leaving Social Security and Medicare on their current growth paths. Relative spending on everything else would continue to decline along the same multidecade trend. New tax cuts would also lead to higher future spending because of higher interest costs. Higher interest outlays, in turn, make it still more challenging to pursue new priorities.
I understand. Every politician in modern times runs for office on what they can “give” to rather than ask from the American public. However, no significant shift in budget policy can occur without simultaneously developing a budget that leaves enough resources available for new choices. After all, needs and opportunities change over time.
Here are only three examples of modern issues that neither party is willing to address in any substantial way, mainly because they cannot extricate themselves from their multidecade juggernaut of past commitments.
First, the rise in “deaths of despair” and related mental and physical health issues calls for shifting a larger share of health spending toward preventative health care.
Second, most of the decline in manufacturing jobs was not due to trade [ [link removed] ] but factors such as technology, the declining need for raw physical labor, and the broad expansion of the service sector. Whatever else it might favor, such as less reliance on imports required for defense, neither industrial nor tariff policy can do little to offset those broader economic forces. Wage subsidies, apprenticeships, early childhood education, and K-12 education for the non-college bound offer better, longer-term options for improving the well-being of the working class.
Third, if we want to continue devoting substantial resources to meet the next big yet unknown crisis headlong, they must come from somewhere. We’ve had three big crises already this century—9-11, the Great Recession, and COVID-19—and paid for none.
Regardless of what future agenda anyone may favor, when it comes to spending and taxes, the past presidential campaign was mainly a fight over whose unsustainable past agenda should be continued. Democrats and Republicans who want to look to future opportunities must stop layering so much wood on the windows through which we can view that future.
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