This week on Facing the Future, Bob Bixby spoke with Jim Capretta, a senior fellow at the American Enterprise Institute and former associate director of the Office of Management and Budget. Topics included President Trump’s promise to send $5,000 checks to every American adult if the Republicans win the mid-term election, whether tariff income would cover the cost of those checks, how the economy is doing, and the long-term sustainability of the nation’s finances.
Capretta identified several problems with the President’s $5,000 check proposal, which has been estimated to cost roughly $1.3 trillion. One problem is finding the money to pay for it. Capretta said, “They would borrow it, of course.” He went on to explain that, “The deficit is running at about $2 trillion per year at this point, so if you added another trillion to it, you would be pushing $3 trillion – another 50% on top of the one that’s already being accumulated and is built into the projections. So, we don’t have the money.”
He emphasized that this proposal is unprecedented in scale compared to past stimulus checks, which were much smaller and always required congressional approval. In that regard, he expressed uncertainty about how the administration might attempt to execute such a plan, given the constitutional power of Congress over the budget. He pointed out that the President is “really pushing hard on a very, very expansive view of what’s allowable unilaterally through the administration.”
As an economic proposition, Capretta observed that “the timing couldn’t be worse.” He noted that, “One of the primary problems the country is struggling with is persistent inflation, which is driven by excessive demand relative to supply, and the government is basically saying, we’re going to send out very large economic stimulus checks at just the time when inflation is the big problem. It puts a lot of pressure back on the Fed to tighten even more. So, from a macroeconomic point of view it doesn’t make any sense.”
While the administration has suggested that tariff revenues could be used to pay for the $5,000 checks, Capretta was skeptical of this claim. “They haven’t really laid out their cards completely about what exactly it is that they’re talking about there,” he said “On the tariff side, they are really pushing on a couple of provisions in current tariff law that have never been used this way before to basically institute permanent revenue increases. These are measures that are intended to correct some kind of trade dispute, that is temporary and gets resolved, not as a permanent way of raising revenue, which of course should be the prerogative of Congress.”
Capretta was also critical of a recent administration report, required by law, called the Mid-Session Review that is supposed to provide Congress with an update on the budget with new estimates of various proposals the administration has advanced in the original budget submission.
“They complied with that, “ Capretta said, “by putting out a document that had two tables in it. What they didn’t do was put out any normal tables that would say here’s how much we expect in total tax receipts and here’s how much we’re spending. There’s a lot of moving parts at the moment so they could have used this as an update to really tell the country, here’s where things stand, and here’s how we’re working on our ideas, we’ll make things even better in the future. But they really didn’t want to do that for whatever reason. They just sort of downplayed it and put these two technical tables together and said it was a mid-session review.”
Capretta connected the truncated Mid-Session Review with a larger point about governing. “Elections are somewhat about accountability,” he noted. “So you need to know what happened. Where did the money go? What’s it being used for, under what authorities, etc. I think to just sort of really minimize and move away from any of the normal ways of trying to provide accountability and transparency is not a good idea.”
When the conversation moved to the broader economy, Capretta acknowledged positive trends such as low unemployment, ongoing growth, and investment in new technologies like artificial intelligence. He said, “There’s a lot of activity out there in the country that is promising.” However, he remained realistic about the limits of growth as a solution to the nation’s debt problems: “Should we bet that we can just rely on that to pay down our debt? No… The amount of growth you would need to really make a dent over a long period of time is very substantial relative to what we’ve had.” He emphasized that growth is necessary but not sufficient, adding, “We need some restraint, too, on… other aspects of the budget.”
Capretta reflected on the long-term budget outlook with a note of concern. “We’ve built into our political process massive momentum around benefit promises that are well in excess of our willingness to go to the public and ask them to pay for it with tax revenue,” he said. However, he pointed out that the insolvency of the Social Security trust fund would likely force action in the coming years, saying, “Congress is going to be faced with that probably first,so they ought to be getting ready to figure out how to deal with it.”
Hear more on Facing the Future. Concord Coalition Senior Advisor Bob Bixby hosts the program each week on WKXL in Concord N.H., and it is also available via podcast. Join us as The Concord Coalition team discusses issues relating to national fiscal policy with budget experts, industry leaders, and elected officials. Past broadcasts are available here. You can subscribe to the podcast on Spotify, Pandora, iTunes, Google Podcasts, Stitcher, or with an RSS feed. Follow Facing the Future on Facebook, and watch videos from past episodes on The Concord Coalition YouTube channel.
