By: AIF Staff
Los Angeles, CA – Talking with David Westin on Bloomberg’s Wall Street Week from the 2024 Milken Institute’s Global Conference, former House Speaker Paul Ryan says the next President could very well face a debt crisis. He says neither President Joe Biden or Donald Trump are doing enough when it comes to getting new trade agreements signed and neither are taking our debt seriously enough.
Video of Ryan’s conversation on Bloomberg TV’s Wall Street Week and excerpts from the interview follow.
The 3 biggest economic policy challenges facing policymakers in 2024-2025
“Number one would be tax policy. What’s the tax code going to look like? What’s tax policy looking like in the future? Number two, I would say tariffs. Number three, I think it’s reasonable to assume the next president is quite possibly going to face a debt crisis. You don’t know when that is or exactly what form that takes place, but a lot of fiscal policies are on the line – tax policy, trade policy, debt policy, and therefore, interest rates.”
The impact of the 2024 election on the future of the US tax code
“It’s more likely than not we are going to have divided government. I feel good as a Republican that we’re going to take the Senate just because the map is so good for us.
The House is basically a tied House right now, so that’s kind of a coin toss which depends on who’s going to win the presidency. My guess is it’s most reasonable to assume divided government because Biden or Trump won’t run the table.
And the law that I worked on quite a bit, the Tax Cuts and Jobs Act, a lot of it expires in 2025 -not the corporate side, not the corporate rate, not the territorial system, but the individual side. If Republicans are in more control [of government], that means we extend the Tax Cuts and Jobs Act and if Democrats are more in control, they will do everything they can to let most of it expire.
If [Democrats] get their way and if they have all of Congress, [Biden] is actually proposing about a 44.6% capital gains tax, which if you add state taxes on top of that you’re at 50% — that’s economic nihilism…
If it’s divided government like I think it’s going to be, we will probably split the difference where maybe the top rate goes up, [the rest of the] individual rates stay the same, hopefully we get a little expensing back in place and Section 199A, which was really important for those medium and small-sized businesses, hopefully that gets extended.”
Both Trump & Biden ‘standing still’ on trade
“I don’t know who’s going to be the president, but Trump’s promising a 10% tariff across the board, which is a giant tax increase on American consumers.
Everybody is going to fight China. A Biden presidency is going to fight China. A Trump presidency is going to fight China. The question is, what about the other countries?
The frustration for me is neither of these two presidents want to do trade agreements. We should have done TPP (the Transpacific Partnership) in my opinion. It’s a very good China policy but neither Trump nor Biden are proposing any trade agreements. Trump is proposing across the board tariffs. Biden is not proposing that, but he’s also not proposing to get new agreements and to get new markets for our products and our goods and services.
And if you’re standing still on trade, you’re falling behind because all the other countries are going around the world getting their own preferential multilateral and bilateral trade agreements, leaving us on the outside looking in. So, you can’t just stand still on trade. But unfortunately, that’s what we’re doing and that’s what, frankly, both these guys are proposing to do.”
Lacking Presidential leadership on the debt & the safety net
“I’m a fan of neither of the guys who are running for president because both of them are demagoguing the issue. In their primaries, they campaigned against people who propose solutions. They’re demagoguing entitlement reforms. They’re basically saying they’re not going to do anything and doing nothing, by the way, makes Medicare go insolvent, makes Social Security go insolvent, and hurts today’s current seniors.
Fixing this problem shores up the finances for these programs so that current seniors can get the promises that are due to them and then solves it for the next generation, so we don’t have a debt crisis.”
Avoiding a debt crisis & acting like the world’s reserve currency
“We’re already on track to spend more in interest payments than we are for national defense and regrettably, none of these guys who are running for president are proposing to do anything about it.
There are good people in Congress that are proposing solutions. There’s bipartisan support for a Fiscal Commission but you have neither Trump nor Biden saying they’re going to do anything about it. So, I think the next president has a reasonable chance of having a debt crisis on their watch…
If the world concludes that America is not going to get its fiscal house in order, that we’re going to get these entitlements under control, then they’re going to conclude that we are going to monetize our debt and there goes dollar dominance. That’s an exorbitant privilege which benefits us greatly.
We’re not acting like a world’s reserve currency. We should be and this, for me, is the biggest fiscal challenge the next president is going to have to confront. I wish I could say somebody has a plan for this but neither of them do. That’s what’s so frustrating for me.”
Stablecoin legislation could help address our fiscal challenges
“I think stablecoin legislation would be a good step in the right direction. It could be helpful, and it could be done this year, but I don’t see anything other than that on the horizon.
Stablecoins are digital and private sector dollar-backed currencies. It’s not cryptocurrency because it’s tethered to the U.S. dollar. They have to have dollar-backed assets. They have to have treasuries or cash to back them. There’s not a law that governs [stablecoins] right now, so they aren’t really deployed…
Reps. Patrick McHenry and Maxine Waters are working to put a deal together and Senator Chuck Schumer is in talks with them, so I think there’s a reasonable chance they could get a deal on stablecoin legislation and that means you have a legal framework to get stablecoins deployed.
[If you have a law governing them] you would go from a couple of hundred billion dollars of stablecoins to maybe trillions. Right now, stablecoins are like the 16th largest buyer of bonds, bills and notes among all sovereigns.
If you actually regulate stablecoins and have them deployed, that does two things: It gets the U.S. dollar more deeply ingrained in the oncoming digitization of currencies, and that’s a good thing. And it creates new consumer demand for our bonds because they have to have those to back up the stablecoins. So, [it would mean] more demand for treasuries and more use of a digital dollar throughout the system, which would help better entrench the dollar. It’s a win-win situation for America.
I think it’s a no brainer. I’m hopeful. I’m cautiously optimistic Congress might do that this year. There are good talks happening and that’s one thing you could do on the margins to improve demand for our bonds and [strengthen the] dollar.”