During the abbreviated debate over the Republican tax plan, Democrats said the corporate beneficiaries of the tax breaks would use their windfalls on priorities such as stock buybacks. We now know, of course, that this prediction turned out to be true.Critics of the GOP plan also said it included all kinds of sloppy and consequential errors that would need fixes, which is also happening.
Dems also warned that Republican leaders would use the impact of the tax cuts as a pretext to go after social-insurance programs – sometimes called “entitlements” – such as Social Security. That, too, is coming true.
And, of course, progressive opponents of the GOP tax breaks said the proposal would do real harm to the nation’s finances, and wouldn’t come close to paying for themselves. We can now add this to the list of things Dems got right and Republicans got wrong. Jon Chait had a good summary of the latest findings from the Congressional Budget Office.
The new projections by the Congressional Budget Office, the first federal budget analysis to be released since the Trump tax cuts were passed into law, shows how fully the Republican government has operationalized its theory. CBO now estimates the 2018 deficit will be $242 billion higher than it had estimated last June, before the tax cuts. And the tax cut is the major reason: “Accounting for most of that difference is a $194 billion reduction in projected revenues, mainly because the 2017 tax act is expected to reduce collections of individual and corporate income taxes.”
The deficit is expected to grow to more than 5 percent of gross domestic product. That would make sense if the country was spending to counteract a serious but temporary emergency, like a recession or perhaps a major war. There is no such emergency, though.
The full CBO report is online here. Note that the budget office projects the annual budget shortfall will swell this year to $804 billion, before growing to $941 billion next year and $1 trillion in 2020.
And as Slate’s Jim Newell explained, these are the “rosy” estimates.
As regular readers know, I’m not a deficit hawk, so I’m not reflexively inclined to complain about budget shortfalls like these. That said, there are three relevant angles to keep in mind here.
First, at some point, Republicans probably ought to face some accountability for the fact that their promises about tax breaks are always wrong.
Second, while I don’t consider deficit reduction a major priority, I understand Keynesian Economics 101 well enough to understand that this is not a good time to run massive shortfalls. It’s not complicated: during a recession, the government should borrow to soften the blow of the economic downturn, and during a recovery, the government can borrow less because it’s less necessary.
With a relatively healthy economy, there’s no need for Donald Trump and congressional Republicans to blow a hole in the nation’s finances like this.
And third, this president swore up and down during the campaign that he’d be a model of fiscal responsibility. In December 2015, for example, Trump insisted that unless policymakers balanced the federal budget, “we’re not going to have a nation anymore.”
I have no idea if Trump understood what he was saying at the time, or whether he was simply trying to deceive the public. Either way, we can add this to the growing list of the promises this president has broken without explanation.