At least, that is, in theory. In practice, the Washington Post reports that the Trump administration isn't too worried about finding the money to pay for tax cuts, because it believes the Tax Fairy will come along and make the costs magically disappear.
The Trump administration plans to rely on controversial assumptions about economic growth to offset steep cuts to business and individual tax rates, a chief architect of the plan said Thursday.
Treasury Secretary Steven Mnuchin said the economic growth that would result from the proposed tax cuts would be so extreme -- close to $2 trillion over 10 years -- that it would come close to recouping all of the lost revenue from the dramatic rate reductions. Some other new revenue would come from eliminating certain tax breaks, although he would not specify which ones.
This, alas, is not a new concept. For decades, conservative policymakers have said tax breaks, especially those targeted at the wealthiest Americans, supercharge the economy to such an extent that increased growth leads to increased revenue. Ergo, there's no need to try to offset the costs of tax cuts because the cuts necessarily pay for themselves.
Republicans have even come up with some nice sounding jargon, "dynamic scoring," to help rationalize the fiscal strategy.
The problem, of course, is that this has not worked, and does not work, in practice.
Sure, tax policy has an impact on the economy, but every time Republicans have said tax cuts will pay for themselves through increased, growth-based revenue, the money hasn't materialized. For a contemporary refresher, consider what happened in Kansas when Gov. Sam Brownback (R) said his tax cuts would pay for themselves.
Which serves as a convenient segue to what's likely to happen in the coming months. Eventually, the White House will probably present some kind of tax package, which will head to Congress for consideration. At that point, the CBO will give it a score, letting everyone know how much the proposal will cost and how much it will increase the deficit.
It's at that point that Team Trump will protest, saying it has its own version of math -- arithmetic based on "dynamic scoring" -- which contradicts the CBO's math. For those who consider tax cuts for the rich to be their top policy priority, this will offer convenient cover to do what they want to do anyway, without regard for the deficit they sometimes pretend to care about.