No good reason for more deficit-financed tax cuts
With the Trump administration projecting a return to trillion-dollar deficits in the fiscal year that starts Oct. 1, economists, former government officials and the public have expressed great concern about the rapid growth of the national debt.
Yet this concern seems hard to find in the House of Representatives, where GOP leaders say they plan to press ahead this week with more deficit-financed tax cuts for individuals and small businesses.
Congress approved and President Trump signed large deficit-financed tax cuts in December that helped put the national debt on steroids.
In July, House Ways and Means Committee Chairman Kevin Brady released a loose framework for additional cuts, including an extension of some of the December changes in the tax code.
He plans to have the committee begin marking up the legislation this week.
With the economy showing solid growth and the federal debt nearing $21.5 trillion, there is no good reason for this proposed further increase in government borrowing.
Despite misgivings among some House Republicans, Brady last week declared that it was "full steam ahead" on the "2.0" tax legislation, which could be broken into several pieces. Brady said he hoped to have the package ready for a vote on the House floor this month.
House Speaker Paul Ryan also recently told reporters such a vote was planned for this month.
The primary concern expressed by some House Republicans about the legislatislation is not that it would increase the debt, but that it would make permanent a $10,000 cap on state and local tax deductions.
If House Republicans do pass the legislation, however, it is given little chance of winning Senate approval because of strong Democratic opposition. The main purpose seems to be to induce Democrats to vote against additional tax cuts before the midterm elections.
Brady's plan would require hundreds of billions of dollars in additional government borrowing later in the coming decade. Preliminary cost estimates vary, depending on the time period used and other assumptions.
Brady himself said in releasing his "framework" this summer that one part of the legislation alone — permanently extending the individual tax cuts that were approved in December — would cost about $600 billion over just a few years.
Supporters of additional tax cuts often argue that they will "pay for themselves" through economic growth. But most independent economists doubt this conclusion, and even Brady has acknowledged that the economic growth he expects from the plan would "offset some but not all the cost."
During a recession, deficits are often needed to help get the economy back on track. But when the country is already enjoying strong economic conditions, responsible policymakers in Washington should be lowering the deficit rather than looking for ways to increase it.