November 22, 2017 at 10:47 AM
An overwhelming majority of academic economists say in a new survey that the Republican tax proposals would cause America's debt to grow by one critical measure.
Thirty-seven of 38 experts surveyed by the University of Chicago's Initiative on Global Markets agreed that the GOP tax bills in Congress would cause U.S. debt to increase "substantially" faster than the economy.
Only one economist — Stanford's Liran Einav — said that he was “uncertain” if the bills would exacerbate America's debt-to-GDP ratio. But after the survey's release, Einav said his response had been a mistake, and that he actually agrees with the economists who expect the debt ratio to soar. (Four other economists in the IGM panel didn't answer the question one way or the other.)
“I did it too fast and didn't read the question properly,” Einav said in an email.
(The survey results mirror an episode in May, in which 35 of 37 economists concluded the tax cuts would not pay for themselves in terms of their impact on the federal budget. The two who disagreed later said they misread the question and had meant to answer with the majority.)
The growing expert consensus that the bills would balloon the deficit — even in the absence of a Congressional Budget Office report — has real implications for the bills' chances of becoming law.
Senate Majority Leader Mitch McConnell needs 50 votes to move a pending GOP tax plan through the Senate, giving him little room for defections as his party controls only 52 of the chamber's 100 seats. And several Republicans have said their support for any tax measure will be influenced by its long-term impacts on the national debt. Sen. Bob Corker (R-Tenn.) has vowed not to vote for a bill that adds “one penny” to the deficit. Sen. Jeff Flake (R-Ariz.) has similarly expressed concern over the bill's impact on the deficit, and President Trump said on Twitter on Sunday night that Flake is a “no.”
Republicans contend their tax plans will spark enough economic growth to offset the lower tax rates they plan to charge corporations and some businesses and individuals, but that claim is widely contested as well.
The nonpartisan Tax Policy Center said in an analysis released this week that, even after accounting for economic growth, the bill the House passed last week would grow the debt by $1.3 trillion over a decade. An analysis by the Penn-Wharton Budget Model, which accounts for the effects of growth, found the Senate bill would increase the national debt by between $1.4 trillion and $1.6 trillion.
The surveyed economists were broadly skeptical the bill would produce the type of economic growth Republicans are promising. 52 percent of economists surveyed disagreed with the claim that GDP would be “substantially” higher under the House or Senate bills, while 36 percent said they were “uncertain” they would substantially increase GDP.
“The idea that these cuts would unleash huge growth is not very well supported, either theoretically or empirically,” said Oliver Hart, an economist at Harvard and one of the experts who responded to the survey. “Almost everyone is extremely doubtful this is going to come out well. This is wishful thinking.'
Only one economist, Stanford University's Darrell Duffie, said he agreed the GOP bill would substantially increase GDP, and in his answer he raised other concerns about the plan's impact on the fairness of the tax code.
“A reduced corporate tax reduction is likely to grow GDP,” Duffie wrote in the survey. “Whether the overall tax plan is distributionally fair is another matter.”
The conservative-leaning Tax Foundation projected the House bill could add up to 3.5 percent to GDP growth, but several other analyses have put that number much lower. An estimate from Penn Wharton, for instance, said the House bill would increase GDP by between 0.4 percent and 0.9 percent.
Senate Republicans are reported to be eyeing a vote on their bill as early as next week, in the hope of accomplishing one of the party's major goals before the Christmas recess.