This week the Congressional Budget Office released a report “showing how the federal budget and the nation’s economy would evolve under three alternative scenarios. In those scenarios, laws would be changed to continue certain policies now in place, leading to even higher debt.”
In the first scenario, the individual tax cuts enacted in 2o17 would be made permanent, exactly as Republicans are promising to do. “Federal debt would equal 148 percent of [gross domestic product] in 2038 and continue to rise in later years. ” The next scenario would resemble the first but “after 2028, tax policy is assumed to be changed so that revenues remain flat as a percentage of GDP, rather than growing over time. In that scenario, deficits would be even larger than in the first scenario. Debt would equal 151 percent of GDP in 2038 and keep rising thereafter.” In the final scenario, “revenues remain flat in relation to GDP after 2018 rather than after 2028. ” That would produce debt equal to 165 percent of GDP in 2038. It would keep rising thereafter.
It is not hard to figure out why the debt is mushrooming: Congress shrunk revenue while spending is expanding. CBO outlines the consequences of this massive buildup of debt: “Reducing national saving and income in the long term; Increasing the government’s interest costs, putting more pressure on the rest of the budget; Limiting lawmakers’ ability to respond to unforeseen events; and Increasing the likelihood of a fiscal crisis — a situation in which the interest rate on federal debt rises abruptly, dramatically increasing the cost of government borrowing.”
Let’s remember Republicans promised — swore up and down — that the cuts would pay for themselves. This was categorically false, obviously so at the time. Sens. Mitch McConnell (R-Ky.), Susan Collins (R-Maine) and others who made this ludicrous assertion should be held accountable — and voted out of office.
The Committee for a Responsible Federal Budget warns: “CBO’s alternative long-term scenarios show the dire path caused by continuing the deficit increases enacted in the past year. If lawmakers act irresponsibly and extend several temporary policies, debt will exceed record levels by 2029.” CRFB adds: “Lawmakers need to enact a plan that puts debt as a share of the economy on a downward trajectory to ensure fiscal sustainability. Doing so will prevent the scenarios spelled out by CBO from becoming reality.”
Fiscal austerity is not necessary or politically feasible, but going forward, politicians should not make matters worse. Stunts such as administratively reducing the capital gains tax and promises to make permanent tax cuts for the super-rich should be recognized for what they are — income inequality generators and disastrous fiscal gamesmanship. The fetish for cutting discretionary spending — a small percentage of the budget consisting of the stuff people like (the National Institutes of Health, national parks, etc.) — should end. (Under the Budget Control Act of 2011, discretionary cuts were enacted as the debt ballooned.) It’s time for some heart-to-heart discussion about entitlements that includes both a reduction in the growth of benefits and new revenue.
Contrary to President Trump’s false assertions, Americans are not the most taxed people in the world. Not even close. Using data from the Organization for Economic Cooperation and Development, the Pew Research Center looked at “four different families: a single employed person with no children; two types of married couples with two children, one with both parents working and the other with one worker; and a single working parent with two children.” Pew found: “In all cases, the U.S. was below the 39-nation average – in some cases, well below.” There is an argument to be had as to what the ideal level of taxes should be, balancing the needs of a dynamic society with the genuine need for public expenditures. But one thing is clear: The 2017 tax cuts were fiscally disastrous and should not be repeated.