To hear House Speaker Paul D. Ryan (R-Wis.) tell it, there is no way to know how the Republican tax bill that will soon become law might affect the deficit and it is straightforward in determining how much the average American family is set to save. There’s some truth to that discrepancy, certainly, which we’ll get to in a moment. But it’s worth noting that the discrepancy is raised by Ryan for very specific political reasons.
We can start with the deficit. Back in 2012, shortly before being tapped to serve as Mitt Romney’s running mate in the presidential election that year, Ryan advocated a budget plan aimed at slashing the federal budget deficit — that is, the gap between the amount of money that the government spends and the smaller amount that it takes in. Ryan was positioned as a deficit hawk, who was focused on bringing those two numbers in line.
The tax bill that he shepherded through the House this year, though, will increase the deficit, according to the vast majority of analyses — including that of the Joint Committee on Taxation, the nonpartisan congressional committee tasked with evaluating tax proposals. That the bill would increase the deficit was a sticking point for a number of Republicans, particularly in the Senate. Sen. Bob Corker (R-Tenn.) told NBC that he wouldn’t vote for a bill that added “one penny” to the federal deficit. And yet Corker voted for this bill, despite it adding several hundred trillion pennies.
Why? Because Republicans were convinced that economic growth would boost the economy and wages enough to increase tax receipts and offset the revenue lost by cutting taxes. The Joint Committee figured that the bill would add $1.4 trillion to the deficit, or about $1 trillion if you accounted for economic growth. Other models were more skeptical, like one from the University of Pennsylvania that predicted a deficit spike of about $2 trillion — 10 percent of the current federal debt.
Many Republicans, like Corker, simply dismissed those analyses. Take Sen. Patrick J. Toomey (R-Pa.) who argued from the Senate floor that he was “convinced” the deficit would shrink — offering no rationale for what convinced him.
Ryan on Wednesday morning offered his nebulous assessment: “Nobody knows” if the cuts will pay for themselves. That’s true, given the uncertainty that surrounds the models. But that’s a bit like saying “nobody knows” if it’s going to rain when the forecasters say there’s a 90 percent chance: You still will probably grab an umbrella.*
The simple reason that the deficit is likely to increase is that the government will cut back on the amount of money people have to pay each April. The Joint Committee’s analysis shows how the cuts by income group affect the federal budget, as on the chart below. But notice that the bulk of the reductions to federal revenue comes from those making $100,000 or more in each year.
(This chart compares JCT estimates of the change to the deficit with revenue shifts by income. It doesn’t include deficit reductions from economic growth.)
In other words, tax cuts are driving the anticipated increase in the deficit, and it’s the cuts for those making $100,000 a year or more that make up the bulk — between 76 and 82 percent in 2019 through 2025 — of the lost revenue.
That’s important context for this snippet of Ryan on “Good Morning America” on Wednesday.
Ryan talks about getting “spending under control,” referring to “cutting entitlements” — meaning reducing spending on programs like Medicare and Social Security. That’s the main critique opponents of the Republican bill have leveled: The bill will increase the deficit (despite Ryan’s vague denials), opening the door for the party to need to cut these programs. The net result would be to cut back on how much money is raised from those earning more than $100,000 a year, necessitating cuts to programs like those above.
In this interview Ryan also cites that very specific $2,059 tax cut for the typical family of four. While he acknowledges — and promulgates — the idea that projections of the deficit are unknowable, taking advantage of the difficulty in knowing just how economic growth might be affected, he lauds this number regularly.
Others have done similar analyses of how the tax bill will affect different groups. The Post has a sophisticated calculator showing how the bill will affect you in 2018 based on where you live and how you file.
But it’s important to note that the Republican bill has effects well past 2018, as shown on the chart above. In fact, you may have noticed that by 2027, the revenue from those making less than $75,000 a year will increase under this bill (relative to current law). That’s because the tax cuts for individuals expire in 2026. The Tax Policy Center put together analysis that allows us to project how your tax bill might be affected in 2018, 2025 and 2027. This is less precise than the calculator linked above, but it shows a longer projection of how the legislation will affect the country.
Ryan would like to focus only on that first bit of data: How the bill affects you over the short term. But that misses a lot of context for what the legislation does, including how it affects the federal budget over the long term.
Republicans are hoping that Americans see more money in their paychecks and pay less money in taxes and, as a result, approve of the legislation despite the anticipated effects. They’re hoping that the bill does pay for itself, through a massive surge in economic growth. They’re hoping the anticipated $2,059 figure is accurate — or even low — and the hand-waving around the anticipated deficit increases ends up being not far from the mark.
Once President Trump signs the bill into law, all we can do is see if that gamble paid off.
* Some of you will rightly note that the odds of the individual analyses being precisely correct are less than 90 percent. Fair! The point, more broadly, is that independent experts are nearly uniform in their predictions that the deficit will increase. So it’s not the amount of rain that the analogy is meant to defend, just the likelihood of any rain.