Americans were promised, for instance, that the tax cuts wouldn’t add a penny to federal deficits. In fact, they would more than pay for themselves, reducing government debt.
In the fiscal year that recently ended, the deficit once again widened, to nearly $1 trillion. That is 26 percent higher than the deficit in fiscal 2018 and an astounding 48 percent higher relative to 2017, the last full year before the tax cuts were in place.
Yes, the deficit went up partly because spending did. But it has also increased because tax revenue isn’t coming in nearly as strongly as you’d expect during an economic expansion. In fact, thanks to Trump’s tax overhaul, corporate tax revenue is down more than a fifth since fiscal 2017. The Congressional Budget Office has predicted that the legislation overall will end up adding nearly $2 trillion in red ink over a decade.
As you may recall, the tax law’s boosters promised it would pay for itself by supercharging the economy. Just two weeks before signing the bill, Trump foresaw “6 percent growth.” If true, that would have been quite an achievement — roughly triple what independent forecasters predicted for the upcoming decade.
Today, Trump and his most craven Capitol Hill allies claim they’ve delivered. During Wednesday’s impeachment debate, in fact, Rep. Mark Meadows (R-N.C.) pronounced that Trump shouldn’t be impeached because the economy is “growing at levels that we have never seen in the history of our country.”
This is a lie.
Not that strong gross domestic product growth would be a get-out-of-impeachment-free card, but in reality the economy is on track to grow slightly more than 2 percent this year. That’s respectable, sure, especially given the country’s demographic challenges. But it’s below the average during the postwar period (about 3 percent) and well below the rate when Bill Clinton was impeached (4.5 percent).
It’s also pretty close to that long-run trend predicted before these tax cuts.
Dig a little deeper, and the GOP’s pro-growth claims look even worse. The mechanism by which these tax cuts were supposed to goose growth, after all, was by stimulating business investment. But business investment has shrunk each of the past two quarters.
Apparently, whatever modest boost the tax cuts gave to investment was not sufficient to overcome the drag from Trump’s trade wars (which Trump also insists are helping the economy).
This illusory investment bonanza was also supposed to fuel higher wages. As the tax bill was working its way through Congress, Trump’s Council of Economic Advisers published an analysis promising that corporate tax cuts alone would “increase average household income in the United States by, very conservatively, $4,000 annually.”
Yet in the most recently available data, inflation-adjusted wages are rising at about the same year-over-year pace as they were in the couple of years before Trump took office.
Those big raises apparently got lost in the mail. Perhaps they were accidentally routed to fund record share buybacks.
And what about the popularity of the law?
It’s true that most households got at least a tiny tax cut, which Republicans thought constituents would be forever grateful for. But the savings were so meager, especially relative to ordinary paycheck fluctuations, that most Americans didn’t even notice, according to multiple surveys.
Unsurprisingly, approval ratings for the cuts have been underwater almost every day since they were but a twinkle in the party’s eye. The law may have also whetted public appetite for the higher taxes on the wealthy that many Democrats want. Though to be fair, making the rich pay more was also popular before the GOP made them pay less.
No matter. Like most starry-eyed parents, the progenitors of this policy believe it can do no wrong. In fact, they’re keen on giving it a baby sibling soon: Trump’s economic advisers have floated yet more plutocratic tax cuts, with various proposals to slash capital gains and corporate income taxes. Trump’s co-partisans on Capitol Hill say they’re ready to help.
The Trump tax cuts may be failing to deliver on key promises. But on at least one developmental milestone — the terribleness of those “terrible twos” — this toddler has proved precocious.