As President Trump’s top economic advisers faced a barrage of questions on Wednesday about the tax plan they had just unfurled, there was one that they struggled most to answer: how to keep the “massive tax cuts” they proposed from ballooning the federal deficit.
The White House insists that economic growth will cover the cost, which could be as high as $7 trillion over a decade. But the question will dog Republicans and could fracture their party as they face the prospect of endorsing a plan that many economists and budget analysts warn will increase the deficit. After years of fiscal hawkishness, conservatives now face a moment of truth about whether they truly believe America’s economy is drowning in debt.
This is fool’s gold that you’ll cut taxes, everybody will work harder, more money will come and you’ll erase the fiscal impact.
The Congressional Budget Office projects that the federal debt will grow by $10 trillion over the next decade. By 2027, the deficit could reach $1.4 trillion, or 5 percent of the economy, it says.
The office’s predictions have been off before, and the impact of tax cuts on the economy is a matter of debate, as so many variables determine a country’s economic fortunes. But tax historians and veterans of previous tax fights are quick to point out that lower rates are not necessarily a panacea for slow growth.
“This is fool’s gold that you’ll cut taxes, everybody will work harder, more money will come and you’ll erase the fiscal impact,” said Steve Bell, who was a Republican staff director of the Senate Budget Committee from 1981 to 1986. “It never happens.”