As the Senate’s tax cut bill careened toward passage last week, it should have reminded its Republican authors of all the malpractice they complained about when Democrats were in charge: A big, complex bill unveiled at the last minute. Hasty committee hearings that left important details unwritten. Closed-door negotiations in the middle of the night. And special deals for senators who withheld their votes: oil drilling for Alaska’s Lisa Murkowski, medical deductions for Maine’s Susan Collins, a bigger small-business deduction for Wisconsin’s Ron Johnson (who owns part of a small business). Important parts of the bill were still being rewritten on Friday afternoon.
But that was just the messy process. Even worse is the substance of the bill: a heap of broken promises.
President Trump said the centerpiece of his economic policy would be a middle-class tax cut, “the biggest in American history.” That’s not what it turned out to be.
Instead, the bill is essentially a big corporate tax cut, with modest (and unevenly-distributed) individual tax cuts on the side.
Important parts of the bill were still being rewritten on Friday afternoon. But that was just the messy process. Even worse is the substance.
According to the Joint Committee on Taxation, Congress’ official scorekeeper, about 62% of taxpayers will see their tax bills reduced by $100 or more in 2019. The remaining 38% will either pay about the same amount they do now or suffer a tax hike. Among those in most danger of a tax increase are upper-middle-class families in high-tax states such as California and New York, thanks to the elimination of the deduction for state taxes. But wealthier people will come out OK: of those earning between $500,000 and $1 million, 91% will get a tax cut.
Trump said repeatedly that the bill would leave rich folks like him worse off, not better. That’s not remotely true.
The biggest broken promise, though, is one fiscal conservatives have made to each other: that their tax cuts won’t add to the national debt. That was a core pledge from the start. “Not only will this tax plan pay for itself, but it will pay down debt,” Treasury Secretary Steven T. Mnuchin said.
But the Joint Committee on Taxation estimated last week that the bill would increase the federal budget deficit by $1 trillion over the next 10 years — even after economic growth is factored in. The committee projected that the bill would boost growth by less than 1%, not enough to counteract the revenue loss it will produce.
Republicans dismissed the bipartisan committee’s forecast as wrong, but they don’t have an official estimate of their own to rebut it. Mnuchin promised that the Treasury Department would provide a forecast, but it never arrived.
Among unofficial estimates, even the most optimistic, from the conservative Tax Foundation, forecast that the Senate bill would stimulate less than 3% in growth over 10 years — still not enough to stop the deficit from swelling.
That should worry conservatives, who have long warned that a growing national debt will doom the economy to long-term decline.
If the deficit keeps growing, “our debt literally gets out of control and it ends the American dream as we know it,” House Speaker Paul D. Ryan warned in 2012, when he was chairman of the House Budget Committee. “Economists tell us that when your debt gets to 90% as a share of your economy, you start slowing down and you stagnate.”
That’s exactly where we’re heading.
The federal debt currently stands at about $15 trillion, about 77% of gross domestic product, according to the Congressional Budget Office. CBO projects that number will reach 91% in 10 years if no policy changes are made — but even faster if the tax cuts become law.
That’s why Sen. Bob Corker of Tennessee staged a last-ditch effort last week to put “triggers” into the tax bill, to stop the tax cuts if the deficit was ballooning.
“If everybody’s so confident that these revenue projections are going to be met, they shouldn’t be a problem,” he said.
Corker’s colleagues hated his idea and shot it down.
That’s because this battle has been mostly about politics, not policy. Trump and the GOP leadership in Congress wanted a big success by the end of the year; there was little time for calm deliberation. They wanted to show their supporters — voters and donors alike — that they could pass Republican legislation, including tax cuts for corporations and the wealthy.
Now, if the economy accelerates, they’ll claim the tax cut produced the improvement. If it doesn’t, they’ll blame something else. And soon, they’ll express dismay as the federal deficit gets bigger.
In fact, they already have. The next item on the agenda, Trump said recently, is “getting spending under control,” specifically welfare reform: “People are taking advantage of the system.”
Sen. Marco Rubio of Florida suggested a bigger target. “The driver of our debt is the structure of Social Security and Medicare for future beneficiaries,” he said.
But wait: Didn’t Trump promise, during his campaign, that there would be “no cuts” to Social Security or Medicare?
He did. Future beneficiaries of those programs can breathe easy. After all, in the Trump administration, a promise is a promise.