There is a lot of hyperbolic rhetoric flying around about the $1.5 trillion tax package Congressional Republicans delivered on this week.
Democratic leaders decried the legislation, declaring it "the end of the world... Armageddon." (I’m not joking, those are the actual words used by House Minority Leader Nancy Pelosi, who should probably consider retiring.)
Republicans, meanwhile, were predictably patting themselves on the back.
The truth is, this legislation was a softball for the GOP.
For one, Democratic hyperbole aside, the tax cuts are relatively modest, amounting to roughly three-quarters of 1 percent of the nation’s GDP. Federal revenues will drop from an anticipated $46 trillion to an estimated $44.5 trillion.
Second, it’s a painless act. Nothing is taken away from anyone; obligations are merely deferred.
That is why passing tax cuts is so easy and the reason one would find it difficult to find a Republican lawmaker under the sun opposed to passing them.
Republicans are welcome to take their victory lap. But the fact is the bill does nothing to change government’s functions or services. The only difference is that instead of taxpayers paying for these services and functions now, taxpayers will be paying for them later.
The real test will be whether Republicans can actually achieve that which no politician or political party has done in the modern era: restrain the growth of the federal government.
Source: U.S. Bureau of Statistics
And so far, the signs don’t look promising.
President Donald Trump’s budget laid out modest proposals that would actually curb spending on some cherished programs that have ballooned in recent years. This includes the food stamp program, which has grown from $18 billion in 2000 to $70 billion today, and Medicaid, which ballooned from $118 billion in 2000 to $389 billion today.
But Congressional Republicans appear to have little appetite for restraining federal spending.
In October, the budget passed by House Republicans, which contained $203 billion in spending cuts over the coming decade, met the budget passed Senate Republicans, which contained approximately $0.00 in mandated cuts. Guess what happened?
“[All] the GOP deficit-hawkery that reigned during the Obama presidency and early in the Trump presidency vanished literally overnight,” noted Ed Kilgore in New York magazine.
Meanwhile, lawmakers on both sides of the aisle reportedly are seeking to abandon the 2011 Budget Control Act caps (also known as sequestration), which helped curb defense and non-defense spending amid a period of surging federal debt.
Taken together, this has all the appearances of a replay of tax-cut and spend economics. We saw how well that worked last time.
There is reason to be optimistic about the tax cut passed by Congressional Republicans, which lets Americans keep more earnings and contains numerous pro-growth provisions likely to spur the U.S. economy.
But even the most optimistic dynamic tax scoring analysis shows the legislation increasing the federal debt, which was already projected to explode in coming decades, by $450 billion over the next decade. (And most economists would be highly, highly skeptical of this scenario.)
Passing a modest tax cut is swell. At some point, however, Republican lawmakers will have to address spending. The nation is one generation away from a debt-GDP ratio the equivalent to that of Greece prior to its economic meltdown.
"There are two ways to conquer and enslave a nation,” John Adams supposedly said. “One is by the sword. The other is by debt."
Whether he said it or not, the nation seems intent on testing the claim.
[Image Credit: ABC News]