Tax Reform

Tax Reform and the Deficit: 1.7 Quadrillion Pennies, and Growing by the Minute

Senate version shies away from mortgage-interest cap, which will likely make fiscal hawks even more anxious.


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On Monday in this space, I predicted that the final tax-reform bill, if one ever makes it to a vote, "is almost certain to generate even more debt" than the package introduced last week in the House of Representatives. This is for two main reasons:

1) Because the Senate is less fiscally conservative (and more politically competitive) than the House, as evidenced by the $1.5 trillion deficit hole in the upper chamber's 10-year budget resolution, compared to the House's deficit-neutral version. (The former of which the House nevertheless rubber-stamped, to hurry along tax cuts.) And 2) because with each passing day of media scrutiny and eroding poll numbers, reliably risk-averse legislators are going to shy away from taking away voters' cookies. "A body that can't bear to jeopardize all of 1,500 shipping jobs in the course of helping 3.4 million devastated Americans is not likely to hold the line on killing the State and Local Taxes (SALT) deduction," I wrote in the L.A. Times. "SALT and the mortgage-interest deduction cut are the two biggest fillers of the $4-trillion hole [between the $5.5 trillion in tax cuts and projected negative-$1.5 trillion deficit], so caving on that could blow whatever slim chance there is for passage in the Senate."

Sure enough, yesterday the Senate came out with its own version of tax reform, and the House's cut on the interest deduction for new mortgages from $1 million to $500,000 was nowhere to be found. Unless there's a corresponding revenue filler/loophole-closer I'm not aware of, that means the $1.5 trillion number will be even higher.

But wait! It already is, according to the Congressional Budget Office (CBO), which on Wednesday guesstimated the 10-year deficit impact of the House bill at $1.7 trillion. Given that Sen. Bob Corker (R-Tenn.), for one, has maintained that "[If] we're adding one penny to the deficit, I am not going to be for it, OK?", that means that his own chamber's version of tax reform is on schedule to add more than 1.7 quadrillion pennies. Fun fact: If you stacked 1,700,000,000,000 pennies, it would reach approximately 1.7 million miles high, or enough to go to the moon and back seven times.

Numbers like that may prove too much for the last remnants of fiscal hawkishness in the Senate. Sen. Jeff Flake (R-Arizona), for instance, reacted to the Senate version by saying, "I remain concerned over how the current tax reform proposals will grow the already staggering national debt by opting for short-term fixes while ignoring long-term problems for taxpayers and the economy. We must achieve real tax reform crafted in a fiscally responsible manner." Sen. James Lankford (R-Ark.), who had made surprisingly skeptical remarks over the weekend, warned Thursday that his colleagues shouldn't "lose sight of our responsibilities to protect the nation, provide basic government services, and confront our federal debt." All it takes is three Republican senators, and tax cuts go to that great Obamacare-repeal in the sky.

I tried to make some of these points this morning on MSNBC:

Reason on tax reform here.

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  1. All in office are idiots.

    1. Looks like the last possible rationalization for voting Republican is about to disappear.

      1. Pretty much.

        1. I’m making over $7k a month working part time. I kept hearing other people tell me how much money they can make online so I decided to look into it. Well, it was all true and has totally changed my life.

          This is what I do…

      2. Basically. It’s been enough years of outright lying to your constituents. You can blame Trump all you want, but the GOp’s problems are caused by the GOP.

        Trump is a symptom. He is not the disease.

  2. “How much money do we have this year?”

    “We have $X.”

    “How much is, um, disposable income?”

    “Not much. We’re on the hook for our loans and commitments.”

    “*** deep breath *** OK, use just the *basic* cable package in the Senate gym.”

  3. I wish Congress was half as worried about paying for spending bills as they are about “paying for” tax cuts.

  4. Crazy idea, repeal the 16th and 17th amendments.

    1. Do you really think any of the 100 Senators would be different people?
      Except maybe Rand Paul?

      1. It’s not about who they are but what they can do.

  5. Where my Welchian alt text gone?


    1. The bottom 10% performing alt-text gets fired.

  6. Salt is an excellent Angelia Jolie vehicle.

  7. Given that Sen. Bob Corker (R-Tenn.), for one, has maintained that “[If] we’re adding one penny to the deficit, I am not going to be for it, OK?”

    What’s his record on saying that about spending increases?

    1. Basically non-existent. He hates Trump enough to fake fiscal discipline.

  8. Senate numbers don’t come close to adding up. It’s a much bigger cut than the house at about a 3% cut to every bracket while keepong medical deductions and the current mortage limit. Even with deferring the corporate cut to 2019 I don’t see how this stays close to 1.5TT in CBO static scoring.

  9. 1.7 trillion dollars is 170 trillion pennies, not 1.7 quadrillion.
    A quadrillion is 1,000 trillion.
    A penny is 1/100 of a dollar.

    1. Let’s check with Mike Pence.

    2. Furthermore, a penny is roughly 1/16 an inch thick, which comes out to 1 million pennies per mile. That’s six zeroes to drop in the conversion, so if it were 1.7 quadrillion pennies, it would be 1.7 billion miles, right? Steps of 3 zeroes are million, billion, trillion, quadrillion, yes, drop back two to billion. Sorry, kind of tired right now, brain is pretty mushy.

      How the heck far is 170 billion miles? A light-day is 186K *86400 miles, roughly 16 trillion miles, so that’s about ten light days.

      Probably got something wrong there. But Mat will never care 🙂

      1. No, CE, you’re right. While quadrillion is a fun word to say, it’s 170 trillion pennies.
        You added a bunch of zeroes there, Scarecrow.

        1.7*10^11 pennies, divided by 16 (to inches), 12 (to feet), an 5280 (to miles), yields only 170,000 miles. Still absurd, but nowhere near what you said.

  10. Sen. Jeff Flake (R-Arizona), for instance, reacted to the Senate version by saying, “I remain concerned over how the current tax reform proposals will grow the already staggering national debt by opting for short-term fixes while ignoring long-term problems for taxpayers and the economy. We must achieve real tax reform crafted in a fiscally responsible manner.”

    OK, Jeff — “Achieve” it.

    1. I was rather disappointed to see that his Senate record was pretty iffy on spending. I liked him as a congressman in Mesa, and I still agree with him on certain things. But I can’t help but feel a lot of his current edge is based in there being no consequence anymore.

      1. Jeff Flake isn’t the man he used to be, and hasn’t been for a long time. Something is incredibly wrong with the US Senate.

        I like Rand Paul’s idea of auditing the Fed, but we really need to audit each and every Senator in this country. From the way pretty much all of them vote and act, I’m pretty sure the corruption would be staggering.

        1. I’d like a report on how much their votes impacted the deficit each year.

  11. Having watched approximately half of the video for which Matt provided a link, I maintain my appreciation for Matt’s patience. I have seen his interactions with various interviewers, talk show hosts, et cetera.

    It seems to me that a number of interviewers have their questions prepared (perhaps for them) and do not actually interact meaningfully with their interviewees.

    Perhaps this perspective will suffice.

    With regards to the Alt-Text, Pennies from Heaven seems too obvious.

  12. It’s pretty pointless worrying about the debt. None of these shitstains will vote to rein in spending unless they’re not on a ballot. Eventually creditors will quit lending, until then I won’t waste any energy on the topic.

    1. Agreed. Let me be perfectly clear. There is absolutely no chance whatsoever that the U.S. government will ever seriously contemplate paying off the federal debt. We are well past the point of no return and there is no point in continuing the charade that fiscal hawks are going to magically solve the problem. The binge will continue no matter who gets elected, the FED will cover their asses, and the empire will collapse. And all of the politicians and talking heads will stare into the cameras like so many deer in the headlights and say “nobody saw this coming” like GW did on his way out.

      1. Then interest rates will always remain low at the fed, providing no incentive for banks and lenders to increase theirs. That means all our retirements will continue to be forced into market based products with high levels of volatility and no millenial will ever see a high girls savings account or cd like our grandparents had.

        Fuck you baby boomers and gen xers. Millenials get all the flack but you’re the chumps who led us to this shit sandwich buffet.

        1. High yield. That’s a ridic autocorrect lol

    2. As long as the US keeps servicing its debt, lenders will keep lending.

      1. Not necessarily. If the debt is serviced from increasingly inflated dollars and lenders feel that the risk is too great that they can’t make up the economic loss on principal with higher interest rates, they’ll stop lending.

  13. A quadrillion here, a quadrillion there, pretty soon you’re talking real money.

  14. Well, since it is only pennies, no harm, no foul, right?

  15. An interesting way to measure the national debt, by the number of pennies! Except that pennies are so inflated that they soon will contain more zinc than a penny is worth. Want a history lesson here? Heritage just sold a rare, silver-center cent, our first penny, which was about the size of a quarter and still needed a plug of silver added to it to bring it’s intrinsic value into line with gold and silver coins of the time.

    Congress eventually rejected silver-center cents for coins of pure copper (large cents), which continued till 1857, The small cent (current size) appeared (as a pattern) in 1856, in cupro-nickel (they’re the color of a nickel), which with the Civil War quickly became too valuable, so the composition was changed to solid bronze. The bronze cent lasted into the World War, when copper became too valuable as a wartime commodity and was replaced by steel (1943 only). Then, after the war, with all those shell casings lying around, the mint melted same and made pennies from brass. Bronze finally was restored until copper prices inflated to more than the value of the coin, and the current coins of zinc became standard. (To facilitate the lie that the penny still was a penny, the mint electroplates copper onto the zinc, but cut a penny open, and you’ll see the garbage.) Now there’s talk of changing to plastic or even ceasing mintage altogether since even the garbage is worth more than a penny.

    As for the national debt…

    1. … I prefer a slightly different way of expressing it:

      A modern dollar bill is 6 inches long; tape two together lengthwise, and you have a foot. String 20 trillion dollar bills together this way, and you’ll make a ribbon reaching from the surface of the earth to the orbit of Uranus!

      Needless to say, anyone who doesn’t recognize this for the financial disaster it must become has his head in Uranus.

      1. Is Uranus still a planet?

        1. Don’t know, but according to scientists, it is full of methane.

    2. Can’t stop producing pennies until sales taxes are no more. Gotta have those pennies for the states, since they actually have to use money instead of a printing press. Now we could do away with the nickel, and bring back the dollar coins. Then replace the paper one dollar with the two dollar bill.
      Or just require all electronic transactions and save all the expense of paper money and coins. And it would make the job of the NSA much easier. Then require chips instead of mag stripes on the cards. Then to save the planet from plastic, just implant the chips.
      See, freedom from wallets and pickpockets and street thugs.

  16. Fun fact: If you stacked 1,700,000,000,000 pennies, it would reach approximately 1.7 million miles high, or enough to go to the moon and back seven times.

    Is it morning in America again already?

  17. Cut the size of the centralized socialist beast oh party of limited government.

    You control the White House the senate and congress.

    Do your fucking job or go join the democrat progressive marxist party.

    1. You don’t get it.

      They view their job as working with the Democrats to keep the spigot flowing.

      Their voters, to them, are just saps.

      1. Exactly. Government is a gravy train. No more, no less. Tax cuts don’t hurt that (immediately), but spending cuts do. We will never see the latter until government bankrupts itself. Which is increasingly OK with me; it’s inevitable anyway.

  18. If voters wanted fiscal responsibility, they would get it. What they want is to have their kids and grandkids pay for everything.

    1. I don’t think it’s that simple. Many just don’t understand the issues or have very “interesting” opinions on the issues. I know a high-powered attorney who is totally unconcerned about the debt because we can just default on all debt to foreign governments and it would it cost us nothing.

  19. Disappointing that a Reason contributor would advocate for the double taxation that comes with the removal of SALT deduction. I suppose he is also good with the double taxation of dividends?

  20. We should begin treating the deficit and the debt as two separate issues. Much of the damage inflicted on the U.S. economy since we went off the gold standard has been caused by issuing debt to fund the deficit, not by issuing fiat money itself. Interest payments on the national debt amount to a steep $2,000 per year for each person in the U.S. over the age of 18. This amount must be paid each year by taxpayers or funded by going still further into debt. This is not sustainable. We can’t fix the deficit in the short term, but we can begin issuing pure “unbacked” fiat money to fund the deficit, rather than going further into debt. The inflationary impact of unbacked dollars would be no different than the inflationary impact of the same amount of debt-backed dollars, and such a policy would call a halt to the increase in the national debt and its crushing $400+ billion in annual interest payments.

    1. As far as bad ways to run a country this has always seemed less patently ridiculous than the way we do it now. You’re inflating the currency either way, but at least when you just straight print and spend you’re not beholden to whoever ostensibly holds the debt like we are now.

  21. (1,700,000,000,000,000c)?(1$/100c)



    Just putting it all out there.

  22. I’ve often wondered if you talked to saaay the head of the Fed, or presidents, senators etc what their REAL opinion is on the national debt. My thinking is that the people who actually know their ass from a hole in the ground must just be thinking “Well, we can always just make the Fed shoot inflation up to 10% a year or something for a decade or so and effectively make the debt go down to next to nothing in real terms… And that’s not technically a default soooo… Why worry about it?”

    This is the generous thought on what they might think. I know many are so stupid they can’t even grasp how any of it works, but it seems that must be the rationale the mildly smarter ones use to make them feel okay about their recklessness. And indeed it’s not entirely unfounded. I mean if I were in charge I might well try to get inflation up to a little more mild 5-6% to just take the edge off of the debt, while screwing our debt holders. That’s the problem with fiat currency in general is the debt holder has zero say in it… A government can technically not default while still fucking you hard.

    1. I am confident that all the people making the decisions will protect themselves from inflation should they go that route.

      1. Of course! It’s their right to not be effected by their bad decisions as our brilliant leaders! Take on a ton of fixed rate loans against real assets, like real estate, so that the real repayment costs are pennies on the dollar… A lil gold… A lil silver… And they’re all good!

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