Tax Reform

Treasury's Tax Reform Analysis Confirms Republicans Don't Give a Damn About the Deficit

Republicans will regret this the next time a budget-busting Democratic proposal comes along.

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Alex Edelman/CNP / Polaris/Newscom

For months, even as independent analyses suggested the Republican-backed plan to slash taxes would add billions, perhaps trillions, to the national debt over the next decade, GOP leaders dismissed those worries.

The Trump White House and Treasury Secretary Steve Mnuchin were supposed to have been cooking up an analysis to show the GOP tax plan "will pay for itself with growth," Mnuchin said in April.

When asked about whether the Treasury plan would be released before the tax bill passed the Senate (a different version had already cleared the House), Mnuchin told The New York Times that he had 100 people working around the clock to finish the analysis.

The one-page analysis released Monday, looking like a final paper written on the eve of a due date, shows Republicans have fully abandoned any pretense that passing the tax bill is based on principles of fiscal conservatism.

Treasury Department economists largely agree with the conclusion reached by the Joint Committee on Taxation—its analysis was released just before the Senate approved the tax bill—that the GOP tax bill will add about $1.5 trillion to the deficit in a decade; or about $1 trillion after economic growth is included.

The Treasury analysis declares that the plan will pay for itself "from a combination of regulatory reform, infrastructure development, and welfare reform as proposed in the Administration's Fiscal Year 2018 budget," the analysis says. That's the same budget proposal, by the way, that was declared "dead on arrival" by Republican congressional leaders.

How does the Treasury know all of these things will be accomplished and what their long-term effect on the federal budget will be? Is there any reason to think that a Republican caucus unable to pass even moderate reforms to the Affordable Care Act will be able to pass serious entitlement reforms in an election year?

The answers, apparently, don't matter enough to the Treasury.

With tax bills already passed in both the House and Senate, what the Treasury's analysis says—or doesn't say—probably doesn't change the trajectory of tax reform. Republican lawmakers in both chambers had plenty of other sources telling them that the bill did not pay for itself and would increase the deficit even after including expected economic growth. The same will be true, in all likelihood, of whatever package emerges from the conference committee.

The lack of detail in the Treasury's analysis is unlikely to sink the bill at this point, because the new analysis basically does the same thing that GOP members of Congress have been doing for weeks: making vague promises of greater-than-expected economic growth without any indication of how or why they believe that will happen.

But while the Treasury analysis does not change this bill's trajectory, it does contribute to one of the main problems with the GOP tax plan by further bending Congress' policy-making trajectory away from anything resembling fiscal sanity.

Indeed, that evolution is already taking place with left-leaning pundits. See, for example, this Matt Yglesias piece he claims is above the petty concern-trolling of Republican hypocrites on the debt, making the contrarian point that "Republicans are right about the deficit."

By which, of course, Yglesias means that debate over deficits should never again hinder progressive goals like government stimulus, expanding entitlements, or anything else.

Just as Democrats now have cause to regret the ways in which they forced Obamacare through the Senate with procedural shenanigans copied by Republicans once they took office, the GOP will rue the decision to disregard concern for the national debt in the name of politically expedient tax cuts.

And liberals will be more than happy to remind them just how vapid the deficit hawks turned out to be.

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  1. The official Damn-Giving Analysis?

    1. I believe 3 Damns equals 1 Flying Fuck.

      1. How many Flying Fucks to An Actual Shit? I’m not sure I have enough saved up.

        1. A Flying Fuck is the same as an Actual Shit.

          Flying Fuck is an East Coast unit of measure.
          Actual Shit is Midwest.
          West Coast uses “I can’t even”.

          1. Oh, cool – I’m good then. I literally can’t even – I just wasn’t aware of current exchange rates.

            Thanks!

    2. 100 economists work for a month to complete a 1-page analysis?

      1. They should be stripped of their credentials on that basis alone.

      2. If it’s not 1500 pages of bullshit, I’m not satisfied.

      3. “… Mnuchin told The New York Times that he had 100 people working around the clock to finish the analysis.”

        Well, sleep deprivation would certainly explain the result. Is all that OT getting tacked on to the deficit.

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  2. “Republicans will regret this the next time a budget-busting Democratic proposal comes along.”

    Probably not.

    1. Right– because shaming a member of Congress for his or her past actions, up to and including actual felonies, has always worked so well.

  3. SO I GUESS REASON WANTS US ALL TAXED INTO OBLIVION RATHER THAN CUT SPENDING.

    1. REASON THINKS THAT MORE SPENDING AND LOWER TAXES WILL INCREASE THE DEFICIT? REAL LIBERTARIAN!!!11!!1!

      1. FINALLY SOMETHING TO SHOUT ABOUT.

    2. STEVE SMITH WANT YOU RAPED INTO OBLIVION BUT NOT TAXED!

  4. Mnuchin told The New York Times that he had 100 people working around the clock to finish the analysis.

    So just THINK OF THE JOBS that’ll happen when the bill itself s passed!

    1. We thought they meant this kind of job, but actually they meant this.

    2. I think the land of Oz should value its ethnic diversity – Mnuchins, Winkies, Gillikins and Quadlings.

  5. And liberals will be more than happy to remind them just how vapid the deficit hawks turned out to be.

    The Democrats are merely happy that their spending remains in place.

  6. No, fuck you, cut spending. And cut my taxes more.
    What’s the point of splitting hairs over tax revenue when entitlements are going destroy us all?

  7. You want them to raise taxes or something?

    The tax reform plan doesn’t have to pay for itself. If it cuts government thievery by 1.0 trillion or by 1.5 trillion over a decade, it’s a good thing either way.

    Now go cut spending.

    1. As long as they continue spending then it doesn’t cut thievery at all. All it does is kick the can down the road to force future taxpayers (who have no representation in Congress, btw) to foot the bill for today’s entitlement spending and military misadventures.

      1. What are they going to do about it? We’ll all be dead by then.

  8. That’s a fine piece of writing there, I’m looking forward to the part of the series where we get confirmation that water is wet.

  9. 2nd time today I have to ask why a blogger would waste space promoting higher taxes on anyone, anywhere, any time.

  10. Anyone who opposed the ObamaCare replacement bill in the Senate, which cut $1.022 trillion in spending on entitlements, $772 billion of that directly from Medicaid, and, after all the tax cuts, also managed to cut $321 billion off of the deficit–shouldn’t be taken seriously on deficit reduction.

    https://www.cbo.gov/publication/52849

    Good intentions are no excuse for opposing small government, and that goes for Rand Paul and Reason staff, too.

    Cutting Spending + Cutting Taxes + Cutting Regulation = Small Government.

    We should support any part of that equation to whatever extent congress will pass it.

    Seeing people oppose tax cuts in the name of libertarianism is soooooooo embarrassing.

  11. Not only is it impossible to cut spending, you can’t even cut the growth in spending. If we just did the latter, eventually revenue would catch up. But either party cries when that is proposed for any of their pet programs.

  12. It’s almost as if Republicans preferred being the opposition party, where they could bitch all day long about government spending, instead of being in power, when they’d actually have to do something about it.

  13. If cutting taxes is the wrong approach because of the deficit, do you imagine that raising taxes is the answer?

    LOL

  14. For all the so called libertarians who claim that THIS tax cut will cause a reduction in spending…how?

    This is Charlie Brown with Lucy holding the football — why do this shit to yourselves.

    Taxes follow spending, not the other way around.

    1. The government spends every penny it gets plus what it can borrow.

      What it can borrow is a function of two basic things–1) the size of the tax revenue stream and 2) the pressure of things like inflation and the exchange rate on the currency.

      Cutting taxes doesn’t necessarily mean we’ll spend less in absolute terms in the future, but cutting tax revenue does mean that we’ll spend less than we would have otherwise. Again, the downward pressure on borrowing comes from 1) making the size of the government’s revenue stream smaller relative to taking on more debt and 2) inflation and the supply of treasuries driving up interest on that debt to make it increasingly expensive to add more debt.

      Therefore, by cutting the size of the govenrment’s revenue stream smaller than it would be otherwise and making government borrowing more expensive than it would have been otherwise, cutting taxes will lead to less new spending–than there would have been otherwise.

      Look at Greece as an example. Why did they stop spending so much money? The answer is because 1) The tax revenue dried up as their economy tanked and 2) the markets would only underwrite their deficit at rates that were prohibitively expensive. Either one of those situations means the government will not continue to increase its cost basis as much as they would have if either of those things weren’t true; i.e., they stopped spending because they had no other choice.

    2. Another way to look at the same thing: think of the opposite strategy.

      Try to imagine a situation where the government becomes so flush with tax revenue that it decides to cut spending. It’s hard to imagine because it’s a ridiculous situation. Why would they do that?

      If we ever see a budget surplus again in our lifetimes, it’ll last for about five minutes–and they won’t spend it on debt reduction. They’ll be giving away goodies to get themselves reelected. Keynes was wrong about a lot of things, but he wasn’t wrong about government spending being a reliable way around the liquidity trap.

      In short, the government using our tax revenue to pay down debt is a childish fantasy–like unicorns and hobbits. The only way to stop drunken sailors from spending money is to cut off their revenue stream. The idea that the government would stop spending our money if only they had more of our tax revenue to spend is a sick joke. We should be taking as much off the table as possible.

    3. I should add one more observation.

      Because cutting taxes means the government will spend less than they would have otherwise is not the only reason to cut taxes. There’s also the question of economic growth. It’s one of the most basic, important considerations–and yet few people ever sit down and think about what makes the economy grow. Government spending might get us around the liquidity trap in a crisis, but over the long run, government spending doesn’t make economies grow. Economic growth comes from things like productivity gains because of investment in technology, growth in consumer discretionary income, free trade, stuff like that.

      Well, tax cuts are like a zero sum game between private, productive activity and public, unproductive activity. For instance, a lot of it is about proceeds taken from productive activity like income generation, capital gains, corporate profits, etc. and spent on things that don’t necessarily generate economic growth at all–like Medicaid, social security benefits, and paying farmers not to farm. When we take money out of the hands of the central planners in congress and let it be used by consumers and businesses in markets, there are all sorts of advantages besides it leading to lower government spending than there would be otherwise. Economic growth is a good thing, and it comes from the private sector.

      1. Cutting taxes, like in the case of the tax reform package–they’re cutting the tax on corporate profits by 40%?!

        That’s privatization.

        Leaving taxes high is socialism.

        From each according their ability (progressive income taxes, taxes on corporate profits, capital gains taxes) to each according to their need (government spending on social programs–especially entitlements), when we cut taxes, we pull socialism out by its roots. If communism is when the tax on profits is 100%, then cutting the tax from 35% to 20% is turning further away from socialism.

      2. You make a number of valid points, but I wouldn’t use Greece as an example. Greece is a currency user, while our federal government is a currency issuer. (The Euro is a flawed currency system, but that’s a discussion for another day.) As to another budget surplus one day – I am not sure that is even a goal we should strive towards (for the federal government). Perhaps it is – perhaps it is not. Correlation does not prove causation, but here’s some interesting historical facts. Our federal government has had a budget surplus a total of seven times. Under president Andrew Jackson, all the federal debt was paid off and there was a true federal surplus. Within three years, we experienced a deep economic depression. In fact, for all of the first six times we had a federal budget surplus, we experienced an economic depression within 3 years. The 7th time – was the Clinton budget surplus. Some suggest the pattern was delayed due to the tech stock bubble, the Fed’s easy money policies, and then the real estate bubble. Then we had the Great Recession.

        I happen to believe that the risk related to the federal debt is harmful inflation, which would be bad for living standards. In a fiat currency system like ours, the risk is always inflation, not solvency, since the federal government cannot run out of money it can create at will.

    4. Oh was a balanced budget supposed to be the goal? Yay we live in an authoritarian welfare state that takes half our income, but at least we pay for our vote-buying on the same balance sheet!

  15. “Republicans will regret this the next time a budget-busting Democratic proposal comes along.”

    Is this a rerun from 1980 or something? This ship sailed long ago.

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  18. History has shown an increase in revenues after tax cuts. In addition eliminating deductions like mortgage interest, state taxes means taxpayers from different states earning the same pay the same for their federal govt. A move towards fairness.
    The deficit is about spending. There is always bi-partisan agreement to spend more than the rate of inflation and more than the rate of population growth. During the Bush years following tax cuts up until the banking crisis revenues increased and average of 8% per year but spending 11% an most of it was domestic, not Iraq war.
    If we only increased spending since 2000 at the rate of inflation or population growth we would have a balanced budget now.

  19. Are our current tax policies, like the high corporate tax rate and its work arounds, creating perverse incentives in our economy?
    Because those perverse incentives, is the treasury actually getting the level of revenue these tax policy analysis assume its getting? Must we retain bad tax policy for fear of deficits?

    The deficit is an annual thing, so I am mot sure what the phrase “add a trilion dollars over ten years actually means. Does it mean that the annual deficit on the tenth year is a trilion dollars greater than this year or that the average additional deficit over ten years is 150 billion. Is it calculatef this way to sound scarier?

  20. Republicans don’t actually care about deficits?

    Again, if you didn’t figure this out a long time ago, you’re an idiot.

  21. Just check the historical record. Republicans have never given a damn about deficits. Republicans are liars. Their rhetoric is good, their record stinks. The problem is the Democrats don’t give a damn about deficits either. They are insane on taxes. That leaves the Libertarians who are delusional. The Libertarian party still thinks legalizing pot is an election winner.

  22. “Just as Democrats now have cause to regret the ways in which they forced Obamacare through the Senate with procedural shenanigans …”,… serial killers have cause to regret the manner and means by which they claimed their victims. FTFY

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