Republican Reconciliation Package Will Lead to $3 Trillion Annual Deficits
A new analysis from the Committee for a Responsible Federal Budget estimates that the national debt will equal nearly 130 percent of GDP by 2034.
The reconciliation package taking shape in the House will add at least $3.3 trillion to the debt through 2034, according to a new analysis by the Committee for a Responsible Federal Budget (CRFB). And if various "temporary" tax cuts are made permanent, the debt will increase by $5.2 trillion, it says.
The GOP reconciliation package's mix of tax cuts and spending increases for defense, homeland security, and federal law enforcement would add $4.1 trillion to the deficit. This would be offset by $1.5 trillion in various savings and spending cuts.
Deficits would spike in 2027 under the bill, rising by $600 billion over 2024's $1.8 trillion. After that, tax cuts—including carve-outs on tipped wages and interest on auto loans—would start to expire, and pay-fors would kick in, causing the costs of the bill to fall.
But if those tax cuts are not allowed to expire, and other spending hikes are made permanent, the CRFB estimates that the bill will increase yearly deficits by $700 billion by 2034.
Either way, the country is looking at annual budget deficits of $2.9 trillion and $3.3 trillion by the middle of the next decade.
The national debt would equal somewhere between 124 percent of gross domestic product (GDP) and 129 percent of GDP by 2034. That's above the 117 percent debt-to-GDP ratio that would result if Congress let the 2017 tax cuts expire on schedule and kept spending levels constant.
All scenarios envision a massive, unprecedented peacetime debt burden.
"By 2027, under the reconciliation bill, debt would exceed the previous record of 106 percent of GDP set just after World War II," reads the CRFB analysis.
In a separate analysis released yesterday, the Tax Foundation projects that the heavy debt burden of the bill would be a significant drag on economic growth.
"American incomes measured by Gross National Product (GNP) would increase by less than 0.05 percent because the deficit impact of the bill drives a wedge between the increase in economic output and the increase in American incomes," reads the Tax Foundation report.
"With debt projected to exceed its historic record and interest costs already consuming a growing share of the budget, adding trillions to the debt through reconciliation would further weaken our fiscal position and constrain future economic growth," concludes the CFPB analysis.
