GOP dismisses report that tax law will add $1.9 trillion to debt

Donald Trump's tax cuts and spending increases are forecast to inflate the US deficit

The massive tax cuts signed into law in December, which Republicans said would pay for themselves, will balloon the US deficit in years ahead, the Congressional Budget Office said on Monday, possibly hobbling President Donald Trump's future agenda.

CBO forecast 3.3 percent growth in 2018 in gross domestic product, a broad measure of the economy, and 2.4 percent GDP growth in 2019.

"Projected deficits over the 2018-2027 period have increased markedly since June 2017, when CBO issued its previous projections", the report said, adding that the tax and spending bills have "significantly reduced revenues and increased outlays anticipated under current law". Beginning in 2020, however, the CBO said deficits would exceed $1 trillion a year. In a decade, the red ink is expected to reach $1.5 trillion.

"Anyone who argues this course can continue is living with blinders", said Campaign to Fix the Debt Co-chairmen Judd Gregg, a former GOP senator, and Ed Rendell, a former Democratic governor. Expirations for individual tax rates at the end of 2025 will slow economic growth as well. Meanwhile, total debt is projected to reach 96 percent of gross domestic product, or almost $29 billion by 2028 - the highest total debt since WWII.

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The report paints an unrelentingly bleak picture of the federal deficit, predicting it will hit $804 billion this year, rise to just under $1 trillion for the upcoming budget year and permanently breach the $1 trillion mark in 2020 unless Congress stems the burst of red ink. This change reflects the net effect of substantial estimated reductions in tax collection (nearly $1.7 trillion) due to policy changes, and a significant increase in tax collections (about $1 trillion) due to higher projected economic growth. From 2021 through 2028, deficits will average 4.9 percent of GDP.

House Republicans are also expected to vote this week on a balanced-budget amendment to the Constitution, which would force federal revenue and spending to balance. And they don't buy the Laffer Curve nonsense peddled in the U.S. and here by tax cut advocates, that company tax cuts will be so stimulatory that they'll produce a net tax revenue increase. "From day one, the Republican agenda has always been to balloon the deficit in order to dole out massive tax breaks to the largest corporations and wealthiest Americans, and then use the deficit as an excuse to cut Social Security and Medicare". It warns that interest rates on government borrowing will spike, with the benchmark 10-year Treasury note, now yielding 2.8 percent, will average a 3.0 percent interest rate this year and 3.7 percent next year.

It's also true that the White House's official budget projects a mere $363 billion deficit in 2028.

"This high and rising debt matters because it harms our economy, by crowding out public and private investment, reducing our fiscal flexibility, and lowering confidence and certainty". The political theory behind this combination was that Republicans needed to take advantage of their full control of government to pass the tax cuts Democrats opposed, which exclusively benefit the very rich.

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