Thursday, April 27, 2017
You can't ignore Kansas
When looking at the newly announced Trump 'Tax Plan' the Sam Brownback induced fiscal disaster of Kansas should be the first thing that comes to mind.
As President Trump’s top economic advisers faced a barrage of questions on Wednesday about the tax plan they had just unfurled, there was one that they struggled most to answer: how to keep the “massive tax cuts” they proposed from ballooning the federal deficit.So long as the tax rate remains low, the corporations will continue to sit Smaug-like on their hoards of cash. And even an old, old real estate salesman like Trump can't throw enough pixie dust in our eyes to make the economy grow as much as needed. But the richers will be happy, imitating their corporations and siting on their own hoards of cash.
The White House insists that economic growth will cover the cost, which could be as high as $7 trillion over a decade. But the question will dog Republicans and could fracture their party as they face the prospect of endorsing a plan that many economists and budget analysts warn will increase the deficit. After years of fiscal hawkishness, conservatives now face a moment of truth about whether they truly believe America’s economy is drowning in debt.
Some skeptics are already ringing alarm bells, fearing that Republicans will sign on to what critics see as a dangerous plan composed by a president who called himself the King of Debt.
“It seems the administration is using economic growth like magic beans: the cheap solution to all our problems,” said Maya MacGuineas, president of the Committee for a Responsible Federal Budget, a nonpartisan group that advocates fiscal restraint. “But there is no golden goose at the top of the tax-cut beanstalk, just mountains of debt.”
Ms. MacGuineas’s group estimates that Mr. Trump’s plan could reduce federal tax revenue by $3 trillion to $7 trillion over a decade. The economy would need to grow at a rate of 4.5 percent — more than double its projected rate, an unlikely prospect — to make the plan self-financing.
While Mr. Trump and his team point to the growth linked to tax cuts passed by previous presidents, today’s economy is different from that of 1981 or 2001, when Presidents Ronald Reagan and George W. Bush cut tax rates.
The Congressional Budget Office projects that the federal debt will grow by $10 trillion over the next decade. By 2027, the deficit could reach $1.4 trillion, or 5 percent of the economy, it says.
“This is fool’s gold that you’ll cut taxes, everybody will work harder, more money will come and you’ll erase the fiscal impact,” said Steve Bell, who was a Republican staff director of the Senate Budget Committee from 1981 to 1986. “It never happens.”
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