Trump and Congressional Republicans fooled us five times when they promised us that their tax cuts would generate enough economic growth to cover the lost tax revenues. They never did.
Trump’s “big, beautiful budget” calls for a tax cut of $5.6 trillion. And he intends to recover the lost revenues from Americans’ safety nets. He wants to cut: $715 billion from Medicaid, $500 billion from Medicare (breaking his promise not to cut either), financial assistance for food programs, farmers, education, health care, anti-poverty programs, housing, disaster relief, medical research, environmental organizations and animal cruelty prevention. What a guy!!!
But all these cuts won’t be enough to cover the lost tax revenues. To do that, Trump will have to borrow more than the current debt ceiling. So, his budget raises the debt ceiling by $4 trillion. The additional borrowing will drive our debt to a record $40.2 trillion and interest costs will follow.
We’ll experience higher interest rates across the board, including on residential mortgages and corporate and consumer borrowing. Higher interest rates will be a drag on home buying, housing starts and consumer spending, which is two thirds of the economy. The cuts bound to lead to a recession, which like the rest of GOP tax reform will hit the middle class the hardest and widen income and wealth inequality further.
It’s happened before. Trump promised his 2018 tax cuts “will be revenue-neutral when you add revenues from economic and job growth because we’re going to have magnificent growth.” The growth fell way short of the lost tax revenues, widening the 2018 deficit to $779 billion, the highest in six years.
Trump’s promise of job growth was also shaky. Rather than using the cash windfall from tax cuts to invest, build and hire, corporations used them to go on a shopping spree of acquiring or merging with other companies and buying back their stock.
Mergers and acquisitions generate job loss since managers fire employees to eliminate redundancies in the surviving entities. Stock buybacks however increase earnings per share which enable CEOs to get paid more. Indeed, corporations spent $6.9 trillion of tax savings on stock buybacks since 2017 and trillions each year on mergers and acquisitions.
Six years later, Trump continued to insist that the U.S. took in more revenue as a result of his 2018 tax cuts even though revenues actually declined.
Even Trump’s first-term Secretary of the Treasury, Steven Mnuchin, acknowledged that any resulting economic growth would not cover the $1.5 trillion of revenue lost from the 2018 cuts. The Office of Management and Budget projected the 2018 tax cuts would increase the federal debt close to the size of the U.S. economy and increase deficitsby about $1.8 trillion, by $2.25 trillion if interest payable on the debt is included. So, the U.S had to borrow to cover the increased deficit by raising its debt by $7.2 trillion.
Republicans accuse the Democrats of spending and borrowing more than Republicans and brag that the GOP is the party of fiscal responsibility. Nothing can be further than the truth. Republican administrations since and including Reagan’s increased the deficit and borrowed more than Democrats. President Obama cut the deficit by more than 50% but had to borrow more to spend our way out of the Great Recession of 2008 in order to save us from a depression. Then Trump and his MAGAs got their hands on Congressional majorities and the White House, and our debt and deficits are headed towards records.
