As Expected, GOP's Tax Reform Legislation Will Greatly Increase the Debt over the Next Decade
Politico and many other news outlets reported yesterday on the Congressional Budget Office's new federal deficit estimates factoring in last year's tax reform legislation and found that the tax reductions in the law will balloon federal debt over the next decade. Even including some enhancement to growth from the tax reductions, the CBO estimates the Republican tax law will result in the annual deficit exceeding one trillion within 2 years and that it will add almost 1.9 trillion to the debt over a decade.
None of this is unexpected and critics of the tax legislation predicted this effect on the deficit. However, as the debt begins to rise this year and next its likely to stir Republicans to consider cuts to federal programs like Medicare and Social Security which they will claim are driving up deficits. Expect Paul Ryan and the Freedom Caucus to be especially vocal regarding the need to cut entitlements. Obviously their arguments will make little sense after passing the 2017 tax reform legislation which will be the primary driver of increased debt, but logic is rarely part of tax and spending debates in America.
Yesterday a distinguished group of economists, including former Federal Reserve chair Janet Yellen, wrote an op-ed arguing that tax cuts, not entitlement spending is the primary cause of rising deficits. But, will Republicans in Washington listen?