With their nine-page “framework,” President Trump and congressional Republicans have turned to tax cuts in a bid to get a victory on their policy agenda. Mr. Trump has promised to deliver “the biggest tax cut in the history of our country.”
It achieved a rare feat of bipartisan agreement in Washington — worry from the left and the right about the plan’s potential to increase the deficit. Senator Charles Schumer, Democrat of New York, warned that the plan would deepen the deficit by $5 trillion to $7 trillion. Senator Bob Corker, Republican of Tennessee, said, “If I think it adds one penny to the deficit, I’m not going to vote for it.”
Are the proposed tax cuts a huge giveaway to the rich? Most definitely. Will they, as advertised, create a booming economy with benefits that trickle down to everyone else? I don’t think so. Mr. Trump’s plan will widen the country’s already dangerous wealth and income gaps, and because the gains go mostly to those at the very top, the tax cuts won’t do much to promote broad-based consumer spending or overall job growth.
That’s enough to reject the plan. But it would be unwise to oppose tax cuts, or any other federal legislation, simply because they add to the deficit.
Why? Because bigger deficits wouldn’t wreck the nation’s finances. Unfortunately, budgetary effects are the sun around which everything revolves in Washington. Should we invest a trillion dollars in our crumbling infrastructure, offer Medicare for All or pass the biggest tax cut in the country’s history?
Propose any of these, and the first question on everyone’s lips will be, “How are you going to pay for it?” The reason is simple: Lawmakers are obsessed with avoiding an increase in the deficit.
The impulse is so strong that it’s almost Pavlovian. It’s also holding us back. Politicians of both parties should stop using the deficit as a guide to public policy. Instead, they should be advancing legislation aimed at raising living standards and delivering the public investments in education, technology and infrastructure that are critical for long-term prosperity.
Right now, anything ambitious requires a score from the Congressional Budget Office. A “bad” score — one that adds to projected budget deficits — can easily doom good legislation because lawmakers are told that their math doesn’t add up. And that’s a problem.
Because, actually, the math always adds up. To see why, we have to look beyond the government’s balance sheet. Think of it this way. Government spending adds new money to the economy, and taxes take some of that money out again. It’s a constant churning of pluses and minuses, and their minuses become our pluses.