The silence is deafening.
Where have all the deficit hawks gone?
Not long ago, readers plied the Missoulian with letters warning of dangers facing the country from our mounting debt. National politicians similarly decried the bills this generation was amassing for future generations.
That concern is so yesterday.
Today, elected officials confidently assure us that this tax cut, this time, will generate such rapid economic growth that our nation’s coffers will be filled to overflowing. Unlike previous tax cuts, this one, we’re assured, will pay for itself.
As a staff member of the U.S. House of Representatives’ Ways and Means Committee during Ronald Reagan’s presidency, I was involved in the last major tax relief initiative.
The Tax Reform Act of 1986 brought real reform to our complex tax system. It eliminated a wide range of expensive tax breaks and giveaways, thereby introducing simplicity and allowing taxes to be cut without adding to the deficit.
And Congress exercised true discipline in applying a “pay as you go” rule: for every tax break a member of Congress proposed, he or she had to propose an equal revenue raiser somewhere else in the tax code.
Committee Chairman Dan Rostenkowski — a real Democrat’s Democrat from Chicago — repeatedly asked members, “How are you going to pay for that?” when they brought lobbyists’ wish lists to committee meetings.
The 2017 Tax Cuts and Jobs Act is no reform. It ignores or barely touches the most expensive tax breaks in our complex code, even while doling out generous permanent cuts for corporations and small businesses and less generous temporary cuts for middle- and lower-income taxpayers.
Congress couldn’t allow for accuracy in its “scoring” of this bill’s costs without violating an arcane rule that would have required more votes — from Democrats — to pass it. I’m as happy as the next person to get a tax cut, but not at the expense of our children and grandchildren.
The bill officially adds about $1.5 trillion to our nation’s debt over 10 years, but the true borrowing cost is even higher. As none other than House Speaker Paul Ryan and other top leaders have said, future congresses surely will extend tax cuts for individuals rather than let them expire, adding to red ink.
And while this Congress technically is bound by a “pay as you go” rule like the one in effect in 1986, this Congress doesn’t feel as wedded to it as in the past.
Despite a “Paygo” law adopted on a bipartisan basis in 2010 — when Tea Partiers’ concerns about the deficit nearly forced the first-ever default on our nation’s debt — Congress has voted repeatedly to waive the requirement that revenue losses be matched by revenue increases to avoid adding to deficits and debt.
Congressional leaders’ recent assurances that these budget discipline rules will be waived in certain cases in the future are another sign that the tax bill’s costs will be higher than advertised.
What about tax cuts’ impact on growth and jobs?
President Reagan’s tax cuts in 1981, aimed at stimulating the economy during a mild recession, ballooned the federal deficit, despite promises by “supply side” economists that growth would offset the cuts.
And Kansas Gov. Sam Brownback — formerly a fiscally conservative U.S. Senator — gives us a recent real-life example of what happens when hype and hope win out over common sense and experience.
Convinced that tax cuts would strongly boost Kansas’ growth and job creation, Brownback pushed his fellow Republican legislators to enact an ambitious tax cut in 2012. Not only did Kansas not grow faster than other states, but declining revenues forced cuts in infrastructure, education, and other essential services in order balance the budget, as required by law.
After a public outcry, Kansas’ Republican-dominated Legislature reversed the cuts earlier this year, overriding Brownback’s veto to do so.
Where does this leave us?
The 2017 Tax Cuts and Jobs Act is the law of the land. Our economy is reasonably strong now, and joblessness is lower than it has been in years —although many workers have dropped out of the workforce and possibly could be drawn back in by more rapid growth.
But the bill doesn’t change such fundamental drivers of economic growth as population growth and productivity (efficiency).
And if new business investment flows into robotics, artificial intelligence, or other technologies to increase efficiency, the net result will be fewer workers needed for the same level of production.
We can hope this gamble with our nation’s finances pays off. But at this stage, count me very skeptical.