How Republicans Learned to Stop Worrying and Love Deficits | News
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Monday, November 27, 2017

How Republicans Learned to Stop Worrying and Love Deficits

Posted by on Mon, Nov 27, 2017 at 9:24 AM

Remember in 2009, when the economy had collapsed just before Barack Obama became president, and Obama pushed Congress to approve a roughly $800 billion stimulus bill to avert a new Great Depression, but Republicans uniformly voted no, arguing that the stimulus would blow a hole in the budget? Fast-forward to 2017, when the economy President Trump inherited from Obama is stable and growing and unemployment is low; now, many of those same Republicans are pushing for a tax cut that will blow a $1.4 trillion hole in the budget. Paul Ryan, the House Speaker, isn’t even pretending to care about that stuff anymore.
  • “The tax overhaul legislation that Ryan shepherded through the House—the Senate takes up its version this week—would add at least $1 trillion to budget deficits over the next decade, even when accounting for economic growth, according to independent tax analysts. Ryan’s willingness to look past that, and his ability to successfully persuade his members that these analyses are flawed, shows how important the tax measure has become to Republicans.”
  • The day after Thanksgiving, the Congressional Budget Office released a new report showing that the Senate’s version of tax reform will hurt the poor, to benefit the rich, even more than originally thought.
  • “The Senate Republican tax plan gives substantial tax cuts and benefits to Americans earning more than $100,000 a year, while the nation’s poorest would be worse off, according to a report released Sunday by the nonpartisan Congressional Budget Office. … By 2019, Americans earning less than $30,000 a year would be worse off under the Senate bill, CBO found. By 2021, Americans earning $40,000 or less would be net losers, and by 2027, most people earning less than $75,000 a year would be worse off. On the flip side, millionaires and those earning $100,000 to $500,000 would be big beneficiaries, according to the CBO’s calculations. … The main reason the poor get hit so hard in the Senate GOP bill is because the poor would receive less government aid for health care.”
click to enlarge screen_shot_2017-11-27_at_7.40.32_am.png

  • “Senate Republicans asked the JCT to calculate what happens to families across the income spectrum if only the tax impacts of the Senate bill are taken into account (so assuming zero impacts from the individual mandate repeal). The JCT sent the table below to Senate Republicans. It shows that all income groups—including people earning less than $30,000—receive a tax cut. But that changes in 2027 because the Senate GOP bill currently allows the individual tax cuts to expire in 2026. In 2027, people earning less than $75,000 would end up paying more, according to the JCT. Republicans say Congress will likely extend those cuts, but that counts on future lawmakers taking action.”
MEANWHILE: While Republicans are trying to muscle through a tax reform measure, the deadline for extending government funds is fast approaching, on December 8, meaning the government could shut down.
  • “While Republicans try to wrap up their tax effort, they must negotiate with Democrats on the litany of other governing items. The first step toward a resolution will be reaching an agreement on government spending levels for 2018 and perhaps beyond, lifting caps imposed under a bipartisan 2011 budget deal. … Under current law, Congress may appropriate no more than $549 billion for defense programs and $516 billion for nondefense programs next year, a cut from current levels. But the Trump administration and defense hawks want to boost defense spending to more than $600 billion, and Democrats are demanding a dollar-for-dollar increase in nondefense spending.”
  • Those limits, you’ll recall, were established as part of the so-called sequester in 2011, in which Republicans, complaining about rising deficits, reached a deal with the White House to cut spending by $1.2 trillion between 2013 and 2021. Again, so much for deficit concerns.
WHAT IT MEANS: Basic Keynesian economics works like this: when the economy is in the toilet—i.e., 2009—cut taxes and increase spending, because a stable economy is more important than deficits. The corollary, though, is that when the economy is stable—i.e., now—that’s when you worry about deficits. This isn’t what’s happening. We ran large deficits to get out of a recession, and we’re about to run larger ones to fund tax cuts for the wealthy is a time of relative stability.
  • The hand-wringing over deficit spending is usually overdone. (And the idea of a constitutional Balanced Budget Amendment, which the GOP has often pushed, is just economically illiterate.) So long as deficits remain a manageable percentage of GDP, debts can be a good thing. Deficits aren’t the primary grounds on which to oppose tax reform. But the Republican hypocrisy is worth noting—and remembering the next time Democrats have unified control of Washington DC.
WHAT’S NEXT: This is a critical week for the GOP’s tax effort.
  • “It’s do-or-die time for Senate Republicans on tax reform. Senate Majority Leader Mitch McConnell (R-Ky.) doesn't appear to have locked down 50 votes for his party’s tax overhaul, with at least half a dozen GOP senators showing varying levels of concern about the legislation released earlier this month. Yet the GOP leadership has a narrow window to push through its tax bill in the Senate before lawmakers become consumed with spending fights that could trigger a shutdown, not to mention a special election in Alabama that could flip a reliable Republican vote to a not-so-reliable one—or even a Democrat.”
  • “The leadership is juggling objections from multiple pockets of the Senate Republican Conference and is running short of time to convince the hold-outs as Republicans try to close out a frustrating year for their policy agenda with a major legislative accomplishment.”
  • “An influential and independent-minded bloc of deficit hawks, including Sens. Bob Corker of Tennessee and Jeff Flake of Arizona, have aired deep concerns about the tax bill’s red ink, even accounting for any economic growth that a tax overhaul might generate. Sens. Susan Collins of Maine and Jerry Moran of Kansas have voiced concerns about including in the tax proposal language that would repeal Obamacare’s individual mandate. Sen. Ron Johnson (R-Wis.), so far the only declared ‘no’ on the tax legislation, has argued that the overhaul unfairly disadvantages small businesses—although to fix the bill to his liking, the changes would likely cost hundreds of billions of dollars. Sen. Steve Daines (R-Mont.) has expressed similar concerns on so-called pass-throughs, according to Republicans.”
Related: The House’s version of tax reform seeks to repeal a 1954 ban on churches participating in political activities.

Related: After tax reform, no one’s sure what President Trump wants to do.

This post was excerpted from the INDY’s morning newsletter, Primer. To read this morning’s edition in full, click here. To get all the day’s local and national headlines and insights delivered straight to your inbox, sign up here.

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