All throughout the process of moving the Tax Cuts and Jobs Act (TCJA) through Congress, detractors of the reform law admonished supporters for the effect it would have on the debt.
One year later, that narrative has not changed — but it’s also not why American debt has been increasing. Irresponsible tax-and-spending policies are to blame for the federal fiscal situation, and the TCJA’s long-term effect on that situation is minimal.
When freshman Representative Alexandria Ocasio-Cortez was asked recently by Anderson Cooper how she would pay for her $38 trillion agenda, she deflected by arguing that “no one asked how we paid for a $2 trillion tax cut” (they did).
So when the Congressional Budget Office (CBO) released a report showing the country on track for a trillion-dollar deficit in 2019, opponents of the tax reform law were quick to crow about how the TCJA is the reason behind our debt crisis.
In the short term, it is true that the tax reform law has not helped the deficit situation. The CBO’s report shows that federal revenues were actually slightly higher than the first quarter of last year, but that doesn’t mean that the tax cut hasn’t had an effect.
Revenues are inflated by $8 billion from tariffs and $9 billion in excise taxes on health insurance providers going into effect. In short, while revenues stayed steady compared to the same period last year, they would have gone up absent TCJA.
But that’s not the full picture. Even the most optimistic projections of the TCJA would have shown a decline in revenue in the short term while the economy kicked into gear. Meanwhile, spending outlays jumped $92 billion (or nearly 10 percent) from last year.
The Bipartisan Budget Act of 2018 (BBA) can be thanked for that — the National Taxpayers Union Foundation (NTUF) estimated that this bill would cost over $200 billion more than the $1.43 trillion TCJA. The BBA was always a greater fiscal albatross than the tax reform bill, but blasting a bipartisan spending bill for its deficit impact was simply less sexy than going after a politically charged tax cut.
Even this ignores the fact that short-term deficit problems pale in comparison to the ones coming down the track.
Medicare and Social Security represent a freight train with tens of millions of retiring baby boomers, projected to cause a shortfall of $82 trillion in these two programs alone over the next 30 years. That this problem has arisen out of programs that routinely award more in benefits than their beneficiaries contribute should not be a surprise.
Given the depth of this crisis (and the popularity of Medicare and Social Security), it’s not particularly surprising that politicians are not interested in discussing feasible solutions.
Proposals from the Left to double the top two tax brackets and cut defense spending to European levels would close just one-fifth and one-seventh of the gap, respectively. The Right’s favorite spending target, antipoverty spending, collectively accounts for half of the gap. In other words, even these radical proposals would not be enough.
So we are left with politicians and pundits force-feeding us a tax reform red herring to “explain” our debt crisis. It is no such thing. After all, we were headed for trillion-dollar deficits even without the TCJA (or even the BBA, for that matter).
While tax reform and Congress’ big-spending budget deal are contributors to the problem, the vast majority of our debt challenges are driven by runaway entitlement spending.
One year after the passage of the TCJA, the narrative around the law as a budget-buster has changed little. But it bears noting that this overlooks the real budget problems facing future generations.
The views and opinions expressed in this commentary are those of the author and do not reflect the official position of The Daily Caller.