Extending Trump Tax Cuts Would Explode the Debt by Almost 50%: CBO

[planosteve]

Permanently extending the 2017 tax cuts as Republicans want to do would result in significantly higher budget deficits over the coming decade and soaring national debt over the longer term, according to a newly released analysis by the nonpartisan Congressional Budget Office.

If the tax cuts are made permanent, budget deficits over the decade from 2025 through 2034 would be about $4 trillion larger, excluding interest costs, Congress’s official scorekeeper said. By 2054, that primary deficit would be 3.7% of gross domestic product, or 1.5 percentage points higher than in CBO’s recent baseline projections. Once net interest costs are factored in, the total deficit in 2054 would equal an estimated 12.3% of GDP, 3.8 percentage points higher than under the current scenario without the tax cuts.

Debt held by the public would climb to 214% of GDP over the next 30 years, 47 percentage points higher than the 166% projected in CBO’s baseline, which itself would be a record high, up from a current 99%.

Rep. David Schweikert, an Arizona Republican and chairman of the congressional Joint Economic Committee, requested the analysis and also asked CBO to consider the outlook if interest rates were 1 percentage point higher than in the baseline forecast.

Those borrowing costs would swell the debt significantly. “If interest rates also increased each year until they were higher by 1 percentage point (before accounting for macroeconomic effects), debt held by the public would grow even larger, exceeding 250 percent of GDP in 2054,” CBO Director Phillip Swagel wrote.

CBO also projected that economic growth would be faster for several years after the extension of the tax cuts — but slower over the longer term, when interest rates would also be higher.

Why it matters: Republicans are grappling with the cost of their tax plans — and the requirement under the budget reconciliation process they are using that those costs must be covered beyond the tenth year.
https://www.thefiscaltimes.com/index.ph ... ost-50-CBO

[Mark]

Tax rates don't create debt. Borrowing and spending does.