Trump and Cruz Tax Plans Would Require Massive Cuts in Federal Spending
Policy + Politics

Trump and Cruz Tax Plans Would Require Massive Cuts in Federal Spending

© Carlo Allegri / Reuters

Republican presidential frontrunner Donald Trump highlighted his plans for taxing and spending at CNN’s town hall in Wisconsin on Tuesday.

After railing against the $19 trillion national debt, Trump vowed to dismantle Obamacare and government agencies like the Education Department. At the same time, he would make the U.S. military “bigger, better, stronger” than ever before and protect Social Security and other entitlements, even as he seeks arguably the biggest tax cut in history.

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Trump and his chief GOP rival, Sen. Ted Cruz of Texas, have boasted they can achieve a balanced budget over the coming decade – long the holy grail of fiscal conservatives and last achieved 15 years ago.

But in their effort to be all things to all Republicans – from ardent deficit hawk, government reformist and champion of tax relief to hard-nosed potential commander-in-chief who will wipe out ISIS – Trump and Cruz are advancing proposals that represent a severe and arguably unrealistic challenge to the budget and fiscal realities of Washington.

Trump’s tax cut proposals would drain the Treasury of $9.5 trillion over the coming ten years, while Cruz’s 10 percent flat tax approach would reduce revenues by $8.7 trillion over the same period, according to Urban Institute-Brookings Tax Policy Center estimates.

What that means is that by 2026, federal revenues would constitute just 14.1 percent of gross domestic product under Trump’s approach and 14.7 percent under Cruz’s tax cut plan – both well below the projected revenues of 18.2 percent of GDP for that year, according to a newly released study by the liberal-leaning Center on Budget and Policy Priorities.

The government essentially would be operating with roughly $1 trillion a year less in revenues by that point than it would collect under current law. At the same time, overall spending would dip far below the 23.1 percent of GDP currently projected for 2026.

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In order to achieve a balanced budget by 2026, federal spending on entitlement and discretionary programs other than for interest on the debt would have to be cut dramatically. As a percentage of the overall economy, spending would be at the lowest level since the administration of Harry Truman between 1945 and 1953. Indeed, if all government spending were slashed by the same percentage, achieving a balanced budget in ten years would require cutting all programs by 37 percent under Cruz’s approach and 40 percent under Trump’s.

“Under both plans, balancing the budget in 2026 would require cutting all government programs — including Social Security, Medicare and defense — by about two-fifths if all programs were cut by the same percentage,” Isaac Shapiro wrote in a summary of the study. “Balancing the budget without cutting Social Security, Medicare, and defense would require eliminating essentially the rest of government under both plans.” [Italics his.]

In short, what Trump and Cruz are proposing would require the most draconian budgetary cuts and savings ever attempted by a White House and Congress. The necessary cuts would make House Speaker Paul Ryan’s previous unsuccessful drives for major entitlement reform – which generated outrage among many Democrats -- look like a walk in the park.

Critics – including Fox News Sunday host Chris Wallace – have told Trump and Cruz that their tax and spending numbers simply “don’t add up” and have pressed for a clearer explanation of what they have in mind.

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Trump has insisted that he could achieve much of his savings without tampering with Social Security and Medicare by going after “waste, fraud and abuse” in government – an evergreen proposal in the budget debate. He would also dismantle the Department of Education and the Environmental Protection Agency and phase out the Common Core State Standards.

“We’re bringing education locally,” Trump explained during a GOP debate in early March. “The Department of Environmental Protection, we are going to get rid of it in almost every form. We’re going to have little tidbits left. But we’re going to take tremendous amounts out.”

Finally, he promised to drive a hard bargain as president in negotiating future government contracts, especially for the Defense Department, to save substantial tax dollars. But many of his proposed savings are a drop in the bucket compared to the enormity of the long term debt.

For his part, Cruz has said he would abolish five major federal departments, including the Internal Revenue Service. Cruz argues there no longer will be need for the IRS after his flat-tax and tax simplification proposals are enacted. He has also targeted the Departments of Energy, Commerce, Education and Housing and Urban Development for extinction.

And after tossing in another two-dozen lesser agencies and programs for elimination, Cruz has boasted that he could achieve savings of $500 billion over the coming decade.

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But experts at the Center on Budget and Policy Priorities are unimpressed by Trump’s and Cruz’s budget math and say it would force draconian cuts that go well beyond the tough reforms and savings recently approved by the Republican-controlled House Budget Committee. That GOP budget plan is going nowhere this year and is viewed more as a political message document than a realistic blueprint for spending in the coming years.

“Offsetting the cost of the Trump or Cruz tax cuts would require cuts in government programs that far exceed the painfully deep reductions in the budget plan the Republican majority on the House Budget Committee recently approved,” the report noted. “Offsetting the costs of the tax cuts and balancing the budget, as both candidates support doing, would require spending cuts about two and one-half times the size of the Budget Committee cuts.”