Larry Kudlow is at it again. Speaking at the Economic Club of New York, the top economic adviser to President Trump said that, while the administration is looking to cut federal spending — including on entitlement programs — he believes that the GOP tax cuts passed late last year are not to blame for the rising budget deficit.
Here’s some of what Kudlow said, followed by a crucial fact check.
On entitlement cuts: “We’ve already tackled a big part of the newest entitlement, namely Obamacare. … And we’re still chipping away on a regulatory basis to reduce the burdens and the inefficiencies of that. … As far as the larger entitlements, I think everybody’s going to look at that, probably next year. I don’t want to be specific. I don’t want to get ahead of our own budgeting, but we’ll get there.”
On tax cuts and deficits: “We have to be tougher on spending. People are quick to blame deficits on tax cuts. Well, but I don’t buy that. Tax cuts promote growth and wages. Revenues come in – federal, state and local revenues come in. We’re going to run deficits of about 4 to 5 percent of GDP the next year or two. I’d rather it were lower, but it’s not a catastrophe. It’s not the biggest thing in the world. Going down the road, of course we’d like to slim that down as much as possible and we will work at it. … The single biggest factor affecting the budget in general and these macro numbers on deficits and debt is the rate of economic growth. If you grow slowly for long periods of time you’re going to have greater deficits. If you grow rapidly, you’re going to have lesser deficits. … Growth solves a lot of problems.”
The fact check: Growth may solve a lot of problems, but budget experts don’t expect it will eliminate the deficit or come close to paying for the tax cuts. The Congressional Budget Office has projected that the tax cuts passed in 2017 will add about $1.9 trillion to the deficit over 10 years, even factoring in economic growth effects. And most economists outside the White House still expect that the economic growth over the next decade will be far slower than the unprecedented boom required to balance the budget, or even to stabilize the debt as a percentage of GDP.
Watch Kudlow’s comments here.