GOP Tax Cuts Are Driving US Debt Ratio Higher: Analysis

GOP Tax Cuts Are Driving US Debt Ratio Higher: Analysis

Lucy Nicholson

Although they are struggling to come up with a budget proposal of their own, Republicans are unified behind the idea that the federal deficit is the product of excess spending and therefore a problem to be solved by slashing government programs.

Democrats, on the other hand, lay much of the blame for persistent budget shortfalls on the tax cuts that Republicans tend to push through every time they gain control in Washington. On Monday the liberal think tank Center for American Progress released an analysis laying out the case that GOP tax cuts are the driving force behind the country’s worsening fiscal outlook.

The argument in a nutshell:

“Tax cuts initially enacted during Republican trifectas in the past 25 years slashed taxes disproportionately for the wealthy and profitable corporations, severely reducing federal revenues. In fact, relative to earlier projections, spending is down, not up. But revenues are down significantly more. If not for the Bush tax cuts and their extensions — as well as the Trump tax cuts — revenues would be on track to keep pace with spending indefinitely, and the debt ratio (debt as a percentage of the economy) would be declining. Instead, these tax cuts have added $10 trillion to the debt since their enactment and are responsible for 57 percent of the increase in the debt ratio since 2001, and more than 90 percent of the increase in the debt ratio if the one-time costs of bills responding to COVID-19 and the Great Recession are excluded. Eventually, the tax cuts are projected to grow to more than 100 percent of the increase.”

Specifically, CAP says that the tax cuts passed under President George W. Bush will cost more than $8 trillion through the end of 2023, while the Trump tax cuts will cost $1.7 trillion. Republican plans to extend the Trump tax cuts would add $2.6 trillion to the total, while the effort to rescind IRS funding would add billions more.

“A series of massive, permanent tax cuts have created large federal budget primary shortfalls and continue to exert upward pressure on the debt ratio,” the CAP analysis concludes. “If Congress wants to decrease deficits, it should look first toward reversing tax cuts that largely benefited the wealthy, which were responsible for the United States’ current fiscal outlook.”