On Tax Cuts and the $5 Trillion Hidden Debt

On Tax Cuts and the $5 Trillion Hidden Debt

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If you thought extending the Bush tax cuts for another ten years had a hefty price tag ($3.3 trillion, according to the Congressional Budget Office), check out this little-noticed Congressional Research Service report issued last week. Their tax wonk adjusted the CBO numbers for two factors – the increase in debt service and alternative minimum tax fix – and came up with a staggering $5 trillion price tag.

CBO chief Doug Elmendorf had harsh words for making the tax cuts permanent when he testified before the Senate Budget Committee last month. While admitting they would give a short-term boost to economic growth, over the long run “lower tax revenues increase budget deficits and thereby government borrowing, which reduces economic growth by crowding out investment,” he said.

 CRS’s conclusion wasn’t much different. “Permanently extending all of the Bush tax cuts would not undercut the economic recovery, but would worsen the longer-term fiscal outlook and possibly signal a lack of progress in dealing with the long-term fiscal situation,” the report concluded.

Congress’ lame duck session gets underway November 15th. A half dozen must-do tax and spending measures are high on the agenda. With Republicans wanting to extend the Bush era tax cuts for everyone and the Democrats wanting to end them for the rich, the non-partisan experts in the stands have a single message for the quarterbacks on the field: whatever you do, don’t go long.

spent 25 years as a foreign correspondent, economics writer and investigative business reporter for the Chicago Tribune and other publications. He is the author of the 2004 book, The $800 Million Pill: The Truth Behind the Cost of New Drugs.