Contrary to the Media Narrative, Trump's Tax Cuts Didn't Blow a Hole in the Deficit
Numerous media outlets are decrying the newly released budget deficit numbers showing the U.S. racked up a whopping $867 billion shortfall through the first 10 months of fiscal year 2019.
They point to the tax cuts passed by the Republicans and signed into law by President Donald Trump in Dec. 2017 as a major culprit in this fiscal imbalance, but such is not the case.
CNBC’s John Harwood deceitfully tweeted the nation had a big debate about the tax cuts in the months leading up to the legislation’s passage and “the Trump WH and Congressional GOP … claimed the tax cut would pay for itself through higher growth.”
While “other specific parts of DC – Congressional Democrats and the entire economics profession – said that wasn’t true, that the deficit would go way up,” Harwood added.
As Trump and the Republicans anticipated (and as history has shown time and again) lowering tax rates has led to higher revenues to the treasury.
Overall, tax revenues are up 3 percent for fiscal year 2019, so far.
This number includes a 1 percent increase in personal income tax receipts and a 3 percent rise in corporate income tax payments to the government.
Meanwhile, the growth spurred by the tax cuts has created a jobs boom not seen in the country since the late 1960s, not surprisingly following tax cuts championed by President John Kennedy earlier in the decade.
In pitching the tax cut, Trump quoted the Democrat JFK who observed, “In short, it is a paradoxical truth that tax rates are too high today and tax revenues are too low and the soundest way to raise the revenues in the long run is to cut the rates now.”
In fiscal year 2018, the federal government in fact collected an all-time record $1.6 trillion personal income tax revenue as the tax cuts were being implemented, CNS News reported.
According to the Treasury Department, federal income tax receipts look to be in the same ballpark this fiscal year, with $1.43 trillion taken in during the first 10 months.
In fact, Trump’s economic policies have led not only to increased revenues, but also to fewer people dependent on the federal government. For example, five million fewer people are enrolled in the food stamps (SNAP) program since the former businessman took office.
The Trump economy has created over 5 million new jobs, which means more people are paying Social Security and personal income taxes.
So it’s a double win: people paying taxes and not drawing as much on the federal coffers.
The GOP tax cuts are not responsible for the current deficits; increased spending is. So while revenues are up 3 percent, spending is up an even higher 8 percent.
The rise in spending includes entitlement programs (like Social Security, Medicare and Medicaid), as well as military and domestic discretionary outlays.
.@realDonaldTrump touts military $$$ boost in spending plan passed by Congress- including pay raises for military personnel. Says in order to get military spending he had to give the Democrats things he thinks are a waste of money. #omnibus
— Jennifer Wishon (@JenniferWishon) March 23, 2018
What Harwood and others of his ilk do not seem to recall or choose to forget is that government officials were predicting a return to $1 trillion plus deficits (in other words, before the president signed the tax cuts into law, or even came down the escalator at Trump Tower to announce his candidacy).
In 2014, the Congressional Budget Office forecasted a return to high deficits in the years ahead due to federal entitlement programs.
The CBO estimated an additional $7.6 trillion in deficits from 2015 to 2024, or an average of $760 billion per year.
The deficit in 2014 was $483 billion, meaning the CBO was anticipating a steep increase in revenue shortfalls over the decade, likely topping a trillion dollars per year.
The tax cuts are performing just as anticipated, creating strong economic growth and increased tax revenues.
It is clear if the nation wants to balance the budget, the answer lies on the spending side.
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