Tax Cuts Don’t Reduce the Debt

From the liberal Wall Street Journal:

Throughout Barack Obama’s eight years as president, Republicans hammered relentlessly at the horrors of debt. In 2011 they took the country to the brink of default because they didn’t want to raise the statutory debt ceiling. Last year candidate Donald Trump repeatedly ripped Mr. Obama for doubling federal debt.

Yet in their drive to overhaul taxes, President Trump and his congressional allies are about to make the trajectory of debt even worse.

Financing tax cuts with deficits isn’t the end of the world: There are economic arguments for doing so, which I will get to. However, Republican leaders aren’t making these arguments. Instead they rely on a far more tenuous case: Lower tax rates will unleash so much new economic activity and thus added tax revenue that, contrary to history and mainstream economic opinion, the debt actually won’t rise much, if at all. It’s a politically convenient face-saver, but it undermines a process Republicans themselves put in place to minimize the abuse of such reasoning.



Source: Wall Street Journal

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