President Trump’s signature legislative accomplishment came just under a year ago when Congress passed a massive tax cut to benefit wealthy Americans. It was a coup for Republicans, who claimed corporations would pass on the money they were about to save to the working class. That didn’t quite happen. They also claimed the tax cut would pay for itself. That didn’t happen either, as was made clear this week when it was revealed that the federal budget deficit has ballooned $779 billion, a 17 percent increase from 2017. The hike is astonishing considering how well the economy is doing.
All signs point to the $1.5 trillion tax cut as the culprit, as well as increased military spending, but the administration is pinning the blame on unnamed “wasteful” expenditures. “President Trump prioritized making a significant investment in America’s military after years of reductions in military spending undermined our preparedness and national security,” Treasury Secretary Steven Mnuchin said in a statement. “Going forward, the president’s economic policies that have stimulated strong economic growth, combined with proposals to cut wasteful spending, will lead America toward a sustainable financial path.”
Prior to the tax bill’s passage in December 2017, Mnuchin claimed that the robust economy that would result from the cut would increase federal revenues. If it has, is hasn’t been nearly enough to offset the money the government in no longer taking in due to the tax cut. Nor has the sweeping round of tariffs Trump has imposed on foreign goods, which the president tried to argue in August would allow the United States to “start paying down” the national debt, which is now on track to surpass $1 trillion by the end of next year.
The rising debt is a tricky subject for the party in control of the government, which has long advocated for fiscal responsibility while railing against the rising national debt. Republicans were ultimately so blinded by their obsession with giving tax breaks to the wealthy, however, that, like Mnuchin, they convinced themselves the debt would not be affected. Sen. Bob Corker (R-TN) managed to vote for it despite a previous claim that he would not endorse a piece of tax legislation that would increase the deficit by even “one penny.”
— Daniel W. Drezner (@dandrezner) October 16, 2018
When the Congressional Budget Office in April estimated the drastic effect the tax overhaul would have on the deficit, Corker said at a Senate Budget Committee that if “it ends up costing what has been laid out here, it could well be one of the worst votes I’ve made.” Whoops!
But others have chosen to key in on the “wasteful spending” part of Mnuchin’s statement about the inflated deficit as a way of justifying tax reform. Last month, National Economic Council Director Larry Kudlow said that while “people are quick to blame deficits on tax cuts,” he’s not worried. “If you grow rapidly you’re going to have lesser deficits. Growth solves a lot of problems,” he said during a speech at the Economic Club of New York. “The gap is principally spending too much.”
Because Republicans would never dare advocate for a decrease in military spending, cuts will have to come to programs that benefit low-income Americans. On Tuesday, Senate Majority Leader Mitch McConnell (R-KY) said as much, blaming the deficit increase on pesky entitlements like Medicare, Social Security and Medicaid. “It’s disappointing but it’s not a Republican problem,” he told Bloomberg News. “It’s a bipartisan problem: Unwillingness to address the real drivers of the debt by doing anything to adjust those programs to the demographics of America in the future.”
When the Associated Press mentioned to Trump that McConnell wants to consider entitlement reform to remedy the deficit, the president said he hadn’t heard about it. When he was asked to comment on the deficit increase, Trump partially blamed the forest fires that ravaged California this summer.
AP tells Trump the budget deficit is very big and that he used to criticize Obama about such deficits.
Trump says he "had to take care of our military"…and also that there were forest fires…and "California does a horrible job maintaining their forests." pic.twitter.com/W4aeWplXbi
— Daniel Dale (@ddale8) October 17, 2018
Regardless of the president’s ignorance, if the GOP retains control of Congress after next month’s midterm elections, they’re coming for health care. Unlike Corker — and most Americans — Republicans don’t regret last December’s tax cuts for the wealthy. In fact, they’re looking to strengthen them. In September, House Republicans unveiled a new set of proposals aimed at making the reform permanent. “Now it’s time to change the culture in Washington where we can only do tax reform once in a generation,” House Ways and Means Committee Chair Kevin Brady (R-TX) said in a statement announcing the package. “This legislation is our commitment to the American worker to ensure our tax code remains the most competitive in the world.”
Democrats have little recourse other than wresting control of the government. Though deficit reduction has been suspiciously absent from the GOP’s list of talking points as the midterms near, Rep. Beto O’Rourke (R-TX), who is currently vying to replace Sen. Ted Cruz (R-TX) in the Senate, is bringing it into focus. On Tuesday night, he took Cruz to task for his role in pumping up the national deficit.
“For Senator Cruz to say that this isn’t going to bust the budget, at a time of $21 trillion in debt and when we’re on track to deficit spend to the tune of a trillion dollars a year, he voted to add $2 trillion,” O’Rouke said during a debate. “Those tax cuts disproportionately will flow to corporation who are already sitting on record piles of cash, and the already wealthy, in a country that is ridden with income inequality unseen since the last gilded age. Why? In the days just before and just after that vote, Senator Cruz accepted $120,000 from the political action committees that represent the corporate interests that benefitted from this tax cut.”
— Beto O'Rourke (@BetoORourke) October 17, 2018
Last October, Cruz called the national deficit “immoral” while arguing that the only way to alleviate it was by passing tax cuts. “The only force big enough to turn the debt around is economic growth,” he tweeted.
With less than a month until the midterms, most polls have Cruz leading O’Rourke comfortably.
Cruz said Tuesday night that he cares “passionately” about paying down the debt and, once again, that the “only force strong enough to do that is economic growth.” Unfortunately, this principle hasn’t really borne itself out in the wake of last year’s tax cut. What to do? Like McConnell, Cruz advocated for cutting spending on “socialized medicine,” also known Medicare, which tens of millions of Americans rely on for coverage.