Extending Trump's tax cuts would make GOP's balanced budget promise all but impossible

Republican lawmakers have been claiming they can balance the federal budget in 10 years without any increase in revenues or cuts to defense or vital safety net programs. A new analysis by the nonpartisan Congressional Budget Office suggests that this would be mathematically impossible.

On Tuesday, CBO Director Philip L. Swagel wrote to Senate Budget Committee Chair Sheldon Whitehouse and Senate Finance Committee Chair Ron Wyden to provide information about various scenarios for achieving a balanced budget by 2033.

Swagel said a balanced budget would be possible if the individual provisions of the 2017 Tax Cuts and Jobs Acts, a law signed by former President Donald Trump, that primarily slashed taxes for wealthy Americans and corporations, were allowed to expire in 2025 and government spending on everything but interest on the debt were gradually reduced by 29%. If Congress were to extend the Trump tax cuts, a 35% across-the-board cut would be needed to achieve a balanced budget.

A bill that would make the expiring provisions of Trump’s tax cut permanent was introduced on Feb. 10 by Rep. Vern Buchanan (R-FL) and already has 92 co-sponsors, all of whom are Republicans.

Swagel noted that getting to a balanced budget in a decade would require major reductions in discretionary spending if Congress were to refuse to make cuts to programs Republican leaders are saying are off the table:

Specifically, under the budgetary path with baseline revenues, noninterest spending in the applicable categories would need to be reduced in relation to the amounts in CBO’s baseline projections by the following percentages in 2033 […]:

 

• 29 percent, when the reduction is applied to all noninterest outlays;
• 41 percent, when the reduction is applied to all noninterest outlays other than those for Social Security;
• 57 percent, when the reduction is applied to all noninterest outlays other than those for Social Security and Medicare; and
• 86 percent, when the reduction is applied to all noninterest outlays other than those for Social Security, Medicare, defense discretionary programs, and mandatory veterans’ programs.

Republicans cannot balance the budget in 10 years while both preserving Trump’s tax cuts and avoiding making cuts to Social Security, Medicare, defense, and veterans’ programs, according to the CBO’s analysis. Even if Congress eliminated every penny of the federal government’s other spending, it could not achieve a balanced budget in 2033 if the Trump tax cuts were extended without some cuts to funding for those four priorities.

Several House Republicans have demanded that the federal budget be balanced by 2033. On Jan. 10, CNN correspondent Annie Grayer posted on Twitter an image of a slide she reported was presented in a House Republican Conference meeting that listed as its first priority, “Adopt an FY24 Budget Resolution, balancing within 10 years.”

President Joe Biden proposed a budget on March 9 that he said would reduce the budget deficit by $2.9 trillion over 10 years without raising taxes on anyone making less than $400,000 annually. It would raise taxes for large businesses and for households worth over $100 million.

House Speaker Kevin McCarthy has demanded that Biden and Senate Democrats agree to significant unspecified budget cuts before he will take action to raise the debt ceiling, a move needed to avert a cataclysmic default by the federal government on payments it already owes.

“We will curb wasteful Washington spending to reduce inflation and return our government to fiscal sanity,” he told the nation on Feb. 6. “We will preserve our ability to defend this nation against threats from abroad. Cuts to Medicare and Social Security are off the table.”

McCarthy voted in favor of a 2018 bill to make the Trump tax cuts permanent.

Senate Minority Leader Mitch McConnell has also pledged to oppose any cuts to defense, Medicare, or Social Security.

The office of the chair of the Senate Budget Committee issued a press release saying that the CBO’s analysis “torpedoes House Republicans’ promise to balance the federal budget while also making permanent the Trump tax cuts.”

In the statement, Whitehouse (D-RI) said:

If ever there were any doubt about Republicans’ blind allegiance to the top 1%, this is a nail in that coffin. While they would permanently extend the Trump tax giveaways for their wealthy donors, Republicans have pledged to use draconian cuts to pro-growth investments for everyday Americans to balance the budget in 10 years. As this analysis shows, no amount of cuts can make their math add up. It is a farce.

Wyden (D-OR) said: “Today’s analysis from Congress’ own nonpartisan authority on the budget makes it clear: Republican promises not to cut Social Security or Medicare on their way to balancing the budget just don’t add up. These numbers show that Speaker McCarthy made impossible promises to land his job, and that’s seriously alarming with a catastrophic default getting closer every day.”

Published with permission of The American Independent Foundation.