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GOP ‘Credit-Card’ Policies Rack Up $4 Trillion More In Debt

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GOP ‘Credit-Card’ Policies Rack Up $4 Trillion More In Debt

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Reprinted with permission from DCReport.

 

Thanks to the Trump tax cuts for the rich and the corporations they control, the federal debt is growing faster than dandelions in spring, a report Tuesday from the Congressional Budget Office (CBO) warned.

That’s a complete reversal of what candidate Trump promised voters.

Trump ran for office denouncing the federal debt as dangerously high and asserting that he could pay it all off in eight years. Instead, his tax cuts, together with profligate military spending—far more than the Pentagon says it needs—are growing our government’s debt.

“If current laws generally remained unchanged, CBO projects, growing budget deficits would boost that debt sharply over the next 30 years,” the new report stated. “It would approach 100% of GDP by the end of the next decade and 152% by 2048. That amount would be the highest in the nation’s history by far.”

The most ominous part of the new CBO report examines how the individual tax cuts are, at least for the moment, temporary. They expire after seven years while the corporate tax cuts are permanent. The seven-year limit understated the real costs, as calculated using Congressional budgeting rules.

Passing their tax cuts, Republican leaders celebrate adding trillions of dollars of new debt.

Assuming the individual cuts are extended for the full 10 years, the Trump tax cut law will add not $1.5 trillion or the revised estimate of $1.7 trillion to our national debt, but about $3 trillion. Add in increased military spending, and the additional debt will soar to nearly $4 trillion–a more than 25% increase from when Trump took office.

“Moreover, if lawmakers changed current law to maintain certain policies now in place—preventing a significant increase in individual income taxes in 2026, for example—the result would be even larger increases in debt,” CBO wrote.

“The prospect of large and growing debt poses substantial risks for the nation and presents policymakers with significant challenges,” CBO reported, noting that “this report’s projections are consistent with the 10-year baseline budget and economic projections that CBO published in the spring of 2018.”

The CBO updates its economic analysis twice a year. Trump’s own projections are rosier, but they assume the economy will grow at about 5% annually, a roughly two-thirds increase over current growth that only economists allied with Trump find credible.

You can expect Faux News and other unreliable news organizations to claim that CBO is anti-Trump and not to be trusted. Fact is, the CBO is nonpartisan. It is also an office of Congress, where Republicans control both the House and Senate. In short, you can trust the CBO is doing its best regardless of who occupies the White House.

When passed the Trump tax cuts were estimated to add $1.5 trillion or 10% to the public traded federal debt. In February the CBO estimated that the Trump tax cuts would likely cost $2.3 billion, a 15% increase in the debt.

Now add rising interest rates into the mix. Last month federal debt carried an average interest expense of 2.41%, up slightly from 2.32% when Obama left office.  But Trump has called for higher interest rates and the Federal Reserve is raising the short-term rates it controls with plans for steadily increasing them into next year.

If America returns to the 6.6% average federal borrowing rate when President Clinton left office, it would mean an additional $618 billion a year in increased interest expense before counting the increased debt on Trump’s watch. That figure is roughly equal to the entire budget the Pentagon requested for this budget year.

Looked at from the perspective of a Cosmic Observer,  Trump is injecting with growth hormones the long-term Washington practice of using subtle budget, tax and regulatory techniques to take from the many and redistribute to the already rich few.

But Trump promised to “drain the swamp” and take care of the “forgotten man.” Trump never said that in office he would use the presidency, as he is, to pick the pockets of those forgotten Americans.

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David Cay Johnston

David Cay Johnston won a 2001 Pulitzer Prize for his coverage of taxes in The New York Times. The Washington Monthly calls him “one of America’s most important journalists” and the Portland Oregonian says is work is the equal of the great muckrakers Ida Tarbell, Lincoln Steffens and Upton Sinclair.

At 19 he became a staff writer at the San Jose Mercury and then reported for the Detroit Free Press, Los Angeles Times, The Philadelphia Inquirer and from 1995 to 2008 The New York Times.

Johnston is in his eighth year teaching the tax, property and regulatory law at Syracuse University College of Law and Whitman School of Management.

He also writes for USA Today, Newsweek and Tax Analysts.

Johnston is the immediate past president of the 5,700-member Investigative Reporters & Editors (IRE) and is board president of the nonprofit Investigative Post in Buffalo.

His latest book Divided: The Perils of Our Growing Inequality an anthology he edited. He also wrote a trilogy on hidden aspects of the American economy -- Perfectly Legal, Free Lunch, and The Fine Print – and a casino industry exposé, Temples of Chance.

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