GOP tax cuts hit balanced budget chances

February 4, 2018 GMT

WHITE SULPHUR SPRINGS, W.Va. The Republicans’ new tax cut law may be putting more money into Americans’ pockets, but it’s about to take a huge bite out of the federal Treasury, all but dooming their chances of producing a balanced budget.

The tax cuts dug them $1.5 trillion further into a hole already $5 trillion deep, and the conversation at last week’s congressional policy retreat focused on how much deeper to go with new spending rather than where to cut to fill the gap.

Now the party’s leaders have floated the idea of not even trying to write a federal budget this year rather than face the difficulties of trying to produce a plan that will put the government on a path to balance.


“It’s nearly impossible,” said Rep. Mark Walker of North Carolina, who chairs the conservative Republican Study Committee, a longtime defender of balanced budgets. “I probably should put on my happy face and tell you it’s just a matter of moving a few numbers around, but it’s very difficult.”

Republicans have long proclaimed themselves to be the party of fiscal discipline. They rode that message to massive wins in the 2010 elections, promising voters to be a check on President Obama’s spending.

Early on, it worked. Republicans forced new limits on discretionary spending, including the budget “sequesters” and spending caps, leading to two straight years of cuts in overall government spending the first time that had happened since the 1950s.

But the talk on Capitol Hill now is about breaking the caps. President Trump and Republican defense hawks say the spending limits have hollowed out the military. Democrats say any hike in defense must be accompanied by domestic spending increases.

That only toughens the challenge.

Rep. David Schweikert, Arizona Republican, said last year’s budget process was hard enough before accounting for the revenue hit from tax cuts.

“If you actually looked at last year’s budget, you really had to pull almost every rabbit out of the hat, and this is long before the math on the tax reform,” said Mr. Schweikert, a member of the tax-writing Ways and Means Committee and the conservative House Freedom Caucus.

Mr. Schweikert said he still believes there is a path to a balanced budget, but it will require a combination of sustained economic growth and the kinds of cuts to entitlement programs that Mr. Trump has taken off the table.

“If we stay at 1.8 [percent growth], it’s a technical math term: we’re screwed. You can’t get there,” he said. “On almost all growth models, you’re still going to have to do something with Medicare. [The] Medicare math is still incredibly difficult. But there is a way to get there.”


Newly minted House Budget Committee Chairman Steve Womack, Arkansas Republican, said overhauling the budget process is among his top priorities, and he has already started writing a fiscal year 2019 budget.

He is soliciting his colleagues for ideas, and a balanced budget remains the goal, said committee spokeswoman Sarah Corley.

“In order to improve the nation’s unsustainable fiscal situation and to address the growing debt crisis, balancing the budget is always the goal,” Ms. Corley said.

Rep. Mark Meadows, North Carolina Republican and chairman of the Freedom Caucus, said he has been talking with Mr. Womack and thinks the House will pass a budget but he doubted the Senate will be able to.

Senate Majority Leader Mitch McConnell, Kentucky Republican, has argued against the politically painful effort of writing a budget, Politico reported.

Democrats say Republicans are shirking their duties now that they are in control of the federal government.

“They won the election,” said Rep. Adam Smith, Washington Democrat. “They control the House, they control the Senate, they control the White House. It’s time to govern, but they’re not doing it. They’re not passing a budget to begin with.”

If Republicans were to attempt to write a balanced budget, they would have to raise taxes taking back their new tax cuts or make excruciating cuts to entitlement programs. Mr. Trump has said he won’t accept such cuts.

“At this point, balancing the budget in 10 years without raising taxes is virtually impossible,” said Brian Riedl, a senior fellow at the right-leaning Manhattan Institute for Policy Research. “It would require eliminating about a quarter of all projected program spending 10 years from now.”

Paul Van de Water, a senior fellow at the left-leaning Center on Budget and Policy Priorities, agreed that the tax cut bill has made a growing fiscal problem even worse.

“Despite the big tax cut that we just enacted, in order to at least keep the debt ratio from getting bigger, we’re going to need some more revenues down the road,” Mr. Van de Water said. “But that’s obviously not the Trump administration’s position at this point.”

He also said, though, that whether some $6 trillion in cuts over 10 years is feasible “is ultimately in the eye of the beholder” and that “overly optimistic” economic assumptions could make up some of the ground.”

“They’ll be able to put down on paper a budget that looks like it balances in 10 years if they really want to,” he said.