As the US budget deficit barrels toward $1 trillion, the White House doubles down on claim that tax cuts will 'pay for themselves'

trump tax reform

  • The Congressional Budget Office projected that the federal deficit would surpass $1 trillion this year for the first time since 2012.
  • Economists say the Republican tax bill President Donald Trump approved in 2017 has driven a sharp jump in the federal deficit.
  • But the White House is doubling down on the claim that the $1.5 trillion package will eventually break even.
  • Visit Business Insider's homepage for more stories.

The US economy is expanding at a healthy pace, with the unemployment rate at its lowest level in half a century. So why is the government increasingly spending hundreds of billions more than it takes in?

Economists say the Republican tax bill President Donald Trump approved in 2017 has driven a sharp jump in the federal deficit, which typically falls during periods of economic growth. But the White House is doubling down on the claim that the $1.5 trillion package will eventually break even.

"I stand by our comments that the tax cuts will pay for themselves," Treasury Secretary Steve Mnuchin said at a congressional hearing on Wednesday. "This will be simple math."

That was just the latest in a string of similar comments from administration officials, who have argued that lower taxes would spur enough economic activity over a decade to make up for lost revenue.

Independent economists have overwhelmingly disagreed. Tax receipts were down sharply in 2018 as the Tax Cuts and Jobs Act took effect, giving businesses the largest rate breaks in history. Republican Rep. Kevin Brady of Texas, who helped craft the package, conceded in June that it was not clear it would pay for itself.

"We will know in year eight, nine or 10 what revenues it brought in to the government over time. So it's way too early to tell," he said at an economic summit in Washington.

The White House referred requests for comment to the Council of Economic Advisers, which did not respond to multiple emails.

At the hearing, Mnuchin added that spending increases were behind the deficit and downplayed the effects of lost revenue. Bipartisan lawmakers passed a spending package last year that was expected to add about $500 billion to the national debt.

"Let me just comment that spending is increasing as well, but the trillion and a half dollars of tax cuts we have made will pay for themselves," he repeated.

The comments came just days after the Congressional Budget Office projected that the federal deficit would surpass $1 trillion this year for the first time since 2012.

"We don't need more false promises about rapid economic growth or tax cuts that will pay for themselves," said Maya MacGuineas, president of the Committee for a Responsible Budget. "We need action to reverse our trillion-dollar deficits."

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