Congress and President Trump Are Spending Money and Cutting Taxes Like There Is No Tomorrow

From Taxpolicycenter.com

What is the difference between Chicago mayoral candidate Willie Wilson, and President Trump and Congress?

Wilson, you may recall, spent last Sunday handing out an estimated $200,000 in crisp new $20 bills to prospective voters. He called it “property tax relief” and apparently broke no Illinois campaign finance laws.

Congress and President Trump spent the past week doing much the same. There are two differences: The magnitude of the Washington give-away dwarfs Wilson’s.  And the money Congress is handing out is ours while Wilson gave away cash from a personal foundation. To wit:

Two weeks ago, the GOP-controlled House Ways & Means Committee voted to cut taxes by about $100 billion over the next 10 years. The House is voting this week on the committee’s bills to expand tax-advantaged Health Savings Accounts for mostly high-income households, allow people to take a medical expense deduction for gym memberships, and repeal an Affordable Care Act excise tax on medical device makers. Later on, it will vote on other committee-approved measures to postpone the ACA’s tax on high-cost employer sponsored health plans and suspend the tax penalties for employers that don’t offer adequate insurance to their workers.

This week, Ways & Means Chair Kevin Brady (R-TX) also said he wants the House to vote in September to make permanent the individual income tax provisions of the 2017 Tax Cuts and Jobs Act (TCJA). And he wants to create several new tax incentives for savings and business investment. CBO estimates that just making the TCJA’s individual income tax provisions permanent would reduce federal revenues by $650 billion over 10 years.

This week, President Trump proposed spending $12 billion to provide financial assistance to farmers who face lower commodity prices as a result of retaliatory tariffs imposed by countries that have been targeted by Trump’s own import taxes.  Sen. Rand Paul (R-KY) called the payments, “welfare for farmers.”  

This week, lawmakers are working their way through a series of 2019 appropriations bills that will turn into real spending the terms of the Bipartisan Budget Act of 2018. It raised 2019 spending caps by $153 billion, on top of the measure’s agreement to hike the 2018 caps by $143 billion. While much of the recent profligacy can be laid in the laps of Republicans, many of whom used to complain about big deficits, Democrats are happily going along with the spending hikes.   

This is all happening at a time when the federal debt is on track to reach unprecedented levels.

Last week, Trump’s own Office of Management & Budget quietly acknowledged that even before taking the new congressional proposals into account, the fiscal year 2019 budget deficit will reach $1.085 trillion, more than double its 2018 estimate. The OMB projection directly contradicts claims by Treasury Secretary Steven Mnuchin and White House economic adviser Lawrence Kudlow that deficits are falling as a result of last year’s tax cuts.

The Congressional Budget Office estimated  that congressional tax and spending bills passed between June, 2017 to April, 2018 will increase the national debt by an additional $1.6 trillion over the next decade. Now, lawmakers are hard at work boosting the debt by roughly another $800 billion.

Keep in mind that all this profligacy is happening at a time when the unemployment rate is near historic lows and the economy is growing smartly. So why all this fiscal stimulus?

That may be the wrong question. Perhaps it is better to think of it as priming the political pump, not the economic one.

Most of the House’s proposed tax cuts are largely symbolic and never will see their way into the real economy. Few, if any, will even get a vote in the Senate.

The spending initiatives are quite different, however. Whether it is more money for the military, Meals on Wheels, or the bailout for farmers, those outlays will go out the door this year and next. They will add to the deficit, further stimulate an economy that may already operating at close to capacity, and give incumbent lawmakers something to brag about before election day.

That brings us back to Chicago mayoral candidate Wilson. There is an election coming up. And whether they are running a local campaign or for Congress, politicians just can’t avoid the temptation to give stuff to voters.    

From Taxpolicycenter.com