Republicans are pushing back against a dynamic score released November 30 by the Joint Committee on Taxation estimating that the Tax Cuts and Jobs Act as passed by the Senate Finance Committee would increase the federal deficit by $1 trillion over 10 years.
The new estimate (JCX-61-17) takes macroeconomic effects into consideration, as opposed to the JCT’s static score (JCX-59-17), which said the bill would cost $1.41 trillion over a decade. A $458 billion growth effect during the 10-year window would be offset by $50 billion in increased interest payments, the JCT estimated in its new report.
The analysis did not support GOP contentions that tax reform would kick-start the economy into high gear, predicting modest increases in GDP, employment capital available for production and consumption levels. Over the course of a decade, the analysis determined that GDP would increase by 0.8 percent relative to the baseline forecast. Gains in employment and increases in consumer consumption were both pegged at 0.6 above baseline estimates. Lastly, the amount of capital available for production was estimated to average 1.1 percent over the baseline score during the 10-year period.
The new analysis came as the Senate continued debating its bill, and could have contributed to greater hesitancy of some Republicans to support the bill, sending leadership scramblingto update the legislation in the evening.
While Democrats were quick to point to the JCT analysis as evidence that tax cuts don’t pay for themselves, some Republicans found positives in the analysis, even if it didn’t confirm their belief that the tax bill would cause growth effects that would offset — or come close to offsetting — the static costs of their proposed tax cuts.
The JCT analysis has “emphatically repudiated” the Democratic view that tax cuts produce no economic growth at all, Senate Majority Whip John Cornyn, R-Texas, told reporters. “We can quibble about how much growth you’re going to get, but clearly even they agree [tax cuts cause growth],” he said.
Treasury Secretary Steven Mnuchin said as recently as November 13 that the $1.5 trillion tax cut would “pay for itself” through a combination of offsetting economic growth and looking at the bill using a current-policy baseline rather than current law. The JCT estimate is based on current law.
A spokeswoman for Senate Finance Committee Chair Orrin G. Hatch, R-Utah, dismissed the JCT analysis as “incomplete,” noting that the Senate bill is still undergoing changes on the Senate floor. “And given that leading economists have projected the Senate tax bill will deliver significantly higher amounts of economic growth and federal revenue than the Joint Committee on Taxation (JCT) reports, the findings of JCT are curious and deserve further scrutiny,” she added.
Meanwhile, the office of House Speaker Paul D. Ryan, R-Wis., sent reporters a link to a blog post by the Tax Foundation arguing that “there is reason to believe that the tax plan would produce even greater dynamic effects than [the JCT] analysis shows.” The JCT analysis is hampered by its assumption regarding the Federal Reserve’s response to potential inflation and its assumption that the United States is a closed economy, the authors argued.
Similarly, Finance Committee member Rob Portman, R-Ohio, said the estimate is based on the Congressional Budget Office’s current economic growth model of 1.9 percent and that he believes the economy will do better than that.
Fellow Finance member Pat Roberts, R-Kan., told reporters that despite the modest growth projected in the JCT’s dynamic score, he still believes larger growth is possible. “I think the anticipation by the business community is intense. They’re not just anticipating, they’re eager and making plans,” Roberts said. He added that the markets would react negatively if Senate Republicans could not pass their tax bill.
Democrats, however, were unsurprised by the estimate.
“I’ve felt for some time that growth would be modest; [I] didn’t think it would be quite this modest,” Senate Finance Committee ranking minority member Ron Wyden, D-Ore, said at a press briefing following the JCT release. “And I didn’t feel very confident about the claims that this wouldn’t generate big deficits.”
The JCT score “ends the fantasy about magical growth and claims that tax cuts pay for themselves,” Wyden said, adding, “This is hard evidence they ought to go back to the drawing board on this.”
House Democratic Whip Steny H. Hoyer of Maryland agreed. “Now that Republicans’ tax proposal has been shown to balloon deficits and yield far less economic growth than they have promised, it is time to abandon this legislative disaster,” he said in a release.
“Without a doubt, the Republican plan is a tax scam,” House Budget Committee ranking minority member John A. Yarmuth, D-Ky., said. “It is irresponsible and reckless, and for the sake of our nation’s future it must be defeated.”
Martin A. Sullivan, Stephen K. Cooper, and David van den Berg contributed to this article.
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