"What don’t want to see is that this tax reform is going to be paid for by magic," said Maya MacGuineas, president of the Center for a Responsible Federal Budget.
This week, Donald Trump decided to take ownership of the GOP tax reform effort by laying out a few broad guidelines. The guidelines are so broad, in fact, that many have rightly pointed out that it’s hard to make heads or tails of them. The deficit hawks at the Committee for a Responsible Federal Budget estimate that Trump’s framework could lose anywhere from $3 to $7 trillion in revenue over the next 10 years, which is a pretty big range.
“Right now, we are all about trying to figure out how to offset the cost of this framework and coming up with pro-growth tax reform ideas that won’t worsen our really dire fiscal situation,” said Maya MacGuineas, president of the nonpartisan Committee for a Responsible Federal Budget. “If the president pursues this proposal of seeing through the largest-ever tax cut rather than reform, he will also be the president who oversees the largest expansion of our country’s debt — and that’s probably not the legacy he’s looking for.”
Ms. MacGuineas said that her group had already started pulling together specific proposals to make the tax legislation less costly. The White House plan, for example, has thus far only made passing reference to proposals for closing loopholes and broadening the tax base, she said.
“It will be all hands on deck to try to come up with ideas,” Ms. MacGuineas said.
President Trump is on the right track by turning focus toward fixing our nation’s broken tax code. But so far, he is going about it all wrong.
CRFB President Maya MacGuineas weighs in on this CBS News This Morning report.
The key to those procedures: Any tax plan can’t increase budget deficits beyond a 10-year period. The Committee for a Responsible Federal Budget said Wednesday that the plan would cost about $5.5 trillion in lost revenue over a decade. Those limitations could lead Republicans to make some or all of the tax cuts temporary to limit the long-run fiscal effect.
Trump’s proposal now poses key tests for both parties. Republicans, who for years chided President Barack Obama about any plan to raise the deficit, must decide whether to back a plan that many budget experts calculate will add to record levels of government debt. The Committee for a Responsible Federal Budget said the plan would probably lead to a loss in government revenue by roughly $5.5 trillion over 10 years.
“It seems the administration is using economic growth like magic beans: the cheap solution to all our problems,” said Maya MacGuineas, president of the Committee for a Responsible Federal Budget, a nonpartisan group that advocates fiscal restraint. “But there is no golden goose at the top of the tax-cut beanstalk, just mountains of debt.”
Ms. MacGuineas’s group estimates that Mr. Trump’s plan could reduce federal tax revenue by $3 trillion to $7 trillion over a decade. The economy would need to grow at a rate of 4.5 percent — more than double its projected rate, an unlikely prospect — to make the plan self-financing.
“If this tax reform is not paid for, it is backwards and disappointing. Tax reform is supposed to be done to create economic growth, not paid for by economic growth,” said Maya MacGuineas, president of the Committee for a Responsible Federal Budget. She argued that the negative impact of a rising national debt, including the risk of higher interest rates, would undercut the very economic growth Republicans claim to want. “This is maybe politically expedient, but it will be economically damaging and a real lost opportunity for the growth agenda we need to be pursuing,” she told me.
Discussing tax reform expectations for the market and the economy with Maya MacGuineas, Committee for a Responsible Federal Budget president.
“What I don’t want to see is that this tax reform is going to be paid for by magic,” said Maya Macguineas, president of the Committee for a Responsible Federal Budget, a group that advocates for deficit reduction.
Analysis from Maya MacGuineas, president of the Committee for a Responsible Federal Budget on Special Report with Bret Baier.
"We definitely need tax reform as a way to grow the economy," said Maya MacGuineas, president of the Committee for a Responsible Federal Budget.
But she said higher economic growth won't offset the plan's lost revenues and it needs to be paid for by reducing tax breaks or other measures.
"What I don’t want to see is that this tax reform is going to be paid for by magic," she said.
“This is all candy and no vegetables,” said Marc Goldwein, Committee for a Responsible Federal Budget. Goldwein said he thinks a 25-percent to 28-percent corporate tax rate would strike a good balance between economic competitiveness and fiscal responsibility.
Maya MacGuineas, a leading fiscal hawk who heads the non-partisan Committee for a Responsible Federal Budget, accused the White House in a statement of "using economic growth like magic beans" to hide their costs. Her group's early estimate of Trump's plan pegs its cost at $5.5 trillion without further offsets.
"A rate reduction that high is going to cost above 2 trillion dollars, and without a plan to pay for it, that's going to explode the debt", said CRFB President Maya MacGuineas on the NBC Nightly News with Lester Holt.
The Committee for a Responsible Federal Budget, an advocacy group focused on reducing deficits, said that Mr. Trump’s tax plan was more likely to increase growth by 0.2 percentage points than by the higher estimates Mr. Mnuchin forecast. “These tax cuts, of course, would not pay for themselves,” the group said in a statement. “As we’ve explained before, there is little evidence to suggest any major tax cut could pay for itself with economic growth alone.”
First, this is risky fiscal business. The nonpartisan Committee for a Responsible Federal Budget reports that America has not seen sustained growth rates of 4% (a rate optimistic Trumpians target), since the early 1960s, when our population was younger and growing.
"This idea that [Trump's plan] can be paid for even mostly by growth doesn't equate with any economic analysis or theory. [It's] fantasy math," said Marc Goldwein, senior policy director of the Committee for a Responsible Federal Budget.
Putting a finer point on it, "if they want to assume 3% to 4% growth, the plan may pay for itself on paper. But it won't pay for itself in reality," Goldwein said.
The current discussions over 2017 spending are in that sense looking in the rear-view mirror, when “we should be focusing on 2018”, said Maya MacGuineas of the Committee for a Responsible Federal Budget.
Maya MacGuineas, president of the Committee for a Responsible Federal Budget, agreed that the spending side of the equation is the most important lever for solving deficits.
But she said it’s important for Republicans not dig the hole any deeper by trying to use tax reform to eke out tax cuts.
“I think their commitment that tax reform be revenue-neutral is incredibly important,” she said. “And if that transforms into big tax cuts that lose hundreds of billions or even trillions of dollars, that is going to explode the debt even more and make getting it under control close to impossible in any shorter amount of time.”
As the tax talks heat up, expect deficit hawks like the Committee for a Responsible Federal Budget and several Republican lawmakers from the far-right Freedom Caucus to make noise about this big-picture question of whether a tax package should add to the deficit. The fiscal hawks in the House, elected specifically to cut government spending, will want Trump to pay attention to the deficit as part of any tax overhaul — just as they did with the health care bill.
The Committee for a Responsible Federal Budget (CRFB) added Friday in a release, “Not paying for tax reform is extremely misguided, would explode the federal deficit and end up harming long-term economic growth prospects.”
Maya MacGuineas with the bipartisan Committee for a Responsible Federal Budget said she thinks Republicans so badly want to avoid a shutdown on their watch that neither Trump nor the House Freedom Caucus will take a stand that risks one — especially after they failed to repeal Obamacare just a few weeks ago.
“Anybody could cause enough problems to create a shutdown,” she said, “and the chances of hurting them are high enough that cooler heads will prevail.”
Committee for a Responsible Federal Budget President Maya MacGuineas discusses how tax reform can help grow the economy on Cavuto: Coast to Coast.
From his campaign days, Trump had promised to improve the healthcare facilities for veterans. According to the Committee for a Responsible Federal Budget, the Choice program cost up to $500 billion over 10 years. Critics are viewing this program as partial privatization that could end up weakening the VA entirely, according to Time.
“Tax cuts don’t pay for things, tax increases pay for things,” said Maya MacGuineas, president of the Committee for a Responsible Federal Budget.
MacGuineas said taxes could be increased for some people at the same time rates are lowered by trimming some of the $1.6 trillion worth of deductions and credits built into the code. It is also possible to trim credits and deductions so that some of the money is used for lower rates and some for increased spending for infrastructure.
Congress and Trump could also just agree to do both: cut tax rates and spend money on infrastructure, and not worry about increasing the deficit. MacGuineas called this a “devil’s bargain” that would reduce or eliminate any economic growth from cutting taxes.
A proposal from four prominent conservatives to cut taxes for businesses and provide funding for infrastructure could cost $5.5 trillion, according to the Committee for a Responsible Federal Budget (CRFB).
"Not paying for tax reform is extremely misguided, would explode the federal deficit, and end up harming long-term economic growth prospects," CRFB, a nonpartisan budget watchdog, said in an analysis released Thursday.
Trump's team is considering a controversial plan that could make his promise to cut taxes harder to keep
Most of the claimants that benefit from the SALT deduction live in traditionally Democratic states, primarily California and New York. Those two states receive around 30.5% of the total benefits from the deduction, according to the Committee for a Responsible Federal Budget.
David Stockman served in President Ronald Reagan’s White House as the Director for the Office of Management and Budget. He is also a two term Congressman and serves on the Board of Directors for the Committee for a Responsible Federal Budget. His latest book, Trumped! Explores exactly what he believes President Trump must do in order to redirect the economy.