Debt talks: Why Republicans shouldn’t allow tax increases on the table
Debt and spending debate needs some agreement on the actual numbers
Almost six years ago, NBC’s Chuck Todd interviewed then-Treasury Secretary Steve Mnuchin on “Meet the Press” in the midst of a fight to pass Republicans’ Tax Cuts and Jobs Act. Todd, clearly an opponent of the legislation, asked Mnuchin: “Where is the analysis that says this is going to lead to economic growth?” He went on to add: “There has been no study that has been able to somehow reinforce this idea that tax cuts do translate to economic growth.”
As a proponent of the legislation, I decided to respond to Todd’s question with a Roll Call column titled “Tax Cuts by the Numbers” that looked at the actual results of four major tax cuts, starting with the Kennedy tax cuts of 1964. Below are a few significant facts.
1964 — Presidents John F. Kennedy (proposed)/Lyndon B. Johnson (signed): Lowered individual and corporate taxes; 66 percent increase in annual federal revenues (1964-69); 6.5 percent or more GDP growth in first two years.
1981 — President Ronald Reagan: Went into full effect in 1983; Growth between 1983 quarter two growth and quarter one growth in 1984 was 8 percent; annual federal revenues between 1983-89 increased by 65 percent; seven years of 3.5 percent or more GDP growth (1983-89).
1997 — President Bill Clinton: 4.1 percent GDP growth or more through 2000; 28 percent increase in annual federal revenues from 1997-2000; balanced budgets for four consecutive years.
2003 — President George W. Bush: 3.5 percent GDP growth or more in the first two years; 44 percent increase in annual federal revenues from 2003-07; deficit cut by 57 percent, from $378 billion to $161 billion.
Apparently, Todd didn’t see that column because on Sunday he interviewed Rep. Byron Donalds and hit the Florida GOP congressman with the same argument he made to Mnuchin years ago.
After Donalds asserted that the 2017 tax cuts had produced significant increases in federal tax revenues, Todd first argued that any increase reflected COVID-19 spending as much as tax cuts, going on to say: “… if, somehow, you keep cutting taxes but more revenues comes in to the government, that math doesn’t work over time. You can have it in the first, first year due to some various accounting tricks. But it doesn’t work over time.”
While trying to defuse Donalds’ argument, Todd also said: “The numbers are the numbers.”
Well, here are the post-2017 tax cut numbers.
2017 — President Donald Trump: Federal revenues increased 43 percent since 2020; from 2020-22, revenues increased $1.476 trillion ($3.421 trillion to $4.897 trillion); 2018 GDP rose 2.9 percent — higher than any year under President Barack Obama; revenues projected to stay over $4.8 trillion for next two years and approach $5 trillion by 2025.
For the past six years, Democrats and the legacy media have spent untold hours and millions of written words telling the American people that the tax cuts are the root of all evil, responsible for debt and deficits, slow economic growth, with only an occasional brush with the facts.
One of the best examples of some truth telling was The Washington Post’s 2021 Glenn Kessler column fact-checking progressive Vermont Sen. Bernie Sanders’ claim that Republicans “voted for almost $2 trillion in tax breaks for the wealthiest people in this country and the largest corporations.”
Giving Sanders “three Pinocchios” for his statement, Kessler concluded Sanders was wrong, writing: “Most Americans, across all income spectrums, received some sort of tax cut. But the share of the tax cuts for the top 1 percent was not as much as the share they pay in taxes — and some of the super wealthy experienced tax increases.”
But some critics never give up. When Donalds pushed back, arguing federal tax receipts are up, Todd responded: “You realize that President Trump has added more to the deficit than Joe Biden?”
Again, the numbers tell another story.
First, Biden has only been in office for less than three years, but Todd compares Trump’s four-year record on the deficit to Biden’s two. Second, despite the fact that the federal government took in nearly $4.9 trillion for fiscal 2022, a 43 percent increase, as Donalds rightly argued, this large revenue gain was offset by a massive increase in government spending over the past three years.
Before 2020, the year of the COVID-19 budget, the federal government never spent more than $4.5 trillion in a given year. Beginning in 2020, for the next three years, the government spent $6 trillion or more each year.
The Congressional Budget Office’s May projections show that Biden’s federal budget deficits during his first three years in office will exceed Trump’s four-year total by $130 billion. At the end of his first term, CBO projects Biden’s budgets will exceed Trump’s budget by adding to the debt by $1.7 trillion. All this despite a massive increase in federal revenues. So much for the president’s claim to be the budget-cutter-in-chief.
Biden’s record-setting spending has offset the increases in federal revenue, much of it delivered by the 2017 tax cuts, and shows Washington doesn’t have a revenue problem. It has a spending problem, as Speaker Kevin McCarthy, R-Calif., has said repeatedly.
What Biden and Hill Democrats are arguing this week is for the normalization of the record-setting COVID-19 budgets.
Republicans, understanding the need to both raise the debt ceiling and find a workable compromise, are simply asking Democrats to agree to not spend more than the Congress spent in 2022. Seems perfectly reasonable given Biden’s significant post-COVID-19 budget increases in 2022 and 2023.
But Minority Leader Hakeem Jeffries, D-N.Y., sees it differently. He told reporters Monday that he was “willing to discuss freezing spending at current levels. That’s an inherently reasonable position many in our party might even be uncomfortable with, but President Biden recognizes we’re in a divided government situation.”
Using the 2023 COVID-19 budget as a baseline isn’t rational by any definition when the country is facing a $32 trillion debt, record inflation, slow economic growth and the obvious fact that Biden officially ended the COVID-19 national emergency on April 10, followed by ending the public health emergency on May 11.
The debt ceiling fight rolls on, but the debate should occur with some agreement on the actual numbers.
David Winston is the president of The Winston Group and a longtime adviser to congressional Republicans. He previously served as the director of planning for Speaker Newt Gingrich. He advises Fortune 100 companies, foundations, and nonprofit organizations on strategic planning and public policy issues, as well as serving as an election analyst for CBS News.