New CBO numbers offer a dose of reality on tax reform
THE CONGRESSIONAL Budget Office is nonpartisan and analytical, a rare honest broker of policy-related information in Washington. As such, the CBO played a major role in the otherwise intensely partisan debate over the House Republicans’ abortive plan to “repeal and replace” Obamacare. The budget office’s forecast that it would reduce future insurance coverage to the tune of 24?million people proved politically deadly.
Now come new CBO numbers that ought to have a similar reality-inducing impact on the impending debate over tax reform, to which the Trump administration and GOP Congress are now pivoting in search of a legislative “win.” The CBO’s latest annual projection of the federal fiscal balance, published on March?30, was, as usual, couched in neutral language. But it unmistakably conveyed a dual message: The United States could benefit from tax reform, but it would be utterly reckless to enact reform that slashes federal revenues by hundreds of billions of dollars, as some versions floated by President Trump would do.
The CBO’s bottom line on the fiscal future was this: If current law remains in place, “federal debt would reach an unprecedented share of GDP [in 30 years], intensifying pressures on the federal budget, dampening economic growth, limiting the nation’s ability to respond to unforeseen events and increasing the likelihood of a fiscal crisis.” Today’s debt amounts to 77 percent of gross domestic product, the highest since the years immediately following World War II. That ratio would nearly double to a completely unprecedented 150 percent by 2047. This represents a five-percentage-point worsening of CBO debt-to-GDP projections since last year, due in large part to a gloomier view of economic growth. That assessment, in turn, reflects structural factors such as an aging population and stagnating productivity growth. Mounting debt itself would also “crowd out” private investment, the CBO notes.
By refining incentives to work, invest and produce, tax reform — especially corporate reform aimed at improving global competitiveness — could help remove structural barriers to growth. Yet reform should be deficit-neutral, lest short-run benefits be swamped by long-run crowding-out of investment by government borrowing, as the CBO suggests. The federal government probably needs more revenue to meet the commitments it has already undertaken. In fact, merely stabilizing the long-run debt at the current elevated level, 77 percent of GDP, would require a combination of tax increases or spending cuts equal to nearly 2 percent of GDP per year, as compared with what’s called for in current law, starting in 2018. In dollar terms, the CBO notes, that would be a fiscal adjustment of $380 billion next year — a huge political challenge and impossible without trims to the middle-class entitlement programs Mr. Trump has promised not to touch. Mr. Trump’s budget blueprint, meanwhile, cuts domestic programs in favor of adding to military spending, but produces no net deficit reduction.
https://www.washingtonpost.com/opinions/new-cbo-numbers-offer-a-dose-of-reality-on-tax-reform/2017/04/03/6aee52c2-188b-11e7-9887-1a5314b56a08_story.html?utm_term=.fc47db9d7f50&wpisrc=nl_rainbow&wpmm=1
= new reply since forum marked as read
