House Speaker Paul Ryan
In Trump proposal, leadership points to economic growth
used to warn about the dangers of budget deficits. Now he’s championing President Donald Trump’s tax plan, which will add some $2 trillion to the nation’s red ink.
WASHINGTON — Not long ago, Paul Ryan stood before charts and graphs as the House Budget Committee chairman like a new Ross Perot, promoting an austerity plan that slashed taxes and spending, and warning of the dangers of deficits.
“The facts are very, very clear: The United States is heading toward a debt crisis,” he said then. “We face a crushing burden of debt which will take down our economy — which will lower our living standards.”
Now as House speaker, the Wisconsin Republican is undergoing a role reversal, championing President Donald Trump’s tax plan, which promises massive tax cuts for corporations and to some extent individuals — and which experts say will add some $2 trillion to the nation’s red ink over the next decade.
It’s a sizable shift for Ryan, and he’s hardly the only one. The Republican majority, which swept to power just a few years ago in part by warning of then-President Barack Obama’s run-up of debt, now plays down concern over deficits. Economic growth must take priority, many Republicans say, and will ultimately take care of worries about red ink.
“If this results in giving us a faster economic growth, that will help us reduce our debt,” Ryan said in a CBS interview.
“You have got to have tax reform to get faster economic growth,” he added. “Faster economic growth is necessary for us to get our debt under control.”
Republicans are racing to assemble Trump’s tax package at a time when the nation’s debt load has topped $20 trillion.
During a recent White House meeting, Trump told lawmakers from the taxwriting House Ways and Means Committee that the country’s economic growth could hit 4 percent, 5 percent or even 6 percent under his tax plan, which administration officials say would more than offset lost revenue and even reduce the deficit.
But the lawmakers asked what an alternative would be if growth isn’t so strong, as most mainstream economists predict.
For that, there was no clear answer, said those who attended. “Republicans have for years railed against deficits,” Rep. Linda Sanchez, D-Calif., said after leaving the meeting at the White House. “You’re going to have less revenue and more deficits.”
Central to the GOP plan are tax cuts that slash the corporate rate from 35 percent to 20 percent and cap the rate for small businesses and other so-called passthrough entities at 25 percent. Individual tax rates would be set at 35 percent, 25 percent and 12 percent, but the income limits for those brackets have not been determined. Some deductions would be eliminated, and the standard deduction would be doubled, in hopes of simplifying the code and broadening the base of taxpayers.
Senate Republicans acknowledge the tax cuts could add a net of up to $1.5 trillion over 10 years to the projected deficit, for which they plan to make up largely through economic growth. They have inserted a provision in their budget that waives the requirement for a nonpartisan Congressional Budget Office analysis of the tax bill before it’s voted on.
That drew objections last week from a top Democrat. “Republicans spent years pretending to care about the deficit when it came to making cuts to middle-class priorities, but the minute it came to handing tax breaks to the rich, that all went out the window,” said Sen. Patty Murray, D-Wash.
In a recent interview on Fox News, Mick Mulvaney, the White House director of the Office of Management and Budget, rejected the idea that a tax cut should not worsen the deficit.
“I’ve been very candid about this,” Mulvaney said. “We need to have new deficits . ... If we simply look at this as being deficitneutral, you’re never going to get the type of tax reform and tax reductions that you need to get to sustain 3 percent economic growth.”
The nonpartisan Committee for a Responsible Federal Budget estimates the tax plan would involve roughly $5.8 trillion in tax cuts over 10 years and $3.6 trillion in so-called basebroadening, resulting in about $2.2 trillion in net tax cuts.
“We absolutely have to find a way to pay for this,” Marc Goldwein, the group’s senior policy director, said at a forum last week on Capitol Hill. “If we cut the rates at the expense of higher debt, all we’re doing is cutting taxes today at the expense of a tax on future generations.”
Treasury Secretary Steven Mnuchin has said growth from the tax cut would be as much as $2 trillion, enough to pay for the cuts and start paying down deficits.
“The president is not going to sign something that he believes is going to increase the deficit,” Mnuchin said recently on NBC.
But as members of Congress begin filling in the details of the plan, the possibility of a tax bill that could saddle future generations with debt is giving pause to some.
“The question is to what degree? I think that’s what we’re all going to struggle with,” said Rep. Mark Sanford, R-S.C.
At the same time, Republicans are under great pressure to deliver on taxes. Rep. Thomas Massie, R-Ky., hung a debt clock in his office — even before photos of his kids — after he was elected. Now, he worries that his colleagues may put aside concern over deficits.
“I didn’t want to forget that is the main issue here that I came to solve,” said the libertarian-leaning congressman. “I may very well be alone. Part it is the zeal for the deal on tax reform, and people are willing to hold their nose ... Because we’ve done nothing else.”