De­sire for tax cuts out­weighs de­mands to re­duce spend­ing

San Francisco Chronicle - - FROM THE COVER - By Andrew Tay­lor Andrew Tay­lor is an Associated Press writer.

WASHINGTON — Repub­li­cans spooked world mar­kets in their ar­dor to cut spend­ing when Demo­crat Barack Obama was in the White House. Now, with Repub­li­can Pres­i­dent Trump press­ing for po­lit­i­cally pop­u­lar tax cuts and bil­lions more for the mil­i­tary, few in the GOP are com­plain­ing about the na­tion’s soar­ing debt.

The Tea Par­ty­ers and other con­ser­va­tives who seized con­trol of the House in 2010 have mor­phed into Ron­ald Rea­ganstyle sup­ply-siders while the GOP’s nu­mer­ous Pen­tagon pals run roughshod over the few hold­outs. Tax cuts in the works could add hun­dreds of bil­lions of dol­lars to the debt while bi­par­ti­san pres­sure for more money for de­fense, in­fra­struc­ture and do­mes­tic agen­cies could mean al­most $100 bil­lion in ad­di­tional spend­ing next year alone.

The bot­tom line: The $20 tril­lion na­tional debt prom­ises to spi­ral ever higher with Repub­li­cans con­trol­ling both Congress and the White House.

“Repub­li­cans gave up on car­ing about deficits long ago,” be­moaned Repub­li­can Sen. Rand Paul of Ken­tucky, who was elected in the 2010 Tea Party class.

It’s a far cry from the Newt Gin­grich-led GOP rev­o­lu­tion that stormed Washington two decades ago with a man­date to bal­ance the bud­get and cut taxes at the same time. Or even from Repub­li­cans of 2001, who en­thu­si­as­ti­cally cut taxes un­der Pres­i­dent Ge­orge W. Bush, but only at a mo­ment when the gov­ern­ment was flush with money.

Now, deficits are back with a vengeance. Medi­care and So­cial Se­cu­rity are draw­ing closer to in­sol­vency. Fis­cal hawks and watch­dogs like the Con­gres­sional Bud­get Of­fice warn that the debt is even­tu­ally go­ing to drag the econ­omy down.

But like Obama and Bush be­fore him, Trump isn’t talk­ing about deficits. Nei­ther much are vot­ers.

“Vot­ers, frankly, af­ter these huge deficits, are say­ing, ‘Well, how much do deficits re­ally mat­ter?’” said for­mer Sen. Rick San­to­rum, R-Pa., a two-time pres­i­den­tial can­di­date. “We’re not Greece yet, right?”

Top­ping the im­me­di­ate agenda, how­ever, is a debt­fi­nanced drive to over­haul the tax sys­tem.

Top Capi­tol Hill Repub­li­cans such as House Speaker Paul Ryan of Wis­con­sin and Senate Ma­jor­ity Leader Mitch McCon­nell of Ken­tucky had promised for months that a tax over­haul would not add to the deficit, with rate cuts fi­nanced by clos­ing loop­holes and other steps.

In­stead, Repub­li­cans are talk­ing about tax cuts whose costs to the debt — still un­der ne­go­ti­a­tion — would be jus­ti­fied by as­sump­tions of greater eco­nomic growth.

“We want pro-growth tax re­form that will get the econ­omy go­ing, that will get peo­ple back to work, that will give mid­dle-in­come tax­pay­ers a tax cut and that will put Amer­i­can busi­nesses in a bet­ter com­pet­i­tive play­ing field so that we keep Amer­i­can busi­nesses in Amer­ica,” Ryan said this past week. “That’s more im­por­tant than any­thing else.”

He backed off months of prom­ises that the Repub­li­cans’ tax plan won’t add to the na­tion’s bal­loon­ing deficit.

The GOP moves could jus­tify $800 bil­lion or so in tax cuts over 10 years, but the administration is press­ing be­hind the scenes to push the en­ve­lope well be­yond that range.

“They’re start­ing to talk about tax cuts in­stead of tax re­form,” said for­mer Sen. John Su­nunu, R-N.H.

Among the few deficit hawk hold­outs is Sen. Bob Corker, R-Tenn., a key vote on the Senate Bud­get Com­mit­tee, who’s been pump­ing the brakes on taxes, a stand that’s earned him face-to-face meet­ings with both Trea­sury Sec­re­tary Steven Mnuchin and Trump him­self. Corker says he be­lieves in some ad­just­ments but doesn’t want to “let this just be party time that just takes us no place but mas­sive deficits down the road.”

Trump’s elec­tion has GOP mil­i­tary hawks press­ing to shovel enor­mous amounts of money into the Pen­tagon — about $90 bil­lion over the strin­gent spend­ing lim­its set by the hard-won 2011 deficit con­trol ef­fort. Repub­li­can de­mands for spend­ing cuts as the price of lift­ing the gov­ern­ment’s debt limit and avert­ing a mar­ke­trat­tling de­fault on U.S. obli­ga­tions pushed ne­go­ti­a­tions per­ilously close to a mar­ket cri­sis that sum­mer.

The un­pop­u­lar left­over from the 2011 agree­ment are those spend­ing lim­its, which if vi­o­lated would be en­forced by across-the-board spend­ing cuts. Repub­li­cans want to scrap them, at least for mil­i­tary money.

“There’s so much pres­sure on our side for ad­di­tional de­fense spend­ing,” said Rep. Tom Cole, R-Okla. “Be­lieve me there’s more de­fense hawks than bud­get hawks in the Repub­li­can con­fer­ence right now.”

But it takes Demo­cratic help to lift the lim­its and their price, un­sur­pris­ingly, is more money for do­mes­tic pro­grams.

That leaves GOP deficit hawks frus­trated. They’ve won, for now, a $200 bil­lion pack­age of spend­ing cuts as part of the House bud­get res­o­lu­tion, which has stalled af­ter com­mit­tee ap­proval this sum­mer.

Con­ser­va­tives de­mand­ing that spend­ing cuts ac­com­pany any ex­ten­sion of the gov­ern­ment’s bor­row­ing abil­ity were un­der­cut by Trump, who agreed last week to add tem­po­rary bor­row­ing ap­proval to a must-pass Har­vey re­lief bill.

Pablo M. Monsivais / Associated Press

House Speaker Paul Ryan wants “pro-growth” re­form.

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