Growth sought by tax cuts elusive

At the center of President Donald Trump’s plan to dramatically cut taxes on businesses and individuals is a promise to stimulate extraordinary economic growth, so much so, his advisers say, that the plan will pay for itself.

If he succeeds in keeping that promise, Trump will have accomplished something that his tax-cutting Republican predecessors failed to do, according to economists and tax policy experts from both parties.

In describing the proposal Wednesday, Trump’s top economic advisers said the plan would unleash new investment and spending by American companies and consumers, supercharging economic growth. That growth, in turn, would prevent the plan from leaving the federal government short trillions of dollars of tax revenue.

But in the experience of two other Republican presidents, Ronald Reagan and George W. Bush, tax cuts produced an uneven record on prompting economic growth. And in both instances, reductions in taxes failed to pay for themselves and instead left the nation to deal with increasing federal debt.

After his 1981 tax cut, Reagan was forced to raise taxes several times. And Bush’s tax cuts put the nation on vulnerable fiscal footing, depriving the government of revenue as the United States waged two wars and faced a financial crisis. Ultimately, Congress and President Barack Obama, after several standoffs over federal finances, increased taxes by billions of dollars and imposed strict limits on government spending.

Economists fear it will happen again. “This is definitely not in pays-for-itself territory,” Alan Cole, an economist at the conservative Tax Foundation, said of Trump’s plan.

At the White House on Wednesday, Trump’s advisers touted the cuts as the start of an economic renaissance.

“This tax reform package is about growing the economy, creating jobs. It’s about the economy,” Gary Cohn, director of Trump’s National Economic Council, told reporters. “That’s how we’re looking at this plan.”

Treasury Secretary Steven Mnuchin said the plan would curb the debt. “The economic plan under Trump will grow the economy and will create massive amounts of revenues, trillions of dollars in additional revenues,” Mnuchin said.