A weak debt ‘trigger’
A provision to make up for lost revenue falls short.
FOR A bill that has steadily gotten worse with time, this week’s news that Senate Republicans might add a debt “trigger” to their big tax plan signaled a potentially healthy change in direction. A mechanism that would automatically close budget gaps resulting from the bill’s tax cuts could make it somewhat more responsible — if it were well designed. The problem is that the trigger ideas under consideration so far look inadequate in the face of the nation’s mounting debt.
With the economy humming and businesses sitting on piles of cash, there is no need to imperil the federal budget by passing unpaid-for tax cuts. Yet that is precisely what Republicans are proposing to do, at the cost of $1.4 trillion in new debt, according to the Congressional Budget Office. Republicans argue that this plan would spur economic growth, increase tax receipts and pay for itself, but they have no evidence supporting this rosy scenario.
Ideally, Republicans would fully offset the tax cuts by eliminating more tax breaks or limiting the size of cuts to what they are willing to pay for. If they nevertheless bet the federal budget on their it-willpay-for-itself fantasy, the least they could do is simultaneously adopt a contingency plan for the scenario most economists predict — a tide of fresh red ink. If federal revenue falls or deficits widen in the first couple of years, some of the tax cuts could be canceled or other revenue raised to repair the gap. In part to mollify Republicans such as Sen. Bob Corker (Tenn.), GOP leaders have been considering such a trigger for the version of the tax bill that senators may vote on this week.
The concept has many enemies. Some argue that nothing should risk the size of the tax cut, an admission of reckless disregard for the fiscal danger to which they would expose the country. Others insist that a trigger would be harmful in case of recession, automatically raising taxes when the government should be pumping more money into the economy. Yet Congress is reliably motivated during recessions to provide fiscal stimulus. A well-designed trigger would protect against a future in which the economy continued to grow but unwise tax cuts nevertheless piled on more debt.
Unfortunately, the trigger ideas floating around the Senate fall short. A good trigger would require tax adjustments large enough to fully offset any revenue shortfall the bill created; but the versions under discussion reportedly would cover only $350 billion worth of shortfalls over 10 years. A decent trigger would also raise revenue by scaling back tax cuts or curtailing tax breaks, not by scheduling spending cuts that probably would never materialize, a possibility some senators floated Wednesday.
A weak trigger provision would be better than none, but it would make the tax bill only somewhat less grotesque. Yet that is the best-case result of what has become a last-minute scramble to cobble together provisions that will win the votes of fence-sitting senators such as Mr. Corker. Future generations may pay dearly for such recklessness.