If Republicans in Congress make good on President Donald Trump’s promise to extend the expiring provisions of the 2017 Tax Cuts and Jobs Act, the move would add more than $37 trillion to the debt over the next 30 years, including $4.5 trillion in the next decade.
The Congressional Budget Office projections were included in a letter to U.S. Rep. David Schweikert, R-Ariz., this week.
Schweikert had asked the CBO to game out an alternative budget scenario in which provisions of the 2017 tax act are extended indefinitely. That includes lower statutory tax rates, the changes to allowable deductions, the larger child tax credit, the 20% deduction for certain business income and the income levels at which the alternative minimum tax takes effect, according to the CBO’s analysis.
“As every dollar Congress votes on is borrowed, we must exercise the intellectual resolve to confront the looming fiscal crisis,” Schweikert said. “Stopping excessive spending is necessary to ensure future generations of Americans are not burdened by our current disregard.”
The Committee for a Responsible Federal Budget, a nonprofit group, estimated the permanent extension, with interest, would raise deficits by $4.5 trillion through 2034, $15 trillion through 2044, and $37.2 trillion through 2054.
The group also noted that financing the tax cuts would eventually reduce the nation’s economic output, as measured by gross domestic product.
“While CBO finds the TCJA extensions would boost output over the next decade, they find that the higher debt load from deficit-financed extension would negatively impact the economy over the long run while also pushing up interest costs,” the report noted.
By fiscal year 2054, CBO estimates that GDP would be 1.8% smaller and the average interest rate on federal debt would be 29 basis points higher relative to its baseline scenario.
The Peter G. Peterson Foundation projected debt would skyrocket as a result. The foundation noted a permanent extension of the TCJA, absent any other changes, would push the debt held by the public to 214% of gross domestic product in 2054 – “47 percentage points higher than under the baseline scenario in which the provisions expire as scheduled and above the level in 2024 of 98% of GDP.”
Trump wants to extend provisions of the 2017 Tax Cuts and Jobs Act. The 2017 law lowered taxes for many Americans and businesses, but it is set to sunset this year without action from Congress.
Congress has run a deficit every year since 2001. In the past 50 years, the federal government has ended with a fiscal year-end budget surplus four times, most recently in 2001.
