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Is the GOP tax bill fiscally responsible?

While Republicans are poised to pass a major tax bill, the party's focus on the deficit seems to be taking a backseat. Will their overhaul spur enough growth to bridge the debt gap, or are GOP lawmakers gambling with an already precarious economic situation? Judy Woodruff gets the perspective of Maya MacGuineas, president of the Committee for a Responsible Federal Budget.

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  • Judy Woodruff:

    As Republicans near the passage of a major tax bill, one thing has changed for many in the party- the focus on deficits and debt. We don’t have an assessment yet of the cost of the latest bill, but a congressional scorekeeper found the Senate version was expected to add $1 trillion to the debt. Many Republican leaders say the tax cuts will help pay for themselves.

    Maya MacGuineas has long been a leading voice over concerns about the debt, the deficit and spending. She’s the president of the Committee for a Responsible Federal Budget.

    Maya MacGuineas, welcome back to the program. So what is, right now, your main concern about this bill?

  • Maya MacGuineas:

    Well, my main concern is clearly that this is going to add hundreds of billions, in fact a trillion or more, to the national debt over the next ten years, and that comes at a time when we can ill afford it.  Just to kind of take a step back, the debt right now relative to the economy is the highest it’s been since World War II, and what we should be doing is putting together a plan to bring that debt down, not something that’s going to add a trillion or more to the debt.

    And also, I would add that I think it’s a tremendous lost opportunity to have done some real tax reform whereas this bill ended up being very expensive, I would say unaffordable tax cuts instead of real reform.

  • Judy Woodruff:

    Is there one change they could have made that would have alleviated your concern about the deficit and the debt or is this just — it’s something that’s just sprinkled throughout this entire piece of legislation?

  • Maya MacGuineas:

    No, absolutely. The overall structure of the tax framework could have been incredibly sensible and really help to promote growth which is the purpose to tax reform. But the key to doing that was broadening the tax base. We have over $1.5 trillion in tax breaks every year. Those are the deductions in credits and exclusions that make the tax code so complicated.

    And the point was, if you get rid a lot of those, you then have the money to bring down rates that will generate growth and you will not add to the debt. But unfortunately, in this bill, they really haven’t been willing to tackle very many of those tax breaks at all and, as a result, it’s going to be incredibly expensive and the biggest way that we’re paying for it instead of getting rid of tax breaks is from borrowing.

  • Judy Woodruff:

    But I’m sure you know, Republican leaders, most of them, are saying, no, this is going to generate growth and from that growth, the government is going to generate revenue. That is going to help ease off and reduce the debt and the deficit.

  • Maya MacGuineas:

    So, tax reform will promote growth and the more you do the smart kind of tax reforms, and there are many that are included in this bill, the more growth you will get. But you will not get anything close to enough growth to actually pay for itself.

    So, it will grow the economy but it will still lose a good amount of revenue because it won’t pay for itself. And by pretty generous estimates, even after growth, it’s going to add a trillion dollars to the debt. So, those lawmakers at this point are basically suspending reality and saying, OK, I’m going to also cross my fingers and hope that it will grow more than any independent forecaster is projecting.

    And that’s really not likely. And, again, when the debt is as high as it is, this is not the time to be gambling with our really sort of precarious fiscal situation. Instead, we should have put together a plan that didn’t add to the debt.

  • Judy Woodruff:

    What about, Maya MacGuineas, some — the argument that some conservatives are making in that, if this bill means that there is less of a government burden at the federal, state, and local level, on individual families on small business owners, for example, that that’s a good thing, that that is enough of a good thing that it should offset any concern about the deficit?

  • Maya MacGuineas:

    Well, there are different kinds of stimulus that you want to do to help the economy. So, if the goal is you want to create economic growth, right now, we should be doing things that will help investment, investing more is what would grow the economy, when you are where we are in the business cycle right now, which is the economy is already doing pretty well.

    If we are in a recession or downturn, we would think about different kind of stimulus and maybe encouraging spending would be better for the economy. But right now, we should be focusing on investment to help generate growth.

    What this — the other argument for this is that you want to give people tax relief. You want to cut their taxes. That’s great. Who doesn’t want a tax cut? I think we all do.

    But if you’ve already built up big deficits like we have, you can’t afford a tax cut unless you also cut spending. And one thing to remember is that the Republican budget passed this year didn’t cut a penny out of the spending side so it maintains the huge deficits that we already have. And that tax cut again goes on the national credit card, that actually slows economic growth.

  • Judy Woodruff:

    Well, speaking of spending, as you know, Congress is just days away from either passing or delaying for another few weeks the passage of a spending bill. Is — could that then be an opportunity in that legislation to cut spending to address the deficit and the debt concerns?

  • Maya MacGuineas:

    I’m afraid what it is is it’s going to be exactly the opposite where, in some ways, this tax bill and no longer caring about paying for things is kind of the dam breaking on fiscal responsibility. And so, what we’re likely to see in the coming week is not only the passage of this big tax cut but also increases in the sequester spending, so increases in domestic and the discretionary domestic defense spending. It looks like they’re actually going to pass another tax cut. I don’t think people saw that coming. But there’s a tax extenders bill that could be quite costly and they may be delaying some other tax cuts that are part of Obamacare.

    So, actually, what we could see next week, on top of this tax plan, is another couple of hundred billions of dollars in borrowing. So, it really seems like there is no fiscal constraint now that’s governing what we’re doing in Congress, and one big tax cut may lead to some more spending increases that nobody’s willing to pay for.

  • Judy Woodruff:

    Red ink in every direction you look.

  • Maya MacGuineas:

    I’m afraid so, and at a time we really should be doing quite the opposite.

  • Judy Woodruff:

    Maya MacGuineas with the Committee for a Responsible Federal Budget — good to have you on the program.

  • Maya MacGuineas:

    Thank you.

  • Judy Woodruff:

    Thank you, Maya.

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