Finance

Deficit hawks voice worry over direction of tax plan

A handful of GOP deficit hawks are worried that their party's tax plan could add trillions to the deficit, deepening a debt crisis for future generations.

"The numbers are really uglier than almost anybody around this place seems to have digested," said Rep. David Schweikert (R-Ariz.), a member of the tax-writing Ways and Means Committee.

Republicans for the most part have rallied around the tax proposal, which is backed by GOP leaders in both chambers as well as the White House.

The tax plan could cost the government $1.5 trillion in revenue over the next decade, but advocates argue that would be made up for through economic growth unleashed by the corporate and individual tax cuts included in the plan.

Treasury Secretary Steven Mnuchin has said that the tax plan would bring in $2 trillion because of economic growth, which would be enough to actually lower the deficit.

The conservative House Freedom Caucus, generally sticklers about debt and deficits, has also endorsed the plan.

But a few lawmakers are expressing worries that the figures their party is putting forward on tax reform will not add up.

"The running joke in our office is we work in a math-free zone," said Schweikert.

Sen. Bob Corker (R-Tenn.), who recently announced his retirement at the end of this Congress, has warned he'll oppose the tax plan if it adds to the deficit.

"If it looks to me like we're adding one penny to the deficit, I am not going to be for it," Corker said on NBC's "Meet the Press" on Sunday.

In a separate interview, he told The New York Times that the debt is "the greatest threat to our nation," more dangerous than the Islamic State in Iraq and Syria, or North Korea.

A number of Republicans share Schweikert's concerns that the GOP's numbers may not add up.

Rep. Mark Sanford (R-S.C.), a Freedom Caucus member, says he has concerns about economic assumptions underlining the tax plan.

"Not only are we in the third-longest economic expansion, but you're presuming we're going to go the next 10 years without an economic downturn," he said. "How many people would bet their house or kid's educational account or whatever else on that? Is that a valid economic projection on which to project a budget?"

Outside experts have warned that the tax plan could add much more to the deficit than $1.5 trillion.

An analysis from the Tax Policy Center estimated that, without factoring in economic growth, the current plan would add $2.4 trillion to the deficit in the first decade and another $3.2 trillion in the second decade. Republicans have taken issue with the study's conclusions.

Republicans are already struggling with policies to keep the deficit within the allowed $1.5 trillion, with revenue raisers such as eliminating the state and local tax deductions coming under fire.

Budget experts tend to agree that even in the best of circumstances, a $1.5 trillion tax cut will not pay for itself.

In the best case, economic growth spurred by tax cuts could pay for a quarter to a half of the cuts, according to Doug Holtz-Eakin, the president of American Action Forum and a former Congressional Budget Office director.

Asked about Mnuchin's estimates, Holtz-Eakin said: "I think those are just too big."

The Committee for a Responsible Federal Budget, a nonpartisan group that advocates for debt reduction, estimated that every $1 of tax cut would need to produce $6 of economic activity to pay for itself. The range of studies they reviewed estimated that each dollar would only produce between $0.10 and $2.35 instead.

"I think that very few economists would agree that the revenue loss would be fully offset with revenue growth," said Alan Viard, a budget expert at the right-leaning American Enterprise Institute.

"The fact that it's adding to the deficit would itself impede growth, because it drives up the interest rate, which reduces investment," he added.

On the left, there are arguments that dynamic scoring shouldn't be considered at all.

"I think it probably shouldn't be part of the budgeting process," said Lindsay Koshgarian, program director of the left-leaning National Priorities Project.

Still, some deficit hawks in the GOP are holding their fire for now, saying they need more details before they pass judgment on the plan.

"We're supportive of the $1.5 trillion placeholder that's in it on the Senate side as long as we can get some reasonable pay-fors on our side," said Freedom Caucus Chairman Mark Meadows (R-N.C.).

Rep. Tom Cole (R-Okla.), a member of the House Budget Committee, is also taking a wait-and-see approach.

"I think drawing red lines complicates things right now," he said.

Mandatory spending is the real debt driver anyway, he added.

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