After months of pressure from watchdog groups, the U.S. Department of the Treasury, led by Trump-appointee Steve Mnuchin, has released a one-page analysis of the Republican tax bill. The report shows that even when analyzed under Republican-favored methods, the tax cuts will enlarge the federal deficit and will require additional policy changes to create the revenue needed to pay for them.
The analysis shows that only half of the growth will come from the trickle-down effect of the tax cuts. The other half would be spurred by a “combination of regulatory reform, infrastructure development, and welfare reform.” This means that in order for the tax plan to make up for its estimated $1.5 trillion addition to the federal debt, Congress will have to pass sweeping infrastructure legislation, cuts to entitlement programs like Medicare and Social Security, and other unspecified regulatory reform.
The report also assumes that the economy will experience nearly 3 percent in growth over the next 10 years—that’s a level of growth the U.S. hasn’t seen since 2005. “We acknowledge that some economists predict different growth rates,” Treasury wrote in the document.
The analysis assumed that a Republican-led Congress would increase revenues by $1.8 trillion over a decade. Democrats are calling the Treasury’s estimate “fake math.”
This “phony math,” is enough to make “Bernie Madoff blush,” said Senator Ron Wyden, the ranking Democrat on the Finance Committee.
“It’s clear the White House and Republicans are grasping at straws to prove the unprovable and garner votes for a bill that nearly every single independent analysis has concluded will blow up the deficit and generate almost no additional economic activity to make up for it,” said Senate Minority Leader Charles Schumer.
"This is a joke. It's like saying, 'I could fly if I could grow wings,'" said Shripal Shah, vice president of American Bridge, a liberal political action committee.
Top Republican leaders like House Speaker Paul Ryan and Senator Marco Rubio have indicated that reform to entitlement programs such as Social Security and Medicare are next on the legislative calendar for the Republican-controlled House and Senate. “We're going to have to get back next year at entitlement reform, which is how you tackle the debt and the deficit,” Ryan said last week.
“The new Treasury one-page memo is a classic case of ‘garbage in, garbage out,’” William Gale, director of the nonpartisan Tax Policy Center, told Newsweek. “It basically asserts that if you use the administration's incredibly optimistic growth estimates of its aspirational agenda, there won't be a problem paying for the tax cuts before Congress right now.”
Treasury’s inspector general currently has an open investigation into whether the delay in Treasury's analysis was politically motivated. Mnuchin promised a study on the effects of the proposed tax bill months ago, but did not release anything until nearly two weeks after the Senate vote.
“The release of this memo is a sad day for the proud analysts at Treasury, who were force-fed silly assumptions and then asked to analyze the implications,” said Gale. “It is a typical day in a tax "debate" that has been continually marred by outright lies and gross exaggerations by the administration and Republican leaders in Congress.”
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