So, even the CBO (Congressional Budget Office)—no friend of supply-sliders—acknowledges that the Donald Trump corporate tax cuts worked.
CBO notes that any improvement to Medicare’s fiscal situation is the result of higher payroll taxes following passage of TCJA and in fact, the latest CBO report incorporated the huge surge in tax revenue, accounting for $800 billion or nearly half of the $1.8 trillion dollar improvement in the FY ’22 budget deficit. The rest of it comes from expiring COVID emergency spending.
You can bet that those Trump tax cuts contributed a big chunk to that revenue pick-up, and what limited overall prosperity we have today.
The CBO, by the way, also tip their hat to two other supply-side criticisms of Bidenomics. One is that all the government checks from the March 2021 so-called emergency spending plan increased demand and contributed to the high rates of inflation. Plus, those very same government checks, according to the CBO, “might also have slowed the recovery of labor force participation in 2021.”
In other words, as the Democrats ended workfare and paid people not to work with massive assistance payments of all kinds, it postponed job recovery and increased inflation. In other words, big government socialism didn’t work. Delighted to have the CBO on board.
That makes almost no one left who approves of Biden’s radical progressive woke economics, but that’s about as much cheering of the CBO report that I can muster because based on current law, we still have multi-trillion deficits as far as the eye can see over the next 10 years.
By 2027, the deficit is back to $1.4 trillion. By 2032, it’s $2.2 trillion. In total, deficits will increase by $15.7 trillion.
As usual, the villain in the deficit story is federal overspending. Even though the COVID emergency programs expire, the government is set to spend 23.2% of GDP over the next decade. That’s well above the 20.8% average during the prior 50 years.
Revenue is expected to average 18.1% of the economy—also higher than the 50-year average. As a result of all this, federal debt held by the public is projected to rise to 109.6% of GDP or $40.2 trillion.
Gross federal debt, which included internal government transfers, sums to $45.3 trillion. Those are big numbers. Those are bad numbers and most disappointing is with all this spending the CBO, like most of the economics profession, still doesn’t believe the US economy can grow.
The 10-year average real GDP estimate runs only a little better than 1.5% per year. That’s it. 1.5%. Is that really the best this country can do?
I know the CBO is underestimating inflation and underestimating interest rates, but it’s that growth number that sticks in my craw. Remember, roughly from the end of World War II all the way through to the year 2000, over 50 years, average growth in the US after inflation came to about 3.5% per year. That’s right, 3.5% per year.
Think how many tens of trillions of dollars of revenues that would add to slash deficits and debt. Think of how many more people would be working and earning and paying taxes at even lower tax rates.
This CBO report, just like all the ones before it, screams for the Laffer Curve. Slash marginal tax rates. Build new incentives for economic growth, higher living standards for working folks, greater job opportunities for minorities, plenty of resources for new technologies to make all forms of power and energy cleaner and more efficient and still plenty left over to bolster America’s national security.
Growth solves so many problems and yet the bulk of the economics profession is satisfied year in and year out to post long-term trends of so-called secular stagnation of roughly 1.5% per year.
Know what? It’s a scandal, an absolute scandal, and that is why it is time to develop a balanced budget plan that will make America growthier and greater—tax cutsderegulation, spending restraintenergy independence, price stability and king dollar.
Get away from big government socialism. Get away from woke progressivism. Get away from this new road to serfdom and get us back to America first. The cavalry is coming.
This article is adapted from Larry Kudlow’s opening commentary on the May 26, 2022, edition of “Kudlow.”