Former CBO Director: Trump’s tax plan is built on a fairy tale

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Schumer and the gang are going to point to the CBO score of this plan, which is going to say it will grow the debt by trillions of dollars in the next 10 years – that you can guarantee. It won’t, at least probably not, because the CBO will score the plan based on a static accounting of the economy and the entire point of a big across-the-board tax cut like this is to grow the economy. This tax cut will spark economic activity, probably in a major way, but CBO’s budget scoring of it won’t account for that. And Trump will be accused of blowing a hole in the budget, and the Democrats will then make demands for tax increases elsewhere to fill the hole.

Hopefully the president and his people are prepared for that, and hopefully the message in response is about economic growth and a reduction of the size and scope of government. There is an economic case to be made about increasing the standard of living for working people, applying upward pressure to wages by freeing up business capital, attracting investment into the American economy, restarting the failing engine of entrepreneurship and reversing the awful trend during the Obama administration in which there were fewer businesses extant in each of Obama’s years in office than the previous year and launching a sizable economic boom which takes people off welfare rolls and makes them taxpayers, and the salutary budgetary effects of such a vision.

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Proposing trillions of dollars in tax cuts and then casually asserting that such a plan would “pay for itself with growth,” as Treasury Secretary Steven Mnuchin said, is detached from empirical reality. A real tax-reform plan would include specifics on how to broaden the tax base — not leave that hard work to Congress. A responsible tax plan would not ignore the threat of increasing a national debt that is already on an unsustainable course.

Accelerating the pace at which the federal budget bleeds red ink must be avoided, and building a tax plan based solely on the premise of future economic growth is dangerous. Sailing straight into a sovereign debt crisis is not a pro-growth strategy. What firm would want to headquarter in a country that is toying with financial meltdown accompanied by emergency austerity and tax hikes?

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But never has a dynamically scored analysis concluded that a proposal would “pay for itself with growth,” and no serious economist would make such a claim. At best, according to the prevailing consensus, the positive feedback effect from tax cuts would recoup in the range of 25 to 35 percent of the cost.

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You think I really give a frick about federal revenue?

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