Growth Paid For 20% Of GOP Tax Cuts, New CBO Data Show

Tax Cuts: During the tax cut debate in 2017, Republicans argued that the cuts would at least partially pay for themselves by spurring economic growth. Democrats said they were nothing more than a giveaway to the rich. The latest data from the Congressional Budget Office makes it clear that the GOP had it right.




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The headline news from the CBO’s latest annual budget and economic forecast report is supposed to be the that deficits will hit $897 billion in 2019, and top $1 trillion by 2022. Proof that the tax cuts failed, right?

“The CBO’s latest report exposes the scam behind the rosy rhetoric from Republicans that their tax bill would pay for itself,” said Senate Minority Leader Chuck Schumer.

The other headline is that the government shutdown would cut ultimately cost the economy about $3 billion this year.

But entirely overlooked is what the CBO report shows about the tax cuts. That they succeeded in boosting economic growth. And that extra growth is, in turn, partially paying for the cuts. Despite what Schumer says, this is precisely what Republicans claimed would happen.

The CBO doesn’t spell this out, but the message is clear to any who look at the data.

Start with GDP growth. The CBO makes it clear that the tax cuts spurred the boom.

Democrats claim that the solid growth in 2018 was baked in the cake while Barack Obama was president. But that’s simply not the case.

In January 2017 — before Trump entered the White House — the CBO projected that the economy would expand by only 2% in 2018, followed by 1.7% in 2019 and 1.5% next year.

That’s what was baked in the cake. Continued tepid economic growth. Keep in mind that, when the CBO made those economic forecasts at the start of the Trump administration, they were right in line with other mainstream economic forecasts.

What actually happened was a very different story.

The actual growth for 2018 will likely have been 2.9% or 3%. And the CBO now expects GDP to climb 2.7% this year, and 1.9% next year.

The jobs picture improved dramatically as well.

In January 2017, CBO forecast an average unemployment rate of 4.4% for 2018. The actual number: 3.9%

In January 2017, CBO said that the economy would create an average of just 94,000 jobs a month in 2018. The actual results for 2018: 203,000 news jobs a month.

In other words, the nation’s economy in 2018 was almost $400 billion bigger and there were about 1.3 million more jobs created than the CBO had expected.

So, what changed after January 2017 that could explain the sudden shift in economic results? Why did the economy do so much better than anyone had anticipated?

Trump signed a major pro-growth tax cut, which went into effect at the start of 2018.

Using the latest CBO report, we can also calculate how much the tax cuts are actually costing, compared with what the CBO said they’d cost.

In late 2017, the CBO said the Republican tax cuts would cut revenues by $1.1 trillion in its first five years.

But that assumed that the tax cuts would have zero effect on the economy.

Based on the CBO’s new revenue forecast, however, which includes those economic effects, the tax cuts will have cut revenues by $878 billion over the first five years.

In other words, economic growth paid for 20% of the tax cuts. Sure, growth didn’t pay for all the tax cuts. But Republicans never said they would.

To sum up, the tax cuts boosted growth, created more than a million additional jobs, and cost 20% less than advertised.

And this is what Schumer calls a “scam”? If so, we could use more of them.

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