December Should Not Become Blow Up the Debt Month
For Immediate Release
As we enter December, lawmakers are looking to address a number of year-end priorities. Unfortunately, the legislative agenda under consideration could add massively to our national debt if not paid for.
Specifically, we estimate the passage of deficit-financed tax cuts, sequester relief, and disaster funding, along with several other extensions, could add $2.2 trillion to the national debt over the next decade. If ultimately made permanent, these provisions could add over $4 trillion. With debt higher than any time since World War II, lawmakers should avoid making it worse.
“As we wrap up 2017, the last thing we need is for Congress to go on a tax cutting and spending spree with the national credit card,” said Maya MacGuineas, president of the Committee for a Responsible Federal Budget. “It’s like Santa Claus in reverse – parents and grandparents spending on themselves and handing the bill to their children and grandchildren.”
|Policy||Potential Ten-Year Deficit Effect|
|Tax Cuts and Jobs Act||$1 trillion to $1.5 trillion*|
|Sequester Relief||Up to $200 billion|
|Disaster Funding||$45 billion or more|
|Obamacare Tax Delays||$55 billion for two years|
|Tax Extenders||$20 billion for two years|
|CHIP and Health Spending Extenders||Up to $20 billion|
|Potential Interest Costs||Up to $375 billion|
|Total Cost of December Legislation||Up to $2.2 trillion|
|Cost of Extending Temporary Provisions (including interest)||$1.9 trillion|
|Total Potential Cost, Assuming Extensions||Up to $4.1 trillion|
Memo: Cost of Waiving PAYGO Sequester for 2018
(included in Tax Cuts and Jobs Act cost)
|$110 billion to $115 billion|
*Low-end estimate reflects dynamic score of Senate bill. High end estimate assumes lawmakers reduce taxes up to the full amount allowed under the budget resolution.
“If Congress doesn’t get its act together soon, we will end up with trillion-dollar deficits in the next few years,” MacGuineas continued, “and debt as a share of the economy will be as high as it has ever been in U.S. history.”
“Fortunately, it’s not too late for Congress to avoid adding to the debt. The path is straightforward – pay for the policies you pass. That is true for tax cuts and its true for spending. Borrowing is not a sustainable answer.”
Being fiscally responsible at the end of the year would mean not allowing any of these proposals to add to debt. Some options to do this include:
- Modifying the tax bill in conference – through a mixture of more base broadening and fewer tax cuts – to be less expensive and ideally at least deficit neutral over ten years on a dynamic basis.
- Offsetting any ‘sequester relief’ package by paying for discretionary spending increases with reforms and reductions to mandatory spending over time (see $400 billion of options here).
- Financing disaster funding by reallocating existing resources and identifying new pay-fors (see $100 billion of options here).
- Coupling the extension of the Children’s Health Insurance Program (CHIP) and other health spending with modest reforms to slow health care cost growth (see the House plan here).
- Allowing expired ‘tax extenders’ not incorporated in tax reform to lapse as intended.
- Allowing Obamacare taxes to take effect or else replace them with an alternative revenue stream (see options here).
- Accompanying any waiver of the Pay-As-You-Go (PAYGO) sequester with equivalent savings or revenues, ideally by modifying the Tax Cuts and Jobs Act to reduce its deficit impact.
“Congress can’t keep adding to the debt and then waiving the budget enforcement designed to keep the budget in check,” MacGuineas continued. “What we ultimately need is a major debt deal that includes revenues and serious entitlement reform to address the unsustainable debt. By adding $2 trillion to $4 trillion to the debt this month, policymakers are making reform that much harder to achieve.”
“The best gift our leaders could give us this December is a responsible federal budget and a sounder fiscal future.”
For more information contact Patrick Newton, press secretary, at email@example.com.