WASHINGTON: The US budget deficit is proving to be a major obstacle to the tax reform plan being offered by President Donald Trump and top congressional Republicans, with one leading Senate hawk saying a week after the plan was introduced that any enlarging of the fiscal gap could kill his support.
From proposed infrastructure enhancements to a military build-up, the deficit long ago put the brakes on major new federal spending programmes; now Trump’s tax-cut proposal is threatened.
“It looks to me like the administration’s already running for the hills. It looks to me like some of the tax-writing chairmen are already running for the hills ... I’m disheartened by the lack of intestinal fortitude I’m seeing,” Sen. Bob Corker said.
The main problem is that the federal government is swimming in red ink with an annual deficit of $550 billion and a national debt — the accumulation of past deficits and interest due to lenders to the US Treasury — exceeding $20 trillion.
The Republican tax plan unveiled last week calls for as much as $6 trillion in tax cuts that would sharply reduce federal revenues. No commensurate spending cuts have been proposed. So, on their own, the tax cuts being sought by Trump would hugely expand the deficit and add to the debt.
The administration has said two things must happen for the revenue losses to be offset. One is for economic growth to generate new tax revenues. Forecasts for that vary, with Republicans projecting much stronger economic growth and unusually large revenue gains resulting from tax cuts.