A new report from the Congressional Budget Office makes it abundantly clear that historically high spending is what’s driving the massive growth in deficits over the next decade — not the tax cuts that President Trump signed into law in 2017.
To be sure, it’s undeniable that Trump’s tax cuts, which were not offset by spending decreases, did result in lower revenue even when taking into account economic growth. This has made deficits higher than they would have been were it not for the tax cuts.
That having been said, it’s clear that the bigger issue is that, largely as a result of growth in Social Security and Medicare, spending has gotten way out of whack with where it has been historically. That is, the government will be collecting an ordinary amount in taxes, but its spending will be extraordinary.
As shown in the chart below, in the 50 years prior to the effective date of the Trump tax cuts (1968-2017), tax revenue averaged 17.4 percent of gross domestic product, while spending averaged 20.3 percent. With the Trump tax cuts in place, revenue is below the historical average for the next few years, but by the middle of the decade, it returns to that average and then surpasses it as some provisions of the tax cut begin to expire. By 2029, the end of the CBO projection period, revenue reaches 18.3 percent — or nearly one point of GDP above its historical average.
In contrast, spending will exceed its historical average in every year through the next decade, hitting 22.7 percent by 2029. Even if taxes were to return to their record level of 20 percent (achieved in 2000), the nation would still be running a deficit every year over the next decade.
Liberals may counter that as a society, we can afford to send a greater share to the government to subsidize spending than we have historically. But that’s a separate debate that doesn’t change the fact that it’s the deviation of spending from the norm that would be requiring an increase in taxes beyond normal levels.
