“I think that there has been a little bit of shock and awe among the fiscal policy community, reacting to the fact that this big tax cut passed,” said Diane Lim, a principal at District Economics Group and former chief economist for The Concord Coalition.
The December tax cut added trillions of dollars to the national debt, she noted in the latest “Economist Mom” segment on Facing the Future. “It was not well motivated in terms of economic reasoning and it was not well distributed from a household distribution standpoint.”
Lim joined host Chase Hagaman and Concord Executive Director Robert L. Bixby to discuss fiscal and economic policies during the first part of the Trump administration. Two previous Economist Mom segments focused on fiscal policies in the administrations of Bill Clinton, George W. Bush and Barack Obama.
For many, Lim said, the Tax Cuts and Jobs Act of 2017 has been President Trump’s biggest legislative achievement. But the Congressional Budget Office projects that over the next 10 years it could add $1.9 trillion to the national debt, even with so-called dynamic scoring, Bixby said. (Such scoring attempts to take into greater account the impact legislation might have on the federal budget accounting for positive economic feedback).
Lim said, “The fact that this was such a hugely deficit-financed tax cut meant that it looked like a stimulus tax cut -- the kind of tax cut you would want when unemployment is high and demand is low, and there is excess capacity in the economy.”
These circumstance do not exist in our economy at this time, she said, with low unemployment and high demand.
In January divided government will return, which could impact President Trump’s policy goals and reform efforts on key issues.
“I think that the possibilities are that there could be something done on health care reform … working together on prescription drug costs, possibly some sort of infrastructure bill,” Bixby said.
“The problem I have is whether they would do any of that in a fiscally responsible way,” he said. “I don’t know that really either side is willing to have the other side in a joint victory.”
Bixby said there is a very serious political problem in that “some folks don’t want to share credit for anything.”
Hagaman hosts “Facing the Future” each week on WKXL, NHTalkRadio.com (N.H.), which is also available via podcast. Join him and his guests as they discuss issues relating to national fiscal policy with budget experts, industry leaders, elected officials and candidates for public office. Past broadcasts are available here. You can now subscribe to the podcast on iTunes, Google Play or through RSS.