The big knock from Democrats used while Republicans were passing tax cuts was that it would balloon the deficit. In reality, the tax cuts have been paying for themselves right along, just as the president said it would. While it’s true that the tax cuts also cut tax collections, the economic growth created a whole bevy of new tax receipts for the government.
In the second quarter of this year, the GDP rose at a rate of 4.2%. The initial tally for the third quarter is 3.5%. During 8 years of Obama, he raised the deficit to GDP by 40%. Under Trump, the ratio is actually going down.
While it may be too much to claim that the tax cuts alone have paid for themselves–raised growth enough to neutralize any revenue losses from lower rates–an only slightly less audacious claim is true. The Trump economic package has led to much higher growth than expected and, as a result, it has very nearly paid for the tax cuts.
The gross domestic product of the U.S. was $18.7 trillion in 2016. Prior to the election, the Federal Reserve estimated that the economy would grow just two percent in 2017 and 2018 before falling to 1.8 percent in 2019. If taxes rates remained unchanged, so that the government continued to collect around 17.4 percent of GDP as tax revenue, the government would have collected $10.15 trillion in taxes between 2017 and the end of 2019.
The economy, however, has grown much more than expected. In 2017, the economy expanded 2.3 percent. As of September, the Fed said it expects the economy to expand 3.1 percent in 2018 (and that was before the government announced GDP expanded by more than expected in the third quarter of this year). The Fed now expects GDP to expand 2.5 percent in 2019, which is seven-tenths of a percentage point higher–a 39 percent change.
The only reason this year’s deficit was so big was because Trump signed an omnibus bloated spending package and still didn’t his the money for his wall. The wall is in the interest of our national defense and Trump should order Mattis to glean money from the defense budget and erect the wall.