Not long ago prominent Republicans like Paul Ryan, the speaker of the House, liked to warn in apocalyptic terms about the dangers of budget deficits, declaring that a Greek-style crisis was just around the corner. But now, suddenly, those very same politicians are perfectly happy with the prospect of deficits swollen by tax cuts; the budget resolution they’re considering would, according to their own estimates, add $9 trillion in debt over the next decade. Hey, no problem.
This sudden turnaround comes as a huge shock to absolutely nobody — at least nobody with any sense. All that posturing about the deficit was obvious flimflam, whose purpose was to hobble a Democratic president, and it was completely predictable that the pretense of being fiscally responsible would be dropped as soon as the G.O.P. regained the White House.
.. How do we know that we’re close to full employment? The low official unemployment rate is just one indicator. What I find more compelling are two facts: Wages are finally rising reasonably fast, showing that workers have bargaining power again, and the rate at which workers are quitting their jobs, an indication of how confident they are of finding new jobs, is back to pre-crisis levels.
GDP, Inflation and Interest Rates Forecast to Rise Under Trump Presidency
On average, economists marked up their growth forecasts. The economy could expand 2.2% in 2017 and 2.3% in 2018, as a fiscal stimulus kicks into gear, up from about 1.5% over the past 12 months. Inflation is seen at 2.2% next year and 2.4% in 2018.
.. Most economists believe tax cuts, especially if not accompanied by spending reductions, would produce a short-term boost to economic growth. His proposals to increase infrastructure spending, if successful, could lead to a large boost in construction employment, with spillover effects for other industries.
.. “Now that Republicans are in control, there’s no concern about debt and deficits,”
Donald Trump’s Spending Push Rankles Fiscal Conservatives
Republicans hope to avert ballooning deficits that may result from president-elect’s low-tax, big-ticket agenda
This suggests the GOP will be willing to tolerate higher deficits in the short-run under Mr. Trump because the party is largely united on overhauling corporate and individual income taxes.
.. And reduced revenues, they worry, could be used to justify big cuts to safety-net programs like food stamps and Medicaid.
.. Under current policy, the Congressional Budget Office sees the budget deficit of 3.2% of gross domestic product holding around those levels for the next four years. By the end of Mr. Trump’s first term, deficits would rise to 5.3% of GDP under the House Republicans’ tax plan, and to 6.8% under Mr. Trump’s proposal, according to an analysis by Cornerstone Macro, a research firm.
.. The last two times Republicans reclaimed the White House from Democrats—in 1981 and 2001—they also successfully pushed for large tax cuts. Deficits nonetheless rose during their administrations.
.. Deficits have also fallen below projections in recent years due to a surprising decline in the growth rate of health care spending and because interest rates have been lower than projected.
.. Already, Mr. Trump has forsworn any changes to the largest future drivers of spending, Social Security and Medicare.
.. Other advisers say they are open to recycling a proposal made by President Barack Obama and Democratic nominee Hillary Clinton to pay for infrastructure with one-time revenues from taxing multinationals’ profits stashed abroad.
.. Mr. Trump’s chief strategist, Stephen Bannon, has echoed arguments made in recent years by left-leaning economists who supported more spending to boost growth.
“With negative interest rates throughout the world, it’s the greatest opportunity to rebuild everything,” Mr. Bannon said
The First Broken Promise of Hillary Clinton’s Presidency
Why her vow not to “add a penny to the debt” is an impossible pledge to keep
“I also will not add a penny to the debt,” Clinton said toward the beginning of her final presidential-debate performance. She made a similar pledge two more times that night
.. “She had to have misspoke. The alternative would be absurd,” Dean Baker, a liberal economist who co-founded the Center for Economic and Policy Research, said in an interview Thursday. “Clearly, she is going to add to the debt.”
.. “Whoever is president will actually be adding $9 trillion to the debt over the next 10 years unless they make changes,”
.. Aides on Thursday said she was simply talking about her “pay-as-you-go” approach to fiscal policy, which they characterized as a middle ground between the austerity budgets proposed by Republicans in Congress and the budget-busting tax cuts that Trump has championed.
.. Clinton would be on stronger footing if she had used the word “deficit” instead of “debt.” President Obama, for example, can credibly claim to have presided over a sharp reduction in the annual budget deficit even as the national debt has nearly doubled during his tenure.