Donald Trump aims to attract Wall Street donors with promises of new tax cuts next year.
However, there are concerns about adding to the national debt due to the potential $4.6 trillion price tag attached to extending his 2017 tax cuts, reported Bloomberg.
Despite the projection, many Republicans believe the tax cuts will stimulate enough economic growth to offset the costs.
Trump’s 2017 Tax Cuts Didn’t Materialize
Independent analyses indicate that the economic gains promised by Trump’s 2017 tax cuts didn’t materialize, and the same is predicted if they’re extended in 2025, Bloomberg added.
This sets the stage for a contentious political battle over how, or whether, to fund them. The nation’s debt has significantly increased due to deficit-financed tax cuts under Trump, pandemic relief packages, and Biden’s spending on key initiatives like clean energy, infrastructure and chip manufacturing.
The U.S. government’s publicly held debt rose from 76% in 2017 to 97% of GDP in December. Yields on 10-year U.S. Treasury bonds nearly doubled from 2.4% in 2017 to 4.3% on Thursday.
Annual net interest payments surged from $263 billion to an estimated $890 billion this year, surpassing the Defense Department budget.
The fiscal strain of the Baby Boom generation’s retirement has loomed large, with Social Security expected to exhaust its funds to pay full benefits by 2033 and Medicare by 2036.
Some conservatives have proposed cutting programs like Social Security and Medicare to address deficits, while others have suggested reversing Biden’s clean-energy tax breaks or increasing tariffs on imported goods, Bloomberg added.
Debt Above 200% Of GDP By 2054
The Congressional Budget Office estimates that extending the 2017 tax cuts could cost $4.6 trillion over a decade, potentially pushing debt above 200% of GDP by 2054.
While proponents have argued tax cuts may spur investment and growth, an analysis suggests the supposed dynamic effect would recover only a fraction of lost revenue (just 1% to 14%), the report said.
Achieving the necessary budget adjustments to offset revenue loss would be unprecedented given Washington’s trend of increasing spending and cutting tax rates since 2001, when the last surplus was recorded.
Treasury Secretary Janet Yellen has emphasized the importance of fiscal sustainability, attributing the deficit increase to Trump’s tax cuts. However, Trump and other Republicans argue that tax cuts stimulated economic growth and increased government revenue.
Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.
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