The divisive tax plan passed by Senate Republicans early Saturday morning would add, under a generous estimate, $1 trillion to America’s debt — a staggering amount of money that has severe bottom-line consequences for Americans.
While $1 trillion could cover the cost of some core government programs for a year or more, government spending experts tell Mic they are equally concerned that the bill will add to the historically enormous federal deficit.
“The real key, no matter what you think about economic growth, is to think about what we’re not paying for,” said Josh Gordon, policy director at the Concord Coalition. “Look at the cost of the tax bill and wonder, is that the best use of resources?”
For example, $1 trillion can pay for a decade’s worth of food stamps; nutrition and health care for infants and mothers; heating assistance for low-income families; and cash grants to poor, struggling households.
The cuts could cover more than the cost of Medicare — $600 billion — for an entire year, according to Tricia Neuman at the Kaiser Family Foundation.
President Donald Trump and Republican leaders have suggested they will move to reduce the debt burden of Social Security, Medicare and Medicaid in 2018 after passing legislation that makes the debt even larger.
The cuts could almost cover the entire cost of the federal government, including the Defense department, for one year — excluding entitlement programs.
This $1 trillion could also be invested in U.S. infrastructure, an element of Trump’s campaign platform, though Republicans largely hope to achieve that level of investment with incentives to companies.
On Tuesday, Gallup released polling that indicated just 29% of Americans overall approve of the proposed tax changes. Meanwhile, the GOP’s opposition is already making these numbers their talking points.
“Their dream has been to undo these programs, give massive tax breaks to those who don’t need them and take us back to the 1920s,” Sen. Bernie Sanders (I-Vt.) said in a campaign-style rally against the tax bill on Sunday.
Even a scaled-down version of the bill, which Republicans long said would be enough to drive economic growth, could have massively changed the legislation’s economic impact.
The bill lowers the corporate tax rate from 35% to 20%. Each percentage point cut slashes $100 billion in federal revenue over 10 years, according to Maya MacGuineas, president of the Committee for a Responsible Budget.
If the bill cut tax breaks for high-income Americans (those who make at least $250,000) and dropped the corporate tax rate to 25%, it would pay for itself, MacGuineas said.
Elaine Waxman, a senior fellow at the Urban Institute, said, “Because they’re very large numbers and they’re extended over a period of time, it’s hard for people to wrap their minds around them. But these guidelines have bottom-line consequences for people.”
The U.S. has a debt-to-GDP ratio of 77%. This means that for every dollar the U.S. economy creates, the federal government is 77 cents in debt.
Over the next decade, that ratio is projected to grow to 91%, MacGuineas said. If the tax plan, which is in negotiations between the House and Senate, passes, the ratio will rise higher, she added. The U.S. needs to borrow $10 trillion in the next decade to pay its bills — with the tax plan increasing that amount to $11 trillion.
At some point, if the bill becomes law, the U.S. government will begin borrowing money that could have gone to private businesses. This means less money for companies to invest, eventually slowing economic growth, lowering wages and creating fewer jobs. It also increases interest rates, again making it more difficult for companies to borrow money to invest in growing businesses and hiring employees.
Massive debt also means the government will not be able to respond to emergencies. Some lawmakers are worried about spending the tens of billions of dollars desperately needed by Florida, Texas, Puerto Rico and the U.S. Virgin Islands to rebuild from 2017’s hurricanes.
Republicans have promised their plan will bring about historic and robust economic growth, which will drive up tax revenues and lower the debt. Democrats are crying foul, citing numerous nonpartisan estimates to the contrary.
“I can’t think of the last time we passed legislation that was this irresponsible,” MacGuineas said.