Debating whether 2017 Tax Cuts and Jobs Act paid for itself

No, it hasn’t:

Tax Policy Center argues federal revenue declined.

Other skeptics cite surging government deficits and debt.

The brief economic spurt in 2018 was evidence of the law’s failure to help long-term growth.

Yes, it has:

None of the above arguments concludes whether the tax cut was worth its cost.

Comparing expected growth in gross domestic product with growth in publicly held federal debt — before and after the tax cut — is a better measure, according to Edward Conard, an American Enterprise Institute visiting scholar and former Bain Capital partner, writing in The Wall Street Journal. His comparison includes the long-term effect of tax reform on the economy and the federal budget.

The Congressional Budget Office last week published a 10-year forecast.

Unlike a pre-reform projection, the CBO now expects annual GDP that’s $750 billion higher by 2027, the last year of its prior forecast.

“A strong case can be made that tax reform played a predominant role in accelerating GDP growth. While most large economies stagnated last year, a sharp rise in business investment in the U.S. helped drive the economy forward,” Conard writes. “On the other side of the ledger, the CBO predicts the tax cuts will add $1.9 trillion of additional debt in the coming decade, and that the government will pay about $60 billion more in interest each year as a result. So the bottom line says an extra $60 billion a year buys the U.S. $750 billion in annual GDP. That’s a great deal for taxpayers.”

The government may collect more than $120 billion a year in taxes from that extra $750 billion of GDP, more than enough to cover additional interest payments.

Tax reform increases real, inflation-adjusted GDP by $300 billion to $450 billion a year in the coming decade compared with the CBO’s 2017 projection.
The higher GDP is much bigger than the debt the government borrowed to pay for the tax cuts (assuming a real growth rate of 1.8 percent and a real long-term U.S. government interest rate of about 1.2 percent).

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