A new study out from the National Taxpayers Union Foundation today analyzes the impact of the Tax Cuts and Jobs Act on the deficit under a realistic budgetary baseline, including the effects from economic growth and the continuation of expiring provisions. While many analysts have predicted doom for the federal budget, the study finds that there will be a modest increase in debt assumed by the federal government relative to the pre-TCJA baseline due to the many positive economic impacts contained within the legislation.
As study author NTUF policy analyst Andrew Wilford states, “The federal government deals with such massive sums of money that context is needed to make sense of the figures. The Tax Cuts and Jobs Act is not the fiscal armageddon that some are making it out to be—rather, it is a meaningful tax cut that grows the economy and puts money back in taxpayers’ pockets while having only a moderate impact on the debt. Taxpayers concerned with the deficit should be more worried about the recent budget deal’s abrogation of spending caps than the effect of badly-needed tax relief.”
While the TCJA will have a moderate effect on America’s debt burden, NTUF’s study highlights that spending restraint is needed to address the long-term budget imbalance. Entitlement programs comprise about 60% of total government spending and are projected to eat up 80% of projected spending growth over the next decade. The real challenge will not be on the revenue side of the government’s ledger, but on the spending side.
The study is a part of NTUF’s ongoing series evaluating the impact that the TCJA will have on the American economy and the federal budget. The next paper in this series will incorporate the changes that the recently-passed Bipartisan Budget Act of 2018 have had on the federal policy baseline in order to sketch out a path to a sustainable budget.
The issue brief is available here.