The U.S. Treasury Department released new 2023 budget figures on Friday that showed a worrying decline in the country’s tax revenue relative to GDP – a metric that fell to 16.5% despite a growing economy – and an annual deficit increase that essentially doubled previous year.
“After record spending by the U.S. government in 2020 and 2021” due to programs related to the economic fallout from the Covid-19 crisis, the Washington Post reports, “the deficit fell from nearly $3 trillion to nearly $1 trillion U.S. dollars in 2022. But probably not.” While the deficit continues to fall to pre-pandemic levels, the deficit this year has unexpectedly increased to around $2 trillion.”
While much of the reporting on the Treasury Department’s numbers painted a picture of different and overlapping dynamics to explain the rise in the deficit – including higher debt payments due to interest rates, tax exemptions related to extreme weather events and the impact of a student loan tax forgiveness program that was later repealed or a decline in capital gains income – progressive tax experts say none of these complexities should serve to shield what is at the heart of a budget that brings in less than it spends: tax giveaways to the rich.
Bobby Kogan, senior director of federal budget policy at the Center for American Progress, has repeatedly argued that the growing deficits in recent years have a clear and singular root cause: Republican tax cuts that primarily benefit wealthy and profitable corporations.
Reacting to Treasury Department numbers released Friday, Kogan said that “approximately 75%” of the increase in the deficit and debt-to-GDP ratio, the amount of federal debt relative to the overall size of the economy, was due to revenue declines as a result of the GOP-approved tax cuts in the last decades. “Of the remaining 25%,” he said, “more than half” was higher interest payments on the debt related to Federal Reserve policies.
“We have a revenue problem because of tax cuts,” Kogan said, pointing to the major tax laws enacted under the George W. Bush and Donald Trump administrations. “The Bush and Trump tax cuts destroyed our modern tax structure. Revenues are significantly lower and are no longer growing strongly with the economy.” And he offered this visualization of a growing debt ratio:
“The point I keep emphasizing is that spending is down, not up, compared to the last time CBO forecast stable debt/GDP,” Kogan said in a tweet Friday evening. “It is the lower revenues that are 100% responsible for the change in debt forecasts. Unless you leave out nothing else, stick with this point.”
In his tweet, Kogan offered the following chart to show current and projected levels of federal revenue and spending relative to gross domestic product (GDP):
In a detailed analysis prepared in March, Kogan explained: “Without the Bush tax cuts and their extensions, as well as the Trump tax cuts, revenues would be on track to keep pace with spending indefinitely, and the debt-to-GDP ratio (debt) would be on track to keep up with spending indefinitely. (as a percentage of the economy) would decline. Instead, these tax cuts have added $10 trillion to the debt since they took effect and are responsible for 57 percent of the increase in the debt-to-GDP ratio since 2001 and more than 90 percent of the increase in the debt-to-GDP ratio if the one-time costs of bills in response to COVID-19 19 and the Great Recession are ruled out.”
On Friday, Sen. Sheldon Whitehouse’s (D-R.I.) office cited the same numbers in a press release in response to the Treasury Department’s new report.
“Tax giveaways for the wealthy continue to leave the federal government short of needed revenue: The tax giveaways passed by former Presidents Trump and Bush have added $10 trillion to debt and are responsible for 57 percent of the increase in the debt-to-GDP ratio since 2001. “,” the statement says. “Without these tax cuts, U.S. debt as a share of the economy would decline.”
Whitehouse, chairman of the Senate Budget Committee, said the decline in federal revenues and the growth in the overall deficit both have the same root cause: Republicans’ loyalty to the wealthy individuals and powerful corporations that bankroll their campaigns.
“In their blind loyalty to their big donors, Republicans’ fixation on huge tax cuts for billionaires has created a revenue problem that is driving up our national debt,” Whitehouse said Friday evening. “Although federal spending fell last year relative to the size of the economy, the deficit rose because Republicans manipulated the tax code so that big corporations and the wealthy could avoid paying their fair share.”
Offering a solution, Whitehouse said: “Fixing our corrupt tax code and targeting wealthy tax cheats would help reduce the deficit. “It would also ensure that teachers and firefighters don’t pay higher tax rates than billionaires and would level the playing field for small businesses and promote a stronger economy for all.”
None of the recent numbers — the ones that show tax cuts have hit revenues and therefore pushed up deficits and debt — should come as any surprise.
In 2018, shortly after the Trump tax cuts took effect, a Congressional Budget Office (CBo) report predicted this exact outcome: that revenues would decline; annual deficits would grow; and not even the Republicans’ promise of economic growth to justify the gift-giving would be enough to make up the difference in the budget.
“The CBO’s latest report exposes the fraud behind Republicans’ rosy rhetoric that their tax bill would pay for itself,” Sen. Chuck Schumer (D-N.Y.), now Senate Majority Leader, said at the time.
“Republicans drove up the national debt by giving tax breaks to their billionaire friends, and now they want everyone else to pay for it.”
In its 2018 report, the CBO predicted the deficit would rise to $804 billion by the end of the fiscal year. Well, for all the empty promises and bluster from Republicans and their deficit hawk allies, the economic formula they pushed through Congress has resulted in an annual deficit of more than double that, while at the same time hurting the poorest and most vulnerable in the country Pay the price They are calling for cuts to key social programs – including food aid, education budgets, unemployment benefits and housing assistance.
Meanwhile, the GOP majority in the U.S. House of Representatives — with or without a speaker currently holding the gavel — still has plans to extend the Trump tax cuts if given half a chance. In May, a CBO analysis of that pending legislation found that such an extension would add an additional $3.5 trillion to the national debt.
“Republicans drove up the national debt by giving tax breaks to their billionaire friends, and now they want everyone else to pay for it,” Senator Whitehouse said at the time. “It is one of life’s great mysteries that Republicans can keep a straight face while simultaneously invoking the deficit to force massive spending cuts to critical programs and supporting a bill that would drive up deficits to Extending trillions of dollars in tax cuts to the people who need them is the minimum.”