Survey Shows that Most Economists Are Critical of the Republicans’ Tax Bill
The Republican tax bill would boost the economy only temporarily, economists and U.S. Federal Reserve analysts agree.
Both private-sector economists and Fed analysts have agreed that the Republican tax bill would lead to a growth spurt, but that jump would potentially disappear fast.
A Bloomberg survey published on Thursday showed that economists polled said that they had increased their growth forecasts by 0.1%. This comes on top of the growth they had already incorporated due to the Republican tax bill currently winding its way through Congress. Another survey in November showed that most economists believed that the tax plan would boost the economy by about 0.28%.
This aligns with Fed estimates.
The issue is that while the tax plan is expected to grow the economy, the scale of that growth is far below the six-percent mark that President Donald Trump told his cabinet members was possible. The long-run GDP growth of three percent is still very much the target for the administration.
But in October, another Bloomberg survey found that 94% of economists polled said they don’t expect Trump policies to boost growth to a sustainable rate of three percent. The Joint Committee on Taxation, a nonpartisan Congressional committee, found that the GDP jump will amount to about 0.8% over the next 10 years. The end goal of a consistent three-percent annual GDP growth over multiple years will be out of reach.
And the numbers do matter here. The Republican tax bill would add $1.45 trillion to the deficit in the next decade. The loss of tax revenue is supposed to be balanced by economic growth, but if the U.S. cannot sustain high levels of economic expansion, the deficit will balloon due to the lowered tax revenue.
Furthermore, as Congress continues to reconfigure the bill, the latest news coming out of the negotiations involves another $200.0 billion being added to the plan. Since the proposal must not add more than $1.5 trillion to the deficit over the next 10 years, the Republicans are considering lowering the cuts they promised to middle-class taxes and other measures to help bring that all-important $1.5-trillion figure down.
The result may be what the proposal’s harshest critics have long feared: A plan that benefits the rich and corporations, while leaving middle- and lower-class individuals without much tax help and sinking the country into an even larger deficit.
“Tax Plan Growth Boost May Vanish Fast, Fed and Economists Agree,” Bloomberg, December 14, 2017.
“Here’s Where the GOP Tax Plan Stands Right Now,” Bloomberg, December 14, 2017.