“The years when we increased deficits are years when the economy is slowing down,” said Gary Cohn, then director of the National Economic Council. He explained lower rates would lead corporations to shift taxable operations back to the U.S. from abroad.
House and Senate leaders used those arguments to reassure Republican holdouts. “We’re right there in the sweet spot with economic growth that gives us more revenue,” Speaker Paul Ryan declared.
“We fully anticipate,” said Senate Majority Leader Mitch McConnell, “this tax proposal in the end to be revenue neutral for the government if not a revenue generator.”
A few skeptics worried anyway. Calling debt “the greatest threat to our nation,” Sen. Bob Corker of Tennessee vowed to oppose it “if it looks like to me … that we are adding one penny to the deficit.”
He had good reason for skepticism. Deficits rose after tax cuts under Republican Presidents Ronald Reagan and George W. Bush. Independent economic forecasters, liberal and conservative alike, projected the pattern would repeat.
Ultimately Corker joined fellow Republicans in finding reasons to go along. Having failed to repeal Obamacare, they yearned for a legislative victory.
Some considered tax cuts their highest priority. Others privately welcomed deficits as a prod to shrinking government. Still others resolved their ambivalence by siding with their party.
“There are about as many economists as there are opinions,” said Rep. Tom Cole of Oklahoma. “In the end I’m going to trust the people who are philosophically aligned with me.”
In June, six months after the tax cut passed, Cohn’s successor, Larry Kudlow, claimed the deficit “is coming down rapidly” due to economic growth. Now, the government Trump oversees has demonstrated the opposite.
Even as growth has accelerated, the Treasury reported that the 2018 deficit swelled to $779 billion. That level, the highest in six years, marks a 17 percent increase over 2017.
Federal spending as a share of the economy fell. But revenue fell even more, with corporate tax receipts plummeting 31 percent. The Congressional Budget Office forecasts deficits hitting $981 billion in 2019 and exceeding $1 trillion every year after that.