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November 22, 2016

It's Not Just Tax Cuts, We Need Spending Cuts

 

As a candidate talking about his tax reform package, Donald Trump said he would also cut federal spending. But there were never any specifics offered, though very few candidates ever do. 

Now that the election’s over and the president-elect is developing his policy agenda, it’s time to get specific about cutting government spending. 

Trump’s economic team disputes some of the doomsday projections of lost government revenue from the Trump tax reform plan, but they concede that even considering dynamic scoring revenue will likely decline. For example, the Tax Foundation’s dynamic scoring projection still projects a revenue decline of between $2.9 trillion and $3.6 trillion over 10 years. 

That possibility has the Left decrying the impact that revenue loss would have on federal debt—though they never complained as federal debt nearly doubled under President Obama. 

If Congress passes the Trump tax reform—and it should—it will need to reduce federal spending also, and the size of government would be a good place to start. 

A survey conducted by the Government Business Council before the election reported that 27 percent of federal employees would “definitely” or might consider quitting their jobs if Trump won. Here’s hoping they have the courage of their convictions. 

Trump has suggested he might eliminate the Department of Education—something Ronald Reagan campaigned on but never did. That would also be a good move. 

Repealing Obamacare will save billions of dollars, though a Republican replacement plan will likely clawback some of those savings. And the Department of Health and Human Services could downsize, after bulking up to administer Obamacare. 

And here’s a possibility: A Trump administration could bring business principles to federal projects and government spending. 

Trump’s strongest argument for electing him was that as a businessman he could get more accomplished with less money. The bureaucracy is going to fight him on that, but if he is successful, it could dramatically reduce federal spending. 

With the right people and policies driving the process, the federal government might be able to: 

  • Spend less while still building up the military; 

  • Spend less on Medicare and Medicaid and get better care; and 

  • Get people off the welfare rolls and on the tax rolls. 

Targeting government waste is a perennial target because there’s a lot of money there. President-elect Trump believes his tax cuts could jumpstart the economy, and we agree. But it will need to be combined with significant government spending cuts if we are going limit the impact on the federal debt.


 

  • TaxBytes-New

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