Trump’s proposals would increase the deficit by $5.3 trillion over the next 10 years

For decades, the Republican Party has championed itself as the party of fiscal responsibility, advocating for balanced budgets and prudent government spending, but now the GOP is the greatest contributor to a massive national debt.

Since 1981, patterns of deficit spending and overly aggressive tax cuts that primarily benefit the rich have increasingly made the Republican Party’s assertions appear laughable.

The GOP’s Tax Cuts and Jobs Act (TCJA) lowered rates for individuals of nearly all income levels, though it cut taxes most for the highest earners, and slashed the maximum corporate tax rate from 35 percent to 21 percent.

The individual portions of that law expire in 2025, but Republicans who wrote the law made the business tax cuts permanent and they are salivating over the prospect of shifting more costs of government from businesses to people.

Republicans have criticized Democrats for expanding the federal deficit. However, under recent Republican administrations, the deficit has ballooned dramatically.

An analysis of former President Donald Trump’s policy proposals has projected that, excluding tariffs and discretionary spending cuts, the Republicans would increase the federal deficit by $5.3 trillion over the next ten years.

One of the most substantial contributors to the deficit increase would be the permanent extension of the tax cuts introduced in the Tax Cuts and Jobs Act (TCJA) of 2017.

This includes lower income tax rates, modifications to the child tax credit, adjustments to income tax exemptions and deductions, and a doubling of the estate tax exemption. According to the Congressional Budget Office (CBO) and rescaled for the current economic outlook, these extensions alone would add approximately $3.0 trillion to the deficit over the 2025-2034 period.

In addition, Trump’s proposal to further reduce the corporate tax rate from 21 percent to 15 percent could add another $1.1 trillion to the deficit. If the rate were reduced to 18 percent, the deficit would increase by an estimated $628 billion.

The federal deficit saw substantial increases during Trump’s tenure. Key factors included the Tax Cuts and Jobs Act (TCJA) of 2017, which slashed corporate tax rates and made significant cuts to individual income taxes.

These tax cuts were not offset by equivalent spending cuts or new revenue sources, leading to a sharp rise in the deficit. For instance, the 2018 fiscal year saw the deficit grow to nearly $779 billion, a 17% increase from 2017, and it surpassed $1 trillion in 2020 even before the COVID-19 pandemic exacerbated the situation.

Republicans have long wanted to cut social insurance programs like Social Security and Medicare to ensure their long-term viability. However, despite controlling the presidency and both houses of Congress in the early years of the Trump administration, no significant reforms were enacted.

Instead, they focused on short-term tax cuts and unfunded government handouts rather than sustainable fiscal planning.

While Republican leaders continue to decry deficits when Democrats are in power, their own policies frequently contribute to fiscal imbalances. This inconsistency undermines their credibility on fiscal issues.

Repeal of the Inflation Reduction Act (IRA)

Trump has proposed repealing several key provisions of the IRA. The repeal of tax enforcement and corporate tax reforms would notably affect the deficit:

• Repealing IRS tax enforcement and technology modernization provisions would save $70 billion but result in an estimated $540 billion in lost revenue, netting a $470 billion increase in the deficit.
• Repealing the 15 percent minimum tax on corporate book income would add $272 billion to the deficit.
• Repealing the 1 percent excise tax on stock buybacks would add $94 billion to the deficit.

Repealing the IRA’s prescription drug provisions, which include Medicare drug price negotiations and rebates for price increases above inflation, would increase the deficit by an estimated $340 billion over the decade.

Repeal of Clean Energy Funding

Trump’s proposal to repeal the IRA’s clean energy provisions would reduce the deficit by $800 billion over ten years, primarily through the elimination of tax credits and federal spending programs aimed at supporting clean energy initiatives.

Repeal of the Affordable Care Act (ACA)

The full repeal of the ACA would add an estimated $292 billion to the deficit. This estimate is derived from the average impact of recent House and Senate repeal bills, adjusted for current healthcare expenditure trends.

Impact of Tariffs and Spending Cuts

Trump has also proposed a universal 10 percent tariff on imported goods. While such tariffs could generate substantial revenue, previous experiences, such as the tariffs on China implemented in 2018, suggest that much of this revenue might be used to offset payments to domestic groups affected by counter-tariffs, reducing the net fiscal benefit.

To mitigate the deficit impact, Trump would likely propose deep cuts to non-defense discretionary spending. However, historical patterns from his 2017-2021 budgets indicate that non-defense discretionary spending actually increased each year, casting doubt on the feasibility of these cuts.

Conclusion

Despite promises of self-financing tax cuts, federal revenue as a percentage of GDP did not increase sufficiently to cover the cost. Instead, these cuts primarily benefited the wealthy and corporations, contributing to income inequality without spurring the broad economic growth required to balance the budget.

By prioritizing tax cuts for the wealthy and increasing spending without adequate revenue measures, Republicans have contributed significantly to the national debt. This disconnect between rhetoric and reality has made the party’s stance on fiscal prudence increasingly difficult to take seriously, casting doubt on their commitment to genuine fiscal responsibility.

Under Presidents Reagan, Bush I, Bush II, and Trump, both defense and non-defense discretionary spending increased.

While Republicans talk about a strong military, defense spending increases were not accompanied by cuts elsewhere and the Pentagon lost track of trillions of dollars.

Non-defense discretionary spending increased, too, contrary to Republican pledges to shrink the federal government.

The pandemic necessitated emergency spending, but even before the crisis, Republican fiscal policies set the stage for larger deficits. The emergency relief measures highlighted the lack of thought and the absence of a sustainable fiscal strategy.

Trump and his advisors want to reduce the corporate tax rate from 21 percent to 15 percent, and Project 2025 proposed reducing it to 18 percent.

While tariffs and discretionary spending cuts might alter the final deficit impact, excluding these measures, Trump’s proposed policies would significantly increase the federal deficit by $5.3 trillion over the next decade.

The analysis underscores the need for a detailed and comprehensive fiscal strategy to address these potential increases in the context of broader economic and budgetary goals.