Republicans have a solution for their deficit problem: flagrant lies

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If there is one thing that threatens the One Big Beautiful Bill Act, it’s the fact that it blows up the budget deficit. According to the Congressional Budget Office (CBO), it will increase borrowing by a total of $2.4 trillion by 2034, because the $1.3 trillion in cuts to Medicaid, food stamps, and other programs do not come close to canceling out $3.7 trillion in tax cuts for the rich. Just the tax cuts going to the richest 5 percent outstrip the cuts to Medicaid and food stamps by $300 billion. And if you add in interest costs, the total debt the bill rings up is more like $3 trillion.

A loud faction of Republican “deficit hawks” are reportedly unhappy with this, not so much because of the tax cuts, but because the welfare and food aid cuts are not savage enough. But a smaller faction of Senate Republicans—perhaps scenting danger if they vote to throw millions of their own constituents off their health insurance—are wavering on the existing Medicaid cuts.

What to do? The Trump administration has come up with a solution: outrageous, bald-faced lying, with talking points delivered through Fox News. Just claim that the bill will decrease the deficit with a blizzard of preposterous nonsense, and hope that will give congressional Republicans enough of an excuse to vote it through.

One argument here is a straightforward falsehood. Republicans claim that the “mandatory savings” in the bill will cut $1.7 trillion, but as noted above, the Congressional Budget Office found only $1.3 trillion. (What’s a cheeky $400 billion between friends?)

Another argument is tendentious metaphysics. Top White House aid Stephen Miller argued on Fox Business that “Extending and making permanent the 2017 tax cuts does not and cannot add to the deficit.” Hey presto, that $3.7 trillion in new borrowing disappears!

By this logic, anything can be made to not increase the deficit. Just pass it for one year, then claim that making it permanent will have no effect. We can, of course, draw up budget estimates where every current policy is assumed to be permanent, but that’s not how either the CBO estimate or budgetary processes work. The CBO is saying, correctly, that passing this bill will cut tax collection by $3.7 trillion relative to current law.

Amusingly, BBB relies on precisely the opposite trick, gaming the CBO budget window with various tax cuts that are set to expire. For example, “no tax on tips” sunsets after four years, as does the elimination of taxes on overtime pay and a tax benefit for seniors. If those are assumed to be permanent, as Miller advocates—and that is highly likely if Republicans are in charge when they expire—then the true deficit increase will be more like $5 trillion.

Another argument is that this bill is going to supercharge growth to 3 percent, which will bring in $4 trillion in revenue. Republicans have been pulling this particular scam for decades. Ronald Reagan claimed his tax cuts would pay for themselves, according to the “Laffer curve,” a literal napkin sketch economic analysis that made the point that if the taxation rate is at 100 percent or 0 percent, then the government will take in no money, so the revenue maximization rate must be in the middle somewhere. Reagan just assumed that the U.S. was on the right side of the curve, and so dramatically cut taxes on the rich.

In reality, Reagan’s tax cuts—and additional spending on defense in the context of high interest rates, just like what Trump is currently proposing—blew up the deficit, but that didn’t stop Presidents George W. Bush and Trump from making the exact same claim about their tax cuts for the rich, which both blew up the deficit even more. (By the way, actual economists have estimated the revenue-maximizing top marginal rate to be something like 70 percent—about where it was before Reagan’s cuts.)

Anyway, as economist Jared Bernstein explains, BBB is definitely not going to create huge growth. “No tax cut bill has ever generated anything like that amount of growth, and even studies that find the [Tax Cuts and Jobs Act of Trump’s first term] did boost investment are clear that it came nowhere near to offsetting the full cost of its deficit financing,” he writes. The math is also wrong: If we do assume ten years of 3 percent growth—a preposterous notion for a one-off tax change—that still only sums to $3 trillion. What’s more, Miller’s argument directly contradicts this one. If there will be no effect on borrowing because all we are doing is preserving the status quo, then there also will be no effect on growth.

This failure to dispel the reality that Trump’s tax cuts will blow up the deficit has compelled the Republicans to devise a third argument: that Trump’s tariffs will bring in $2.8 trillion. This is likely an overestimate, if for no reason other than Trump has shown little appetite to leave them up for more than a few days here and a few days there. It is true that current tariff collections have tripled to about $24 billion a month. This will directly work against any stimulatory effect of tax cuts, however, and much more powerfully—hence reducing tax revenues even more.