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- The House passed the Senate budget allowing $1.5 trillion in lost revenue. Republicans say economic growth sparked by tax cuts will pay for much of that. Deficit hawks are irked by the lost revenue but are still on board pending a dynamic score of the forthcoming tax plan.
WASHINGTON – A key figure in Republicans’ forthcoming effort to overhaul the tax code could spell bad news for the economy – expanding the national debt further even if the economy begins to grow at a faster rate.
The newly passed budget allows for $1.5 trillion in lost revenue, which the US could be forced to borrow on top of an additional $10 trillion being borrowed over the next decade. That could become worrisome for Republicans in the future, forcing them to make substantial spending cuts to entitlements like Medicare and Social Security benefits.
The budget narrowly passed the House on Thursday by a 216-212 vote, with five lawmakers not voting and 20 Republicans rejecting it. While the bulk of Republican “no” votes were from lawmakers demanding protections for the state and local tax deduction, the substantial figure of $1.5 trillion has frustrated deficit hawks on Capitol Hill.
“It is a little frustrating that the Senate at the same time stripped out three areas that we thought we could help with the pay-fors,” said Rep. Mark Walker, who chairs the Republican Study Committee. “One was the mandatory reforms of $200 billion, obviously it’s still a vehicle to repeal and replace Obamacare, but also one of the things was any kind of consideration for a balanced-budget amendment. So when they stripped out all of that and then add the $1.5 [trillion] it is a tough pill for many of us to swallow.”
Rep. Richard Neal, of Massachusetts, the top Democratic tax writer in Congress, told Business Insider the $1.5 trillion to be borrowed would ultimately become well over $2 trillion as a result of interest. He said the growth Republicans say would pay off the $1.5 trillion was a farce.
“There is no school of thought – left, right, or center – in the economic world that will guarantee that outcome,” Neal said. “And I think, even when you hear from people who are respected, respected economists and academics, they say that at best it’ll be tiny if anything.”
Rep. Mark Meadows, the North Carolina Republican who chairs the ultraconservative House Freedom Caucus, told Business Insider that the Republican plan was the most conservative option in contrast to anything Democrats want.
“We’re gonna use the $1.5 trillion,” he said. “We’re gonna dynamically score it so it’ll be more than $1.5 trillion on what we do in terms of using it for tax cuts.”
But the massive gap between lost revenue and economic growth Republicans say will pay for the tax cuts is still being worked out. Exactly which additional spending cuts could come with it are still unclear, according to Rep. David Schweikert of Arizona, a member of the House Financial Services Committee.
“We’re still moving levers,” Schweikert said. “But we’ve also spent a couple of years bathing in these things. So everyone sort of knows the issues – now it’s sort of the adjustments of what makes it work.”