Here, at CSM, there is a "business as usual" estimate that paints a bad enough picture if things stay as they are:
Before beginning the Great Fiscal Policy Debate of 2017, it helps to know where we are starting from, and what would happen if government stayed on its present course. The Congressional Budget Office measures that baseline by assuming that current law remains in place for decades to come. Gale and Auerbach project the fiscal outlook through a different lens, what they call a “business-as-usual” baseline.
They assume that temporary tax cuts continue indefinitely and that all discretionary spending will increase with the rate of inflation, despite the budget caps that Congress first enacted in 2011 but delayed in 2013 and 2015. They also assume that spending for Medicare and Social Security continues at promised levels even after their trust funds run out of money. They assume the economy continues at close to full-employment for the entire period.
Based on these assumptions, the deficit would more than double from 2.9 percent of Gross Domestic Product to 6.1 percent by 2027. The ratio of debt to GDP, now 77 percent (twice the average of the past half-century) would approach 100 percent in a decade and top 120 percent in two decades.Those assumptions means this:
And there, of course, lies the problem: If spending rises to 24.1 percent of GDP by 2027 but taxes increase to only 18 percent, that leaves a troubling fiscal gap. In 2027, the annual deficit under their assumptions would nearly triple in nominal terms to $1.7 trillion and more than double as a share of GDP.And the final point:
That’s the environment in which President Trump has proposed a tax cut that would add $7.2 trillion to the national debt over 10 years, according to Tax Policy Center estimates. The outlook developed by Bill and Alan can provide a road map to help understand the consequences of such a fiscal policy.At Bloomberg, a prediction is made that Republicans will simply let the deficit grow:
What scares deficit hawks like Maya MacGuineas, who runs the nonpartisan Committee for a Responsible Federal Budget, is the prospect of a deal to give both Trump and Capitol Hill Republicans whatever they want. In that scenario, House Speaker Paul Ryan would get the huge tax cut he has always craved, with most benefits going to the wealthy, and would agree to take politically unpopular cutbacks in Medicare and Social Security off the table, as candidate Trump promised. Trump would get the money to bulk up the military and build lots of roads, bridges and airports.
To make Ryan's tax cuts permanent without touching the big entitlement programs that drive deficits, Republicans would have to take the axe to other domestic spending.
Robert Greenstein, president of the liberal Center on Budget and Policy Priorities, spearheads opposition to reducing spending on the poor and working class. But he has substantive credibility and works with some Republicans. Last week he warned there are "mounting signs" that Republicans are planning "harsher" cuts than they have offered in recent years, slashing as much as $8 trillion of non-defense spending over a decade.
That would take domestic spending, exclusive of Social Security and Medicare, to about half the average under President Ronald Reagan. The impact would fall heavily on the poor.And what about the mooted reform of a wide ranging border tax? Well, Fox Business, of all places, reprints an article that says "it could be a $23.2 trillion headache".
That would probably antagonize too many voters, though, including some who supported Republicans in 2016. The way to avoid that political trap while giving Ryan and Trump what they want? Let the deficit grow.