House Republicans approved a tax cut bill that faces a bleak future in the Senate and both chamber pushed off any real debate on spending until December in order to avert a government shutdown.
On Friday, the House approved what Republicans call Tax Cut 2.0, the centerpiece of which is to make the individual tax cuts permanent from last year’s tax cut legislation. At the same time, the House approved a temporary spending bill of more than $700 billion to cover government operations until December 7.
Spending remains largely at the same levels established in February when Republicans beefed up military spending and Democrats got their way on discretionary spending. President Trump did get $1.6 billion for his border wall but that’s just a fraction of what he wanted.
On taxes, making those cuts permanent for families won’t have the same impact as the corporate tax reductions, but experts still believe families will appreciate the certainty of stable rates.
“That changes a lot of calculations as you’re budgeting for the future as an individual of what those tax rates are going to be. As we know from previous experiences with temporary tax cuts like the Bush tax cuts, you don’t change your spending habits or your savings habits as much as you would had those tax cuts been permanent,” said Vance Ginn, senior economist at the Texas Public Policy Foundation.
However, on spending, Ginn gives Congress a thumbs down.
“We must get control of spending. As Reagan used to say, wee don’t have a revenue problem. We have a spending problem. I think that’s the same situation here,” said Ginn.
“Passing a bill that’s just going to punt the ball for a couple more months down the road and then have to go through this again, is not an appropriate form of budgeting,” said Ginn.
This year alone, the U.S. is piling up $800 billion in deficits, which in turn grows our massive debt.
“If you have a debt to (Gross Domestic Product) ratio, meaning debt as a measure of economic activity above 80 percent, you have slower economic growth. We are currently above 100 percent of debt to GDP.
“That is telling me that we are having slower economic growth than we otherwise would have even as the economy looks to be doing pretty well right now. Just think about how much more growth and prosperity we could have overall,” said Ginn.
Listen here for the full conversation, including Ginn’s suggestions for reining in federal spending.