The same lawmakers who exploded the federal deficit by gifting millionaires and billionaires a favorable corporate tax bill are now telling the public that the way to fix the deficit is to shred the social safety net.
On Tuesday, after the Treasury Department released figures showing the federal deficit for Fiscal Year 2018 rose 17 percent to reach $779 billion, Sen. Majority Leader Mitch McConnell (R-KY) was interviewed by Bloomberg. He was asked about the growing debt and deficit.
McConnell said it was “very disturbing,” and driven by Medicare, Social Security, and Medicaid spending. The solution to cutting the deficit, he concluded, is making “entitlement changes.”
Asked about the federal debt reaching $21 trillion and the deficit projected to top $1 trillion next year, McConnell did not mention tax cuts at all.
“It’s very disturbing, and it’s driven by the three big entitlement programs that are very popular,” he said. “Medicare, Social Security, and Medicaid. That’s 70 percent of what we spend every year. The subject we were just discussing, the funding of the government, is about 30 percent of what we spend. There’s been a bipartisan reluctance to tackle entitlement changes because of the popularity of those programs. Hopefully at some point here, we’ll get serious about this. We haven’t been yet.”
This is not the first time a Republican congressional leader has admitted to his party’s desire to slash Medicare and Social Security to pay for their tax cuts. At the end of 2017, House Speaker Paul Ryan (R-WI) said, “next year we’re going to have to get back at entitlement reform, which is how you tackle the debt and the deficit.” But McConnell’s specific mention of three very popular and incredibly necessary social safety net programs he thinks should be “changed” (or cut), taken with his silence about the role that the tax cuts played in the deficit, is telling.
In fact, according to a report from the Senate Democrats on the Budget Committee, over half of the deficit comes from the Bush and Trump tax cuts — with military and war costs responsible for more than the remaining half.
Including ensuing interest payments, in FY2018:
The Bush tax cuts cost $488 bn
The Trump tax cuts cost $164 bn
The overseas wars cost $127 bn
The base defense increases post 9/11 cost $156 bn
If not for those, the deficit of $779 billion would have been a surplus of $156 bn. pic.twitter.com/PBgcA6aD4g
— Bobby BOO!th Kogan (@BBKogan) October 15, 2018
But the impact of the Trump tax cuts will be long-lasting. McConnell and Ryan shoved their tax bill through their respective chambers and Trump signed it at the end of last year. It was unpopular when it passed, and has only become more so during the intervening 10 months. This has led to an utter collapse of corporate tax revenues — in one year, they dropped $92 billion, a decline of 31 percent. Corporate profits have increased, but those profits have not passed through to worker wages, which have remained essentially flat since the passage of the tax bill.
Any way you slice it, the tax cuts are not working. But that doesn’t change the tune coming from the White House. Trump’s top economic adviser, Larry Kudlow, argued in June that the deficit was “coming down rapidly.” And Trump has completely given up on his multiple promises to balance the budget.
The national debt is projected to hit $25 trillion, according to the administration’s own numbers. Instead of scaling back the tax cuts to address this, the Trump administration and Republicans in Congress have set their sights on making the individual tax cuts permanent, instead of allowing them to expire in 2026 (the corporate tax cuts are already permanent).
Treasury Secretary Steve Mnuchin argued in April 2017 that the tax cut plan would “pay for itself with growth,” but just before the vote on the bill, the conservative-leaning Tax Foundation admitted that the bill would do no such thing. So did the nonpartisan Joint Committee on Taxation.
Mnuchin was still arguing this in April of 2018, before any revenue began to come into his coffers.
What has the Trump administration done to try to address the deficit? In May, it asked Congress to claw back $15 billion in federal spending — heavily targeting the Children’s Health Insurance Program.
Bloomberg also asked McConnell if divided government might make entitlement reform easier. McConnell said, “well, we had that opportunity during the Obama years, and I talked to President Obama about it a number of times. It would have been the perfect time to do it.” He waxed nostalgic about the deal Ronald Reagan and Tip O’Neill cut to raise the Social Security retirement age. “That’s what we had the chance to do during the Obama years because we had divided government for six of his eight years. Unfortunately it was not achieved.”
This elides the fact that congressional Republicans at that time refused to accept any fiscal deal that would include even a penny of additional revenue, even through closing unpopular and costly tax loopholes.
Translating McConnell’s comment about divided government: If they retain their majorities in Congress, Republicans will next year look to cut Medicare, Social Security, and Medicaid from millions of American in order to pay for the corporate tax cuts that only benefit the wealthiest people in the country who don’t rely on a strong social safety net.