According to the Congressional Budget Office (CBO), President Donald Trump’s “big, beautiful bill” would cut taxes by $3.7 trillion while raising deficits by $2.4 trillion over a decade.
The CBO makes projections based on information provided by Congress when considering legislation that includes spending and taxes. But is it always right?
Not according to Larry Kudlow. During his show on Thursday, Kudlow outlined how the Congressional Budget Office missed projections related to the 2017 Tax Cut and Jobs Act, Trump’s signature bill in his first term.
“The current cost of the 2017 tax cuts should be zero. Why should they be zero? Because they actually produced more revenues, $2.3 trillion more revenues than CBO estimated over the past seven years,” Kudlow said.
TRUMP SPENDING BILL WOULD CUT TAXES BY $3.7T, ADD $2.4T TO DEFICIT, CBO SAYS
He added, “So current policy shouldn’t be scored. The deficit impact should be neutral. Now, I believe there will be a growth dividend which may be debatable, but if I plug in 3% growth instead of the CBO’s lowball 1.8%, then I actually get $4 trillion worth of additional revenues for purposes of deficit reduction.”
Kudlow continued, offering up some caveats, but noting the CBO’s estimates rely on GDP of 1.8%, which is a low figure.
“You can play with these numbers interactively. If you lower the growth dividend, let’s say to 2.6%, you’ll probably lose up to two trillion in revenues and deficit reduction,” he said. “Or if you want to use CBO’s dreary 1.8% growth, you’d probably lose the whole four trillion in additional revenues and deposit reduction.”
Kudlow noted, “You’d still come out ahead on the deficit reduction scorecard, but just not as much. But importantly, the GOP will prevent a $4 trillion tax hike, which would be catastrophic for the economy.”
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According to Kudlow, it is not the only time the CBO has missed estimates. For example, with the Affordable Care Act, the CBO initially estimated up to 25 million people would sign up for healthcare on the Obamacare exchanges by 2017. The actual figure in 2017 was only 12 million, a significant miss of 13 million people.
Also noted were the potential savings from the 2022 Inflation Reduction Act. The CBO initially estimated billions in deficit reduction, but the latest estimates show it could add $428 billion to the deficit. The CBO made such projections assuming that the more significant tax cuts in the 2017 package would expire at the end of 2025.
Whether the House version of ‘A Big Beautiful Bill’ passes and is ultimately signed is up in the air. In the Senate, two Republicans, Rand Paul, R-Ky., and Ron Johnson, R-Wis., have indicated dissatisfaction with the bill due to a lack of deficit reduction.
Republicans want to pass the bill in the Senate using reconciliation, which only requires a simple majority of 51 votes instead of having to reach a cloture vote of 60. With a 53-47 majority, Republicans cannot risk more than two defections, or the bill will be defeated.
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