Karoline Leavitt, the press secretary for President Donald Trump, asserted in a broad statement on Monday that the president’s tax measure won’t increase the country’s already large budget deficit.
Leavitt said that the plan “does not add to the deficit” and that it contains the biggest savings in American history at a briefing on Monday. “In fact … this bill will save $1.6 trillion,” she stated.
What the figures indicate
Regarding the spending reductions in the law, the $1.6 trillion figure is correct. It disregards the far larger tax cuts, which are the primary driver of the bill’s profitability.
The House reconciliation bill would actually raise primary deficits by $3.2 trillion over the next ten years, according to a Penn Wharton Budget Model analysis released Monday. This is before interest costs on the debt are taken into consideration, and that is after the $1.6 trillion in spending cuts mentioned by Leavitt.
MarketWatch was informed by a senior White House official that the Penn Wharton model is erroneous and that the tax cuts will increase growth sufficiently to cover their costs.
The continuation of the 2017 tax cuts, new deductions for overtime pay and auto loan interest, and an increase in the cap for state and local tax deductions are the main causes of deficits.
Additionally, the bill contains changes to food stamps and Medicaid, which would somewhat offset the costs. All things considered, the proposal would generally harm Americans with lower incomes and help those with higher incomes.
The Penn Wharton model estimates that the highest 10% of households would enjoy almost two-thirds of the bill’s total benefits, while the average household in the bottom 20% of the U.S. income distribution would lose over $1,000 annually.
As Republican legislators look for compromises on important topics, such as the extent of Medicaid cuts and the SALT deduction, Trump traveled to Capitol Hill Tuesday morning to address the tax plan negotiations.
Also read: Trump complains that removing the SALT cap is a favor to Democratic governors
