Fact Checker: Larry Kudlow’s claim that 'we have virtually paid for' Trump’s tax cut
By Salvador Rizzo Salvador Rizzo Reporter for The Fact Checker Email Bio Follow March 14 at 3:00 AM Judy Woodruff, PBS: “You are hanging a lot of this on these tax cuts, but we now have a number of experts who are watching those tax receipt numbers that come in regularly, and they are saying that they do not add up to what is anything like the kind of growth that the administration had projected off these tax cuts.
CBO Director Keith Hall factored in several big developments in this analysis. One was the estimated effect of the tax cuts Trump signed in December 2017. Another was “changes to federal spending resulting from legislation enacted early in 2018.” The biggest change came from “revised historical data and changes in the economic outlook ... before accounting for the effects of the tax act.”
On Feb. 28, Hall gave an updated economic forecast. Kudlow accurately noted that CBO analysts revised upward by $7 trillion their estimate for nominal GDP for the 10-year period from 2017 to 2027. When Kudlow mentions the added $7 trillion in GDP covering 80 percent of the tax cuts’ cost, and cites the CBO analysis, he misses the point and ends up in deceptive territory. The question is really whether the tax cuts generate more revenue than they remove from the equation. If you have economic growth from other sources and you’re using it to cover the cost of the tax cut, you’re forgoing other uses for that money.
So, you take the increased economic activity , the interest on the borrowed funds and the lost revenue . Then you do the math. Looking solely at the tax cut, the CBO says the increased economic activity offsets 20 percent of the growth in the deficit over 10 years. Overall, the tax cut would increase the projected deficit by more than $1.8 trillion through 2028, the CBO said.
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