Richard Rubin thinks he has an approach to Republicans’ desire to cut taxes:
To pass a bill without Democrats, GOP lawmakers seek agreement on the deficit number
That’s the subheadline for his article. He then opens his piece with this:
As Republicans prepare the party-line tax bill at the core of their 2025 agenda, the key to everything is, simply, “The Number.”
The Number is the maximum budget deficit increase that Republicans are willing to tolerate as they extend tax cuts scheduled to expire after 2025 and advance the rest of President-elect Donald Trump’s plans. To unlock the gate to the legislative fast track that lets them sidestep Democratic objections, Republicans must agree, with virtually no defections, on The Number.
But that’s only part of the matter, and as long as Republicans—either party, come to that—insist on treating taxes in isolation, they’ll continue to fail. The plain fact is that Republicans don’t have to agree on any deficit Number; what they need to agree on instead is a Number that represents any value in the interval from zero to budget surplus.
That, of course, also would require them to agree on spending cuts that bring that overall spending down to within the expected (dynamically projected) revenues realized from the tax cuts.
There are two ways those revenues will grow on net from the from this sort of budget move. One is the well-known increase in overall economic activity that results simply from tax rate cuts. These leave more money in the hands of private economy players—individuals, households, and the businesses they own and operate. It’s been repeatedly demonstrated that those players allocate their spending far more efficiently than anything a government can achieve.
The other way revenues increase, though, is less frequently discussed, even as it’s closely related to tax cuts. This is that, with less government spending, there is less competition for the resources—labor, raw materials, finished and semi-finished products—that private enterprises need for their own operation. With that resource competition from Government greatly reduced, the prices for those resources come down, and private businesses can more easily and cheaply acquire what they need. Private enterprise competition then increases and overall economic activity increases, overlaying the increase from simply reducing taxes, and a positive feedback loop develops among increasing production, lowering prices, increasing private demand, increasing employment, and increasing innovation. And net increasing revenues to Government.
Those two outcomes achieve one other item of critical economic, and political, and security importance. It provides an opportunity to commit those budget surpluses to paying down our national debt.
Of course, the Progressive-Democratic Party is going to quibble over any spending cut and tax cut, all the while objecting to either altogether, so to get these done even temporarily, Republicans will have to do them through legislative reconciliation.
That, in turn—both the taxing and the spending reductions—will require the Republicans’ Chaos Caucus to leave off their ego-driven their-way-or-nothing-at-all obstructionism and agree to compromises that move things in their direction, even if not everything all at once.
And get Republicans like Senator James Lankford (R, OK) to shape up or at least stay out of the way. According to him:
We’re not going to have something that’s going to have zero deficit impact. That’s not going to happen[.]
On that score, the Chaos Caucus is right. There need to be spending cuts to achieve outright deficit elimination and actual surplus.