In a concession to economic reality, Vice President Mike Pence on Sunday admitted that the tax plan proposed by the Trump administration last week would increase the federal deficit. But he insisted that the proposal, which economists say would deliver a windfall to the wealthy, would eventually pay for itself through increased economic growth.
In an appearance on Meet the Press, Pence was asked multiple times by host Chuck Todd how the administration planned to pay for a proposal that would slash personal and corporate tax rates with few offsetting measures to maintain federal revenue levels. Wouldn’t the plan increase the deficit? Todd asked.
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“Well maybe in the short term,” Pence finally conceded. “But the truth is if we don't get this economy growing at three percent or more as the President believes we can, we're never gonna meet the obligations that we've made today.”
The vice president laid out the administration’s case this way:
“We have nearly a 20 trillion dollar debt -- doubled under the last administration,” he said. “It didn't just double because of excessive government spending, it doubled because of a struggling American economy. We just got the numbers, 1.6% - the strongest economy on Earth growing at less than two percent, and less than one percent in the first quarter. Look, all those statistics and talking with everyday Americans and job creators across this country attest to fact that American people are crying out for tax relief.
“We have one of the highest corporate tax rates in the world, the President's gonna drive to lower that to 15 percent, to make businesses large and small more competitive, and we're gonna lower tax rate to three marginal rates for every American unleash the bound up energy of the American economy.”
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The trouble with the administration’s position, though, is that with a few exceptions economists across the ideological spectrum have concluded that the economic benefit of tax cuts does not offset their fiscal cost.
Economists are also very dubious when it comes to claims from the Trump White House that the economic growth rate can be pushed up above three percent per year, with or without tax cuts. The World Bank, for example, projects US growth rates to be below two percent for the next several years. With the economy near full employment and productivity growth unlikely to surge, the general assessment among economists is that growth above three percent is probably out of reach in the near term.