The Trump administration is sending confusing signals on their tax plan and the federal deficit

Mick Mulvaney

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Mick Mulvaney
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Carlos Barria/Reuters

During President Barack Obama’s administration, Republicans built a leg of their opposition to his policies by ripping their potential effects on the federal deficit.

Now in President Donald Trump’s nascent administration, most, if not all, members of the party favor overhauling the federal tax code.

Therein lies a potential problem: Cutting taxes would increase the deficit, unless it is offset by reductions in deductions. But the way Republicans have laid out their tax proposal, it looks like the deficit could take a potentially big hit.

Squaring the issue is a central concern for the Trump administration in selling their plan to overhaul the tax code. As it stands, the unified framework released by President Donald Trump and Republican leaders would increase the federal debt load by between $2 trillion an $2.5 trillion over the next 10 years, according to multiple studies.

Already, some GOP members of Congress have expressed concern about the effects of the tax package on the deficit and federal debt (most notably Sen. Bob Corker of Tennessee).

But top Trump administration officials have wavered over whether the deficit will factor into their calculus on pushing the tax plan.

Office of Management and Budget Director Mick Mulvaney argued earlier this week on CNN’s “State of the Union” that increasing the federal deficit is necessary to unlocked the desired economic growth the Trump administration has targeted.

“If we simply look at this as being deficit-neutral, you’re never going to get the type of tax reform and tax reductions that you need to get to sustain 3% economic growth,” Mulvaney told CNN.

That represents a shift in public thinking from Mulvaney, who as a member of Congress was one of the most stringent budget hawks. It also stands in contrast to suggestions from other members of the administration, such as Treasury Secretary Steven Mnuchin.

“Not only will this tax plan pay for itself, but it will pay down debt,” Mnuchin said at a conference in Washington on September 28.

The Trump administration’s proposed budget contained similar assumptions that the tax plan would reduce the deficit and overall debt load, something that was widely contradicted by economists.

While both Mnuchin and Mulvaney are arguing that the Trump tax plan would spur economic growth, it appears they disagree on the extent that would affect the federal government’s fiscal situation.