Fact Check: Tax cuts can lead to increased deficits if not offset by spending cuts.

Fact Check: "Tax cuts can lead to increased deficits if not offset by spending cuts."

What We Know

The assertion that tax cuts can lead to increased deficits if not offset by spending cuts is supported by various studies and analyses. For instance, a comprehensive review by William G. Gale and Peter R. Orszag indicates that tax cuts not financed by corresponding spending reductions typically result in increased federal borrowing, which can adversely affect long-term economic growth. The authors emphasize that without immediate cuts in unproductive government spending, tax cuts will likely increase the federal budget deficit.

Furthermore, the Congressional Research Service notes that the tax cuts enacted under the Tax Cuts and Jobs Act (TCJA) are projected to increase the deficit significantly, necessitating increased government borrowing that could crowd out private investment. This aligns with findings from the Tax Policy Center, which estimates that the TCJA will add between $1 to $2 trillion to the federal debt due to the resultant deficits.

Analysis

The evidence supporting the claim is robust, primarily drawn from reputable economic analyses and reports. The study by Gale and Orszag is particularly credible as it comes from established economists associated with the Urban-Brookings Tax Policy Center, which is known for its rigorous research on tax policy. Their conclusion that tax cuts without spending offsets lead to increased deficits is echoed by the Congressional Research Service, which provides a nonpartisan assessment of the economic implications of tax policy changes.

In contrast, some sources, such as the White House Council of Economic Advisers, argue that tax cuts can stimulate economic growth and ultimately reduce deficits. However, this perspective may be seen as biased, given its alignment with the political agenda of the administration at the time. The claims made by the Council do not fully account for the long-term implications of increased borrowing and the potential for crowding out private investment, as highlighted by the Associated Press and other independent analyses.

The conflicting views on the impact of tax cuts on deficits underscore the complexity of economic forecasting. While proponents of tax cuts argue for their potential to spur growth, the consensus among many economists is that without corresponding spending cuts, tax cuts are likely to exacerbate budget deficits.

Conclusion

The claim that "tax cuts can lead to increased deficits if not offset by spending cuts" is True. The evidence presented by multiple credible sources indicates that tax cuts, when not accompanied by spending reductions, generally result in increased federal borrowing and deficits. This conclusion is supported by rigorous economic analysis and aligns with historical data on the effects of tax policy changes.