There are various economic projections related to the tax cut bill and other policies. The projections are created by the US government agencies, Universities, and independent groups.
The differences tend to be whether
* the US federal deficits go up by $1.5 to 2.5 trillion over ten years.
* the GDP increases by 0% or 1% or 1.5% each year
* Federal tax revenue decreases by $1.7 trillion or $1 trillion over ten years
So this has to be measured against fluctuating baseline projections of GDP, tax deficits and tax revenue. Fluctuations and other causes will be used to spin the results but the actual results will combine policy and randomness.
Converting the ten years differences to annual numbers is
* the GDP increases by 0% or 1% or 1.5% each year
* the US federal deficits go up by $150 to 250 billion each year on average for ten years.
* Federal tax revenue decreases by $170 billion to 100 billion each year on average over ten years
GDP growth and unemployment will matter more for determining win or loss for the next 7 years
GDP over 2.9% a year is a clear victory for the Republicans. The US Treasury used that number to justify being able to pay for the tax cuts and has been mocked by their opponents. 2.1% or less GDP growth is a loss. 2.2-2.7% GDP growth is a draw. Many other factors can cause GDP growth to fluctuate but political winning or losing involves taking credit or taking the blame for the policy and randomness.
Overall factors playing out over the next 7 years are that the US has not had a recession for a long time.
The recovery from the devastating 2007-2009 financial crisis has been unusually lengthy. The latest growth stretch has already lasted 100 months, and if the poll predictions come true it would mark the longest economic expansion in more than 150 years. Economists are forecasting another 2 years in the current expansion before a recession hits.
If the strength of the US economy was the sole determination of political success or failure then having average GDP growth for 2018-2020 of 2.8% or higher and no economic recession before 2020 would translate into continued Republican majorities and a second term for Trump. Conversely having a recession and having GDP growth less than 2.1% would translate into losses.
Note: The US and the world could be experiencing an AI and blockchain economic boom for the next several years. This would be lucky for the Republicans if it occurred.
Higher Deficits will harm the long-term growth of the US economy
The US deficits were projected to decrease to $440 billion in 2018 and $530 billion in 2019 and $490 billion in 2020 before the tax cuts.
2018 US federal deficit of $590 billion or less is a win for the Republican tax plan over $690 billion is a loss and in between is a draw.
2019 US federal deficit of $680 billion or less is a win for the Republican tax plan over $780 billion is a loss and in between is a draw.
2020 US federal deficit of $640 billion or less is a win for the Republican tax plan over $740 billion is a loss and in between is a draw.
The US federal tax revenues have been projected to be $3.65 billion in 2018 and $3.8 billion in 2019.
2018 US federal tax revenue of $3.55 billion or more is a win for the Republican tax plan over $3.39 billion is a less is a loss and in between is a draw.
2019 US federation deficit of $3.7 billion or more is a win for the Republican tax plan over $3.63 billion is a less is a loss and in between is a draw.
US Treasury projections
The Treasury Department issued a one-page memo outlining its views on the economic growth prospects of the Senate-passed version of the bill.</a Its conclusion: The tax bill, in combination with the rest of the White House economic agenda, will not only generate enough new revenue to pay for the tax plan but generate an additional $300 billion over a decade.
The debate over the successful US economic impact of tax cuts and policy is if the US economy maintains an average of 2.9+% GDP growth and federal deficits below $500 billion per year. This would be a total success. Currently, US GDP growth forecasts are for 2.5% GDP growth in 2018 and 2019. US GDP growth was revised upwards during 2017 based upon pro-growth policies and deregulation.
As recently as September, economists were dismissing Trump’s 3% growth target. Survey data published by the National Association of Business Economists called for the macro trend to decelerate to 2.3% in 2018.
In modeling the Senate tax plan, the Treasury’s Office of Tax Policy came to a similar conclusion as the nonpartisan Joint Committee on Taxation, the memo said. The JCT found that the bill would lose close to $1.5 trillion over a decade. After accounting for the potential growth effects of the bill’s measures, however, the JCT found it might generate $408 billion in new revenue, reducing the bill’s cost to just over $1 trillion.
But then Treasury took its analysis one step further, layering on a 2.9% annual growth assumption that comes from the White House budget office.
And that 2.9% rate is assumed to come from the Trump administration’s total economic agenda — including tax, regulatory and welfare reform, as well as infrastructure investment.
The US economy has grown at an average rate of 2.6 percent over the past 30 years. GDP growth has been 2.1 percent since 2010 as baby boomer retirements have slowed the influx of people into the job market and worker productivity has lagged.
0.6% to 1.1% additional GDP growth or 2.9% GDP growth ?
Penn Wharton Budget Model’s (PWBM) static and dynamic analysis of the Tax Cuts and Jobs Act (TCJA), reported by the conference committee on December 15, 2017. The TCJA increases debt by between $1.9 trillion to $2.2 trillion over the next decade.
By 2027, under our standard economic assumptions, we project that GDP is between 0.6 percent and 1.1 percent larger, relative to no tax changes. Debt increases between $1.9 trillion and $2.2 trillion, inclusive of economic growth.
By 2040, we project that GDP is between 0.7 percent and 1.6 percent larger under our baseline assumptions, and debt increases by $2.2 to $3.5 trillion.
Brian Wang is a Futurist Thought Leader and a popular Science blogger with 1 million readers per month. His blog Nextbigfuture.com is ranked #1 Science News Blog. It covers many disruptive technology and trends including Space, Robotics, Artificial Intelligence, Medicine, Anti-aging Biotechnology, and Nanotechnology.
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