From our Budget Breakdown series highlighting problems in fiscal policy to inform the 2025 tax and budget debate.
Republicans have spent the last four years decrying deficits during the presidency of Joe Biden and pledged to start bringing those deficits down when they took control of Congress. But those promises proved hollow when the House and Senate Budget Committees both advanced competing budget resolutions this week. Although they differed greatly in their details, both were designed to pave the way for Republicans to pass budget-busting policies on a party-line basis, the biggest of which would be an extension and possible expansion of the Tax Cuts and Jobs Act (TCJA) they passed in 2017.
The budget resolution passed by the House Budget Committee on Thursday would give the Ways & Means Committee the ability to spend $4.5 trillion on tax cuts over 10 years in a filibuster-proof reconciliation bill. It would also give other committees the ability to increase spending by another $300 billion. But the resolution only calls on other committees to identify $2 trillion of offsetting spending cuts, meaning the Republican reconciliation bill is likely to add more than $3 trillion to the national debt over the next decade after including the cost of interest. If passed, this reconciliation bill would add more to deficits than any other bill passed through the filibuster-proof reconciliation process in history.
Supporters of the House budget resolution tried to deflect from their fiscal hypocrisy by claiming that economic growth stemming from tax cuts would generate up to $3 trillion in additional revenue. House Budget Chair Jodey Arrington even went so far as to claim that these savings made their resolution effectively a “balanced budget” in yesterday’s markup. But these figures are farcical: even the most ideologically sympathetic groups find that less than one-seventh of TCJA’s cost could be offset by economic growth. In fact, the official scorekeepers at the nonpartisan Congressional Budget Office estimate that extending TCJA’s non-business tax cuts would actually reduce economic growth and lose additional revenue.
The Senate GOP’s budget resolution was seemingly more measured, calling for “only” $342 billion in new spending on defense, immigration enforcement, and energy. However, while Senate Republicans claim that this spending will be fully paid for, the resolution is light on details and does not specify from which committee(s) offsets will come. Moreover, Republican senators have made clear that, should their budget be adopted, it would only be the first of two. A second resolution would be used to clear a path for a separate tax cut bill, which is likely to be even more fiscally irresponsible than the one proposed by House Republicans.
With federal deficits already hovering near $2 trillion for several years in a row, it is fiscally irresponsible to continue piling on debt for unpaid-for tax cuts. As we saw during the Biden administration, unchecked deficits can exacerbate inflation and raise costs for American households. It was this very bout of inflation that helped propel Republicans to victory this past November. If they successfully implement either the House’s or the Senate’s reconciliation instructions, Republicans will be solely responsible for any price increases it might cause, and would completely abdicate any pretense of being the party of fiscal responsibility.
U.S. inflation rose 0.5% in January — the fastest monthly increase since August 2023 — and was driven by higher costs in groceries, gasoline, and housing. Several components of Trump’s economic agenda, including tariffs and deficit-increasing tax cuts, are likely to put further upward pressure on inflation over the coming months.
