Trump Team Slams CBO Over Tax Bill Economic Projections
Trump-GOP tax legislation confronts skepticism due to reduced GDP projection estimates by the White House.
In a heated exchange, the Trump administration is locking horns with the Congressional Budget Office (CBO) over its projections for the “One Big, Beautiful Bill.”
According to Treasury Department counselor Joe Lavorgna, CBO's analysis massively underestimates the economic upsurge the tax bill would fuel, leading to exaggerated budget deficits.
The Republican tax-cut and spending reform package, scrutinized by the CBO, is estimated to increase budget deficits by approximately $2.4 trillion over a decade on a static basis. This projection factors in GDP growth of a mere 1.8% over the ten-year period, a number that Lavorgna labels incredibly low.
However, CBO's dynamic score, factoring in macroeconomic effects, projects revenues boosted by additional economic activity totalling around $124 billion. Yet, it also takes into account higher interest costs, leading to deficits that are $356 billion wider over the same period.
"The problem here lies in CBO's overly pessimistic GDP growth forecast—they assume a 1.8% growth rate, something unseen in a decade, even during the Obama administration," Lavorgna said during an interview with FOX Business. "This assumption leads to lower projected revenues and, thus, larger deficits than reality will undoubtedly show."
CBO Estimates Show Deficits of $2.8 Trillion Under the Proposed Bill
Lavorgna explained that the legislation would energize economic growth by triggering corporate investment and employment, leading to significant gains in productivity, wages, and overall GDP. This, he claims, would ramp up the economy's pace, providing more goods and services at lower prices—a trend observed under the Trump administration.
Analyses by the Penn Wharton Budget Model and Joint Committee on Taxation echoed CBO's findings, estimating a 0.4% GDP growth boost by the end of 2034. However, the Trump administration put forth their own analysis, projecting GDP to be 2.4% to 2.7% higher after a decade under the bill's passage.
"The 'One Big Beautiful Bill' will significantly speed up the economy by providing the means for increased plant and equipment, which companies will use to employ workers for the production of goods demanded by businesses and consumers alike," Lavorgna explained. "Following the first Trump administration's lead, we expect this to result in real median household income gains, similar to 2018 and 2019."
If Trump's analysis holds true, then the economic growth generated by the bill would render CBO's negative fiscal impact estimates moot.
Politicians Dig In Heels over Budget Scoring Dispute
This dispute over the bill's economic impact is part of a broader political squabble surrounding budget scoring. Republicans championing the measure anticipate the legislation to trigger stronger economic performance, which is not wholly reflected in CBO's cautious, nonpartisan analysis. Conversely, Democrats lean on CBO's numbers to argue that the bill disproportionately benefits the wealthy and drives up the national debt.
[1] Budget Scoring Controversy: CBO vs. the Trump Administration[2] A Deep Dive into CBO's Estimates for the Tax Reconciliation Bill[3] White House Responds to CBO's Calculation of $2.8 Trillion Deficit Impact[4] CBO Under Fire for Predicting $1.4 Trillion Surplus Under Trump Tax Proposal if Assumptions Altered
- The Trump administration, in response to the Congressional Budget Office (CBO) projections, asserts that the analysis significantly underestimates the economic surge the tax bill would generate, leading to inflated budget deficits.
- Joe Lavorgna, Treasury Department counselor, contends that CBO's assumptions that the economy will grow at a rate of 1.8% over a decade are overly pessimistic and misrepresent the economic reality under the tax bill.
- The Republican tax-cut and spending reform package, according to Lavorgna, would boost capital investment and employment, resulting in increased revenue from higher productivity, wages, and overall GDP growth.
- If the Trump administration's economic growth projections materialize, it is suggested that CBO's negative fiscal impact estimates may be nullified.
- The controversy over the bill's economic impact is part of a larger political battle concerning budget scoring, with Republicans advocating for the bill's ability to stimulate the economy and Democrats relying on CBO's numbers to argue against it.
