Extending Trump Tax Cuts Would Explode the Debt: CBO

(iStockphoto/The Fiscal Times)
By Yuval Rosenberg and Michael Rainey

TGIF and thank heavens for the distraction of the NCAA basketball tournaments. Here's what's happening as we head into the weekend.

Extending Trump Tax Cuts Would Explode the Debt by Almost 50%: CBO

Permanently extending the 2017 tax cuts as Republicans want to do would result in significantly higher budget deficits over the coming decade and soaring national debt over the longer term, according to a newly released analysis by the nonpartisan Congressional Budget Office.

If the tax cuts are made permanent, budget deficits over the decade from 2025 through 2034 would be about $4 trillion larger, excluding interest costs, Congress's official scorekeeper said. By 2054, that primary deficit would be 3.7% of gross domestic product, or 1.5 percentage points higher than in CBO's recent baseline projections. Once net interest costs are factored in, the total deficit in 2054 would equal an estimated 12.3% of GDP, 3.8 percentage points higher than under the current scenario without the tax cuts.

Debt held by the public would climb to 214% of GDP over the next 30 years, 47 percentage points higher than the 166% projected in CBO's baseline, which itself would be a record high, up from a current 99%.

Rep. David Schweikert, an Arizona Republican and chairman of the congressional Joint Economic Committee, requested the analysis and also asked CBO to consider the outlook if interest rates were 1 percentage point higher than in the baseline forecast.

Those borrowing costs would swell the debt significantly. "If interest rates also increased each year until they were higher by 1 percentage point (before accounting for macroeconomic effects), debt held by the public would grow even larger, exceeding 250 percent of GDP in 2054," CBO Director Phillip Swagel wrote.

CBO also projected that economic growth would be faster for several years after the extension of the tax cuts - but slower over the longer term, when interest rates would also be higher.

Why it matters: Republicans are grappling with the cost of their tax plans - and the requirement under the budget reconciliation process they are using that those costs must be covered beyond the tenth year.

Some in the party are looking to downplay the deficit impact of their plan by vigorously advocating for an accounting approach that would wipe out the official cost of extending the tax cuts by considering them simply an extension of current policy, rather than a renewal of tax cuts set to expire under current law.

"Schweikert and some other Republicans have rebuked this accounting assumption as intellectually fraudulent," The Hill's Tobias Burns notes. Budget hawks also decry the "current policy" idea as a gimmick.

The latest CBO analysis confirms that the GOP plan would explode the debt, and Democrats are already using it to reiterate their criticisms of the tax cuts and expensive giveaways to the wealthy. "The playbook couldn't be clearer: explode the debt with handouts to the ultra-rich, then turn around and use that debt as an excuse to slash health care, gut education, and go after Social Security and Medicare," Rep. Brendan Boyle, the top Democrat on the House Budget Committee, said in a statement Friday.

The Republican playbook may well also feature attacks on the CBO. Treasury Secretary Scott Bessent slammed CBO's scoring methodology this week. "Shame on me," Bessent said on a podcast. "I was in the investment business for 35 years. I talked very confidently that 'CBO scoring says this.' And it turns out I didn't know you-know-what about CBO scoring. When you're on this side of the wall, you realize how crazy it is."

Ultimately, the Senate parliamentarian would have to weigh in on whether the "current policy" scoring approach is allowable under the chamber's budget reconciliation rules. But the CBO analysis may give some lawmakers pause about driving up the debt as projected.

CBO releases budget infographics: On a separate note, CBO this week released a series of four infographics depicting the federal budget, mandatory spending, discretionary spending and revenues for fiscal 2024. You might want to give them a look.

Social Security's Acting Chief Threatens to Close Agency After Court Ruling

Leland Dudek, acting head of the Social Security Administration, reportedly threatened to shut down the agency in response to a judge's order restricting the access of DOGE employees to sensitive payment information.

U.S. District Judge Ellen Hollander issued a temporary restraining order against DOGE operatives Thursday, denying them access to payment information while saying "the DOGE team is essentially engaged in a fishing expedition at SSA."

The White House attacked the ruling, accusing Hollander of being a "radical leftist-judge" who is trying to "sabotage President Donald Trump's agenda." Dudek, who was recently elevated to the top of the agency by President Donald Trump, responded to the order by saying he may have to shut down the organization because all SSA employees are tasked with working with DOGE, and therefore the restraining order applies to them, too.

"Unless I get clarification, I'll just start to shut it down. I don't have much of a choice here," Dudek told The Washington Post. Dudek reportedly said he is consulting with lawyers at the agency and at the Justice Department.

Social Security advocates said the incident simply demonstrates that DOGE and the White House are acting in a destructive rather than constructive way. "For almost 90 years, Social Security has never missed a paycheck - but 60 days into this administration, Social Security is now on the brink," Lee Saunders, president of the American Federation of State, County and Municipal Employees, said in a statement, per the Post. "Acting Commissioner Leland Dudek has proven again that he is in way over his head, compromising the privacy of millions of Americans, shutting down services that senior citizens rely on and planning debilitating layoffs, all in service to Elon Musk's lies."

Trump Says Student Loans Moving to the Small Business Administration

President Trump said Friday that as part of his effort to radically shrink the Department of Education, he is moving the management of all student loans to the Small Business Administration.

"I've decided that the SBA, the Small Business Administration, headed by Kelly Loeffler, will handle all of the student loan portfolio," Trump told reporters in the Oval Office, adding that the loan portfolio is a "pretty complicated deal, and that's coming out of the Department of Education immediately."

Trump said the restructuring would provide considerable benefits, though he did not explain how the process would play out. "You're going to have great education, much better than it is now, at half the cost," he said.

More than 40 million Americans currently hold student loans, totaling more than $1.6 trillion.

Steep staffing cuts: The announcement comes on the same day that the SBA announced that it will reduce staffing levels by more than 40%, eliminating approximately 2,700 positions from a workforce of nearly 6,500.

Trump also announced Friday that the Department of Health and Human Services will take over programs for students with disabilities and nutrition programs currently run by the Department of Education. "Bobby Kennedy, with the Health and Human Services Department, will be handling special needs and all the nutrition programs and everything else," Trump said. HHS has previously offered buyouts to most of its roughly 80,000 employees.

Recipe for trouble? Critics of the Trump administration's effort to gut the Department of Education expressed concerns about Trump's plan to move the student loan portfolio.

Peter Granville, a higher education finance expert at The Century Foundation, a liberal think tank, told CBS News that moving the loans "is not a recipe for efficiency or innovation." Instead, it's "a recipe for chaos and frustration for millions of people who rely on the student loan program."

Jessica Thompson of The Institute for College Access and Success, a nonprofit group focused on education policy, said it "doesn't pass the sniff test" to quickly move "a complex, large student debt portfolio" from one department to another. "We are concerned that there is not a serious, detailed thoughtful plan for reform around what to do with the student loan portfolio," she told CBS.

Quote of the Day

"This is perhaps the first moment in the history of food banking that we have seen record low unemployment and record high demand at food banks. ... Any circumstance that would cause even a modest increase in demand at food distributions will result in a food crisis."

– Vince Hall, chief of government relations for Feeding America, a network of more than 60,000 food pantries and other distributors, in a New York Times article examining the fears and challenges facing food banks nationwide as they confront a reported $500 million shortfall after the Trump administration halted deliveries to food banks. Hall reportedly told the Times that Agriculture Department officials said the department was reviewing the food aid programs backed by a federal fund called the Commodity Credit Corporation.

Trump Awards Boeing Contract for Next Generation Fighter Jet

President Trump announced Friday that Boeing will build a sixth-generation fighter plane as part of the Next Generation Air Dominance program. Boeing beat out Lockheed Martin, maker of the fifth-generation F-35 Joint Strike Fighter, for the contract to replace the F-22 Raptor, which entered service in 2005.

Calling the new stealth jet, to be known as the F-47, "virtually unseeable," Trump said it would be the most advanced fighter aircraft ever built, designed to operate in coordination with unmanned drones. "An experimental version of the plane has secretly been flying for almost five years, and we're confident that it massively overpowers the capabilities of any other nation," he added.

The developmental contract is reportedly worth $20 billion, and the Air Force says it hopes the F-47 will be ready by 2028, during Trump's administration. Ultimately, if the contract continues, it could be worth hundreds of billions of dollars to Boeing as the plane enters full production.

The contract was previously scheduled to be awarded in 2024, but was delayed amid growing concerns about the plane's cost and design, Defense One reports.

Estimates indicate that a single F-47 could cost as much as three F-35s, and some critics have questioned the need to develop a new generation of manned fighters as militaries increasingly turn to unmanned platforms. But Air Force leaders have decided the program is necessary at a time of increased competition with China, which is developing its own sixth-generation technology, and Air Force Chief of Staff Gen. David Allvin made what was apparently a successful argument in favor of the F-47 at a meeting with Trump last week.

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