President Donald Trump’s tax plan is a mixed bag: it slashes corporate tax rates, but it merely just shifts the responsibilities around. Plus, analysis from conservatives and libertarians suggest that U.S. households will be paying more in taxes in the next several years.
Moreover, the tax cuts were not followed up with spending cuts to ensure the budget deficit wouldn’t explode. Tax cuts should always be embraced, but the government would always need to reduce spending as well. Trump buys into the theory that economic growth would cover spending. That never happens.
Former Federal Reserve Chair Alan Greenspan is now sounding the alarm.
Speaking in an interview with Bloomberg, Greenspan echoed this sentiment: tax cuts are good, but spending cuts are needed, too.
“The trouble, unfortunately, is it’s unfunded,” he said. “Republicans should have spending cuts first before you try to do tax cuts.”
There is just one problem with his analysis. By saying tax cuts are “unfunded,” it gives the impression that the government owns the money that comes into their hands. It doesn’t. Tax cuts are giving the people back their money. It is a bad idea to say “unfunded.”
That said, Greenspan is correct in worrying about spending and the deficit. He should remember, however, that he facilitated the expansion of deficits and spending during his time as head of the central bank.
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