The Economic Boost from the Tax Bill is Temporary

On October 11, 2018, the CNN show, “Quest Means Business1 features a heated debate about the recent rate hikes by the Federal Reserve and President Trump’s disapproval of them, in which he cites recent economic growth. Opinion columnist for “The Washington Post”, Catherine Rampell, cites PWBM — alongside the Congressional Budget Office, International Monetary Fund, and Federal Reserve — as finding that the economic boost from the Tax Cuts and Jobs Act is temporary.

Figure 1 shows that PWBM analysis of the TCJA finds that in the short run, the TCJA will increase the average annual GDP growth rate, but that boost diminishes over time. In fact, the additional economic growth will not be enough to pay for the tax cuts which will increase federal debt between $1.9 trillion and $2.2 trillion over the first 10 years.

Figure 1: TCJA Effects on Average Annual GDP Growth Relative to Current Policy over Period of Time Shown

Figure 1.png

  1. The discussion referenced is from 5:02 to 15:22.  ↩