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The Republican tax plan is not going to pay for itself, and the Trump administration should stop pretending it will.


That’s the message from Douglas Holtz-Eakin, a former director of the Congressional Budget Office and senior adviser to President George W. Bush and the presidential campaign of Sen. John McCain (R-Ariz.).

“I don’t think these things pay for themselves. They never have,” said Holtz-Eakin, president of the conservative think tank American Action Forum, in the latest edition of the POLITICO Money podcast. “But the growth is really important.”

Holtz-Eakin said he was disappointed by the Treasury Department’s decision to release a one-page document this week arguing the Trump administration’s plans won’t actually add to the federal debt. The paper essentially concurred with other analyses of the tax cut plan, saying that on its own it would add to the debt by $1 trillion or more.

But it also suggested that coupled with other White House plans — including potential infrastructure and welfare-reform initiatives — tax cuts would lead to 10 years of nearly 3 percent growth and thus actually reduce the federal debt.

“It’s not a dynamic score of a tax bill,” Holtz-Eakin said of the Treasury one-pager. “It’s essentially a restatement of what they said in their budget. I wasn’t a big fan of putting that piece of paper out, I’ll be honest. Most of the things on that paper don’t exist. There is no infrastructure plan. I thought it was overpromising and certainly beneath the level of analysis that the Treasury is capable of.”

Most economic models, including that of Congress’ own Joint Committee on Taxation, show the tax plans adding at least $1 trillion to the debt over the next decade. Holtz-Eakin said the number could be somewhat lower, but that it ultimately wosn’t matter if slashing the corporate rate leads to greater investment by American companies and thus higher productivity and better wages.

“The American people can feel their access to the American dream disappearing over the horizon, and they are not happy,” he said. “So we are going to borrow $50 billion or $60 billion more every year. Is that worth it for the growth we are going to get? That’s the calculus. People come down in different places. I’m deeply worried about growth, so I’d like to see us stir things up and get things going.”

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Holtz-Eakin said Republicans should just be straight about the bet they are making on growth and the risk of higher deficits.

“I prefer a much simpler formulation,” he said. “Deficits are a problem, and we have deficits. And this is going to give us somewhat larger deficits. But the growth is going to be worth it.”

Holtz-Eakin said he’s been pleasantly surprised by President Donald Trump’s policy approach on the economy thus far. “I think there is an enormous amount to be said for where we are, policy by policy,” he said. “We are not in a trade war with China, and many feared we would be.”

But he said he worries that 2018 could see a return to protectionist themes Trump hammered on the campaign trail. “If they can’t build on their governing majority in the Senate, the only way he’ll be able to get anything done is through executive action. And that’s trade. That makes me think that next year is a more important year to watch than this year.”

