A new report from bond-rating agency Moody’s Investor Service finds that President Donald Trump’s “tax cuts and a slowing economy will erode America’s fiscal strength during the next decade”, contrary to every claim Republicans made as they touted the tax law’s benefits before and after its passing.
Republicans are zero for three on their major predictions:
The $1.5 trillion tax would pay for itself and even generate more tax revenue. (didn’t happen)
The economy would “take off like a rocket ship” once the Trump tax cuts went into effect. (didn’t happen)
Family incomes would rise by $4,000 or more due to a sharp cut in business taxes. (didn’t happen)
None of that is happening or coming into view. The economy grew at a robust 4.2% in the second quarter, the highest level since 2014. But Moody’s Analytics predicts growth of just 2.9% for all of 2018, and 2019 as well. It will then fall to 0.9%, according to the forecasting firm. If so, economic growth under Trump would average just 2.2% per year, almost exactly the same as during President Obama’s second term.
The federal budget deficit, meanwhile, rose from 3.5% of GDP in 2017 to 3.8% in 2018. Moody’s expects it to hit 4.8% of GDP in the current fiscal and soar to 8% by 2028. The U.S. fiscal debt burden is the heaviest among nations that earn Moody’s Aaa rating, its highest.
And the picture only becomes more bleak from here, according to Moody’s:
“The United States’ fiscal strength is set to gradually decline from 2019 onward,” Moody’s Analysts wrote in the report. “A persistent widening of fiscal deficits will push the federal debt and interest burdens to historic levels, which will ultimately weigh on the sovereign credit profile.”