Washington Insider - Wednesday

Will Tax Cuts Pay for Themselves?

Here’s a quick monitor of Washington farm and trade policy issues from DTN’s well-placed observer.

USTR Lighthizer Praises WTO but Offers Sharp Criticism

Praise for the WTO and its role facilitating global trade is how U.S. Trade Representative Robert Lighthizer opened his remarks at the Argentina WTO Ministerial. "WTO is obviously an important institution. It does an enormous amount of good, and provides a helpful negotiating forum for [members]," he said. However, he then shifted tone, noting the U.S. believes "serious challenges exist."

A focus on litigation, rather than uniform application of trade principles, has stymied WTO's effectiveness, he argued. "WTO is losing its essential focus on negotiation and becoming a litigation-centered organization. Too often members seem to believe they can gain concessions through lawsuits that they could never get at the negotiating table. We have to ask ourselves whether this is good for the institution and whether the current litigation structure makes sense."

Brazil Deputy Ag Minister Reiterates Expectation of Deal with US on Beef Exports Soon

Brazil expects to reach a deal with the U.S. "soon" on the ban of Brazilian fresh beef from the U.S. market, Brazilian Depute Ag Minister Eumar Novacki told Reuters in an interview, noting the country has already sent information to the U.S. that was requested by the government.

U.S. officials said earlier this month that there was no timeline for the imports from Brazil to resume and the U.S. had requested additional information from Brazil. Novacki also said Brazil could start buying Russia wheat soon as part of negotiations between the two countries over another Russian ban on Brazilian beef.

Washington Insider: Will Tax Cuts Pay for Themselves?

There is a big kerfuffle underway in Washington now involving a basic question: Will the recently passed tax cuts boost economic activity enough to offset their cost in reduced revenue?

The administration says they will, but they have been somewhat casual about making their case and many, many skeptics remain including the Congressional scorekeeper on tax matters, the Joint Committee on Taxation.

The Hill is reporting that “the tax bill House Republicans passed last month wouldn't produce enough revenue from economic growth to pay for itself, Congress's tax scorekeeper said in a 12-page report released Monday.”

The Hill said that the economic growth resulting from the bill would lower the measure's revenue loss by more than $400 billion over 10 years. The tax cuts, however, “would still cost about $1 trillion over a decade, even after accounting for those revenues, according to the Joint Committee on Taxation."

The report came as House and Senate Republicans work to resolve the differences between their two tax bills and produce a final piece of legislation that they can get to President Trump's desk by the end of the year. The Hill said that House Ways and Means Committee Chairman Kevin Brady, R-Texas, said Monday that he thinks the analysis reflects the fact that JCT "historically is a very conservative estimator of growth."

He noted that some analyses have found that the bill would produce more economic growth than JCT predicts, while others have found that the bill would produce less growth.

Earlier Monday the Treasury said the President’s economic policies would pay for tax cuts, and pursued that point with a one-page analysis.

The department's analysis assumes a 2.9% growth rate, which was the rate projected by Trump's fiscal 2018 budget. The department compared that rate to previous projections of 2.2% growth in gross domestic product.

The Treasury Department’s analyses have been extremely controversial, especially among Democrats, The Hill said. Senator Elizabeth Warren, D-Mass., targeted the Treasury Department's analysis of the GOP tax plan in a “tweetstorm” Monday, saying officials "made up the numbers" to fit their claims.

She bashed Treasury’s one-page analysis that contradicts several independent analyses, including one from the JCT Monday evening.

The senator, who has been a fierce critic of the tax measure, claimed that the figures used in the analysis didn't make sense. She wrote that instead of using economic models, Treasury officials "just made up the numbers."

So, the tax proposals have become more controversial than ever. President Trump plans to give a tax speech today in an effort to sell the GOP's tax-cut plans to the public--amid efforts from congressional Republicans to get legislation on his desk by Christmas.

Axios is reporting that the president’s speech will take at the Treasury Department, where the audience will consist mainly of young people and middle-class families.

In the meantime, The Hill says that Republicans are fretting about how their tax bill is being viewed by the public and say they need to do a better job of selling it to middle-class and low-income voters. A CBS News poll conducted last week found that 53 percent of people nationwide disapprove of the GOP tax bill and only 35 percent approve.

While support for the bill was strong among self-identified Republicans, according to the poll, 52% of independents and a whopping 84% of Democrats disapprove of the legislation.

Other reports indicate that a majority of Americans do not believe they will pay lower taxes after the Republican tax overhaul, The Hill reported. According to the USA TODAY/Suffolk University Poll, 53% of respondents do not think they will pay lower taxes, while 53% also believe the plan will not have a positive impact on the economy.

Only 31% think their taxes will go down as a result of the new legislation, the poll found. A majority of voters, 64%, said they think the wealthy will reap the most benefits from the overhaul. And, nearly half of those polled, 48%, do not support the Republican plan, while 32% back the legislation.

So, like everything else in Washington, the tax proposals are controversial and will be long debated and possibly even modified. Increasingly, public responses to the bills are deeply angry and may have economic consequences far into the future in the form of serious constraints on proposed government efforts, Washington Insider believes.

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