The Republicans’ tax legislation is built on economic projections that are as confidently as they are cheerfully made concerning the legislation’s shaping effect on the economy over the next 10 years. This claim to prescience must amaze alumni of Bear Stearns and Lehman Brothers, which were 85 and 158 years old, respectively, when they expired less than 10 years ago in the unanticipated Great Recession.
The predictions of GDP and revenue growth assume, among many other things, continuation of the current expansion. It began in June 2009 and has been notable for its anemia relative to other post-1945 expansions: Its average annual growth rate has been 2 percent; theirs, 4.3 percent. But it also has been remarkably durable. It is 102 months old; the average since after World War II is 58 months. Unless the business cycle has been repealed, a recession is almost a certainty during the 10-year window for which the tax bill has been tailored.
What the legislation’s drafters anticipate, indeed proclaim, is that Congress will not allow to happen what the legislation says, with a wink, will happen. So, this might mark the historic moment when Washington decided that it no longer will bother to blush.
The legislation says the tax reductions for individuals will expire by 2025. Treasury Secretary Steven Mnuchin, however, says “we have every expectation that down the road Congress will extend them.” Of course Congress will. The phantom expiration is an $800 billion fudge, a cooking of the books in order to cram the tax bill into conformity with arcane parliamentary procedures that make the measure immune to filibuster.