President Biden has been heavily criticized during his time in office for allowing the budget deficit to soar, pushing the national debt to an all-time high of about $34.8 trillion. But as politicians continue to debate extending the signature law, which is set to expire in 2025, Treasury Secretary Janet Yellen blamed former President Donald Trump’s Tax Cuts and Jobs Act on Monday for the nation’s fiscal problems. He said there is.
“I think this is the cause of a lot of the problems we’re facing right now with the fiscal trajectory,” Yellen said in an exclusive interview with Yahoo Finance, adding that keeping the tax cuts in place would be “concerning.”
President Trump’s Tax Cuts and Jobs Act of 2017 boosted the economy through several measures, including lowering the corporate tax rate from 35% to 21%, lowering income tax rates in most tax brackets, and increasing the standard deduction for tax-exempt individuals. It was an effort to encourage spending and investment. – Itemized tax filers, etc. But Treasury Secretary Yellen argues that instead of creating the investment and spending boom that was intended, Trump’s policies have only increased the national deficit while giving tax breaks to wealthy corporations and individuals.
She points out that the national debt increased by $7.8 trillion during the Trump years, from $19.95 trillion to $27.75 trillion. And a new report from the nonpartisan Congressional Budget Office (CBO) finds that if President Trump’s tax cuts were extended over the next 10 years as proposed, the budget deficit would increase by $4.6 trillion.
But supporters of the Trump tax cuts argue that they were an important tool to stimulate the economy and make U.S. companies more competitive with foreign companies. Jay Hatfield, CEO of Infrastructure Capital Advisors, an investment management firm, told Fortune magazine that President Trump’s tax cuts have contributed to the recent economic and market trends in the U.S. compared to other developed countries. He said he believes this is one of the main factors behind the outperformance.
Hatfield argued that the tax cuts made American businesses more resilient and more likely to invest in growth and research and development. At the same time, lower tax rates could prevent major U.S. companies from locating in more tax-friendly regions, thereby improving economic growth. “It’s critical to global competitiveness,” he says.
He pointed out that if the Trump tax cuts were not extended, the U.S. corporate tax rate would be 35%, but the average corporate tax rate in the G7, the seven richest countries in the world, was 27.2%, and the average corporate tax rate in 38 countries was 27.2%. It is said to be 27.2%. The average corporate tax rate in the mostly wealthy Organization for Economic Co-operation and Development (OECD) countries is just 23.7%.
Still, opponents of the Trump-era tax cuts say the policy will only increase inflation and the national debt and make the wealthy even richer.
“The Trump tax law was never intended to help ordinary people. It was a windfall for the wealthy and big corporations who are making record profits by jacking up prices. It’s time to reverse it,” Lindsey Owens, executive director of the Groundwork Collaborative, a nonprofit progressive think tank, said in a statement to Fortune.
For Treasury Secretary Yellen, canceling the Trump tax cuts and passing President Biden’s $3 trillion 10-year deficit reduction plan is key to getting the U.S. on the right fiscal path. But she doesn’t think the government is too far off track.
“I think the most important metric for determining sustainability is the interest cost of debt. Even as interest rates rise, the interest cost of debt remains at historically normal levels,” she said. “If we work to reduce the deficit so that it stays at this level, I think we will be on a fiscally sustainable trajectory.”
