LARRY KUDLOW: Congressional Republicans must not stop the Trump Tax Cuts

All of a sudden, nothing but bad news is coming out of the Republican Congress regarding tax cuts. Some people in the House are talking about a 5-year extension of the Trump Tax Cuts. The Senators are talking about 2, or even 3 budget bills that would put the tax cuts toward the back of the queue. This is bad economics and bad politics. 

Are Republicans suffering from amnesia about the economy. Which was the number one issue in last November’s election. And there were 2 components to the economy: inflation and affordability. In other words, with Bidenflation going up 20%, real wages for middle- and lower-income blue-collar workers went down. Mr. Trump’s successful coalition of working-class voters was not based on race, gender, or left-wing culture. It was based on the paucity of income.

There are 2 ways to fatten middle-income wallets.  Getting inflation down, which would lower energy costs, and less government spending and money printing, and cut their taxes. Supply-side policies are always political and economic winners. Working class voters could not afford to live in the Biden economy. But Republican economic policies must give plenty of elbow room to working folks so they can fatten their wallets and easily afford the Trump economy. And if the Republican hang-up is a bunch of failed economic models from government bean counters, like the CBO, the GOP should stand up and fight it. 

Revenues after the Trump tax cuts in 2017 increased by $1.5 to $2 trillion. Even the CBO admits it was close to $2 trillion above their early estimates. And although it seems arcane and, in the woods, the GOP should be using Senator Mike Crapo’s policy baseline — which argues that making the popular tax cuts permanent have not, yet nor will in the future, cause a loss of revenues. So they don’t have to cut $4 to $5 trillion in spending right away. Yes, they should get spending down to Scott Bessent’s 3% of GDP deficits. And lower the debt to GDP ratio. But the Laffer Curve growth dividend from tax cuts will be huge. 

That’s what history shows. And there’s another reason why the GOP should make all the Trump tax cuts permanent: the President wants it. 

He was elected on the tax cut promise among others. As White House Press Secretary Karoline Leavitt said today, the tax priorities of Mr. Trump are very clear: make the 2017 Tax Cuts Permanent, no tax on tips, no tax on seniors, no tax on overtime pay, tax cuts for Made in America products, and eliminate special tax breaks for billionaires — including sports team owners. Or the carried interest loophole on investment. These are Presidential priorities. He won the election by a near landslide. 

His working-class coalition of blacks, browns, Asians, young people, women, males, that coalition was based largely on an optimistic belief that Trump can rejuvenate the economy and unlimited access to climb the ladder of opportunity is what elected Mr. Trump. Republicans in the House and Senate must not stand in President Trump’s way.