The Tax Cut Bill Would Push U.S. Debt Over the Critical Breaking Point

5 Pages Posted: 20 Nov 2017 Last revised: 6 Dec 2017

See all articles by Calvin H. Johnson

Calvin H. Johnson

University of Texas at Austin - School of Law

Date Written: November 20, 2017

Abstract

Best data shows that federal debt is close to the critical breaking point at which creditors cease extending faith and credit to the U.S. government. Internationally, government debt of 80% of GDP has led to fiscal instability. If the Tax Cut Act of 2017 passes, debt will be above the 80-percent-of-GDP line in 2018, up to 91 percent of GDP by 2022, and to 117% of GDP by the end of the decade.

At its core, the bill gives $2.6 trillion over a decade as incentives to capital. There is a global glut of capital. Capital is in oversupply. The return to risk-free capital is zero. It will be driven below zero by the tax shelters created by the bill and by capital diverted from our trading partners. Incentives to an oversupplied commodity will not increase growth.

Suggested Citation

Johnson, Calvin Harsha, The Tax Cut Bill Would Push U.S. Debt Over the Critical Breaking Point (November 20, 2017). U of Texas Law, Public Law Research Paper No. 689. Available at SSRN: https://ssrn.com/abstract=3074682 or http://dx.doi.org/10.2139/ssrn.3074682

Calvin Harsha Johnson (Contact Author)

University of Texas at Austin - School of Law ( email )

727 East Dean Keeton Street
Austin, TX 78705
United States
512-232-1306 (Phone)
512-232-2399 (Fax)

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