Donald Trump has a plan to cut taxes by about $5.5 trillion over 10 years.
That’s a gargantuan sum of money — much larger than the Obama administration’s fiscal stimulus program and bigger than George W. Bush’s tax cuts. It’s such a big sum of money that it’s hard to get your mind around it.
But one useful way to put the $5.5 trillion tax cut into perspective is to observe that it’s equal to the combined cost of a whole bunch of separate pie-in-the-sky proposals.
You could buy a lot for $5.5 trillion
The biggest dream project in American progressive politics right now is replacing the existing patchwork health care system with a single-payer, Medicare-for-all scheme. That would take considerably more money than the value of the Trump tax plan. Almost anything else on the liberal wish list, however, is not just cheaper but a lot cheaper.
So much cheaper, in fact, that you could do an enormous amount of it simultaneously.
- For one, you could take a big step toward universal access to child care. Researchers Kathryn Edin, Jane Waldfogel, Christopher Wimer, Irwin Garfinkel, Timothy Smeeding, Greg Duncan, Hiro Yoshikawa, and David Harris are working on a menu of policy options to drastically reduce child poverty in the United States through the creation of a universal child allowance. The most ambitious form of their proposal offers $300 a month to children under the age of 6 and $250 per month to older kids. The total cost of this would be about $1.1 trillion over 10 years. It would essentially cut the rate of child poverty in half.
- You could drastically reduce American poverty. Rep. Ro Khanna (D-CA) is working on a plan for a massive boost in the earned income tax credit that is based on work done by Neil Irwin of the New York Times with the help of the Center on Budget and Policy Priorities and the Tax Policy Center. The goal is to “replace every dime of income that the bottom 20 percent of earners have lost compared with the average family since 1979.” It would cost about $1 trillion over 10 years.
- You could tackle skyrocketing student loans with a free college plan. Sen. Bernie Sanders’s plan to make college tuition-free at public universities carried a price tag of $750 billion over 10 years.
- You could clean up all the lead paint and lead contaminated soil in the United States, which is estimated to cost about $400 billion.
- You could also make a big push to invest in infrastructure. Donald Trump has rather vaguely proposed the idea of a $1 trillion federal investment into upgrading America’s infrastructure, and Senate Democrats have put together a somewhat more detailed version to tackle everything from roads and bridges to school construction, public lands, municipal water systems, and airports.
- You could get universal preschool up and running. Back in 2013, the Center for American Progress rolled out a universal preschool plan that it said would cost about $100 billion over 10 years, but it was counting on states to match federal spending. Make it all federal and account for a few years’ worth of inflation and call it $250 billion in spending.
- You could further drive down uninsurance rates and improve health care affordability. Hillary Clinton proposed improving the Affordable Care Act with a new cost-sharing tax credit that, according to the RAND Corporation, would reduce the ranks of the uninsured by an additional 10 million and “reduce consumer out-of-pocket spending for all groups” — dramatically so for the poorest, but also offering meaningful assistance to middle-class and even affluent families. It would cost about $1 trillion over 10 years.
Add up every single one of those pie-in-the-sky proposals, and you have $5.5 trillion in total program costs split between new spending and new tax credits. That would be, obviously, an enormous amount of money — the exact same amount of money as we’d be talking about with the Trump tax plan. But unlike Trump’s tax agenda, this spending plan would transform American life in some fairly unambiguously positive ways.
A transformative agenda for the United States
The EITC boost would have the most dramatic immediate impact, putting a boatload of extra money into the pockets of working-class families. And because the EITC is linked to work, it acts on the supply side of the labor market as well as the demand side — pulling adults who’ve fallen out of the labor force back into paid work while also boosting the incomes of current workers and driving up demand for more hiring.
The enhanced child benefits would, of course, immediately raise living standards for most parents across the board. Evidence suggests that the reduction in child poverty would also improve long-term health, brain development, and educational attainment over the long run, building a healthier and more productive workforce.
Infrastructure investments have often been discussed as a possible short-term economic stimulus, but they’re actually somewhat poorly suited to that. What’s more, the time when the American labor market needed that kind of short-term fiscal boost appears to be largely in the past. The real benefit of infrastructure, however, is in improving the medium-term productivity of the economy — allowing people, goods, and information to flow more smoothly from place to place.
For the long term, new investments in preschool and college tuition subsidies would, similarly, improve the skills of the workforce and grow the economy. Preschool investment would also increase the ability of parents (especially mothers) to participate in the workforce, further strengthening the supply side of the economy.
An enormous regressive tax cut could, of course, also have some upsides. Lower personal tax rates on high-income households would likely increase the proclivity of women with affluent husbands to work full time. And the various cuts to business taxation and capital income that Trump is proposing should further lower interest rates and make it easier for businesses to make new investments. But while these benefits may be real enough, they deserve to be considered not just in terms of their financial cost but in terms of the foregone opportunity to reap the benefits of direct investment in supporting work, children, education, and physical infrastructure.