Photograph by Nathaniel St. Clair
Last week the US Congress passed the Trump Tax Cuts. The mainstream media and economists have been mostly reporting the details of the cuts—i.e. which taxes got cut in the 2025 Act, how much accrued to businesses and wealthy as opposed to the rest of us, what’s the impact on GDP and maybe even government deficits and debt. All interesting facts. But not the most important. They purposely ignore the cuts in historical perspective and the bigger picture they represent.
That bigger picture is the looming fiscal crisis driven by the growing convergence of runaway tax cutting since 2001, chronic escalating defense and war spending, more frequent deeper crashes of the economy with slower economic growth between, and now since 2022 accelerating trillion dollar annual interest costs on the US national debt.
The US national debt is on track to reach $38 trillion by year end 2025. Interest payments to bondholders are already exceeding $1 trillion a year. The Congressional Budget Office, research arm of the US Congress, estimates the national debt will reach $56 trillion by 2034 with interest payments of $1.7 trillion—and all that before Trump’s just passed $5 trillion tax cuts.
Moreover, the US elite today show no sign of addressing the coming fiscal crash. It continues to cut taxes by $trillions on corporations, investors and wealthiest 1% households; to raise spending on the Pentagon, wars and other ‘defense’; to allow health insurance and big Pharma to gouge the US Treasury; and to pay holders of US securities—foreign and US—trillions of dollars more every year.
Multiple studies show that historically 60% of the US budget deficits and thus national debt are due to insufficient tax revenues—from chronic tax cutting, slow economic growth, legal avoidance and fraud. Here’s some interesting facts about cumulative tax cuts by both political parties together since 2001:
Cumulative Tax Cutting 2001-2025
George W. Bush’s tax cuts in 2001-03 amounted to $3.8 trillion over the decade 2001-10. Estimates are roughly 80% accrued to corporations, businesses, and wealthy individuals by focusing overwhelmingly on individual income tax rates, corporate capital gains and dividends, and the estate tax affecting the wealthiest 1% or less households. Bush then cut taxes in the spring of 2008 by another $180 billion as the economy began to slide into recession and the great crash of 2008-09.
When Obama took over in 2009 his American Rescue Plan stimulus for the economy passed that March provided for another $325 billion in tax cuts. His entire stimulus plan was $787 billion, another $280 billion of the remaining $487 billion went to the states which then hoarded most of it. So less than $200 billion went to stimulate consumption which immediately proved too little to reboot the US economy. He had to add another $25 billion for ‘cash for auto clunkers’ and another $25B for ‘first time home buyers’ later that year. Most of the latter, moreover, didn’t go to home buyers but to mortgage lenders as incentive to approve more mortgages.
When Bush’s tax cuts came up for renewal in 2010, Obama extended them for another two years through 2012. That amounted to another $803 billion in tax cuts, again mostly to wealthy and corporations.
In August 2011, in an agreement with the Republican Congress, Obama cut social program spending by $1.5 trillion in a new ‘austerity’ plan. $1 trillion was cut in just education and other social programs; $.5 trillion was supposed to be cut for defense spending but was kicked down the road and never applied. Austerity social program cuts always follow crisis bailouts. They did in 2011 after the 2009-10 bailouts. They’re occurring again today in 2025 after the 2020-21 Covid bailouts—more on which shortly.
The 2012 Obama tax cuts made the Bush tax cuts permanent. They cost another $5 trillion. They were supposed to avoid what the media, lobbyists, and propagandists called the pending ‘fiscal cliff’. They were supposed to boost the economy. They didn’t. US economic growth in GDP terms for the rest of the Obama term averaged only 60% of what was historically average during recovery periods from the earlier 10 US recessions since 1948.
Obama thus cut taxes on wealthy and corporations more than Bush did. To restate: Bush cut by $4 trillion ($3.8 trillion + $180 billion). Obama cut by $325 billion (’09) + $803 billion (’10-11) then by $5 trillion (2012). That’s $4 trillion (Bush) and $6.1 trillion (Obama). Then came Trump’s $4.5 trillion in 2018.
Trump promised during the 2016 election to cut taxes by $5 trillion. And he roughly did. The 2018 tax cut over the next decade cost $4.5 trillion.
His administration, with the media and professional economist class in tow, estimated the $4.5 trillion at only $1.9 trillion. Trump’s Treasury Secretary at the time, Steve Mnuchin, even publicly declared the Trump tax cuts would ‘pay for themselves’. By that he meant the tax cuts would boost US GDP and the economy so much that economic growth would result in a rise in so much more tax revenues over the decade that would offset the $1.9T. To quote Mnuchin at the time: “we believe the tax cuts will pay for themselves over a 10 year period of time” (Reuters, 2-12-20).
Proof that the Trump 2018 tax cuts were $4.5T—not $1.9T—was reflected in the Trump administration’s budget forecast and a US federal deficit reduction of $4.6 trillion over the decade 2018-28. An even more convincing later piece of evidence was the US Congressional Budget Office, the research arm of Congress, that estimated in 2025 that the cost of the 2018 tax cuts were at least $4 trillion total!
For several years in debates with professional mainstream economists like Robert Reich and Paul Krugman this writer kept showing the Trump tax cuts weren’t $1.9 trillion but actually $4.5 trillion. Here’s how:
First, the $1.9 trillion official estimate was based on the assumption that the US economy would grow over the next ten years, 2018-28, by 3%-3.5% annually. A forecast that proved grossly inaccurate in fact.
After a modest growth in 2018-19, the US economy crashed in 2020 as the government ordered a partial economic shutdown in response to Covid. The economy haltingly reopened and recovered in stages in 2021. Thereafter it grew only moderately from 2022-24.
That modest three year GDP recovery followed the massive $10.7 trillion fiscal and monetary stimulus by Congress and the Federal Reserve during the years 2020-22: $6.7 trillion in fiscal stimulus and another $4 trillion in monetary stimulus by the Federal Reserve Bank. In other words, a mountain of stimulus brought forth a molehill of GDP.
Second, the 2018 tax cut estimate grossly under-estimated and failed to account for the magnitude of tax cuts that accrued to US multinational corporations offshore.
The largest 108 US Fortune 500 corporations with offshore subsidiaries had accumulated $2.7 trillion in their corporate offshore accounts they weren’t returning to the US in order to avoid paying the then 35% corporate tax rate. Estimates of un-repatriated hoarded profits from the offshore operations of US multinationals were as high as $4 to $5 trillion. Trump’s 2018 tax cuts allowed them to bring back those profits and pay only 10%. That’s a 25% tax saving on at least $4 trillion. The US Commerce Dept. estimated in 2020 US multinationals brought back only $750 billion in 2018 and another $250 billion in 2019. They thus paid 10% or $100 billion instead of 35% or $350 billion. They pocketed the other $900 billion of the $1 trillion repatriated. No government records were kept after 2019 unfortunately.
What did they do with the $900 billion they did repatriate? As the Wall St. Journal reported on January 28, 2020: “Much of what firms retrieved went to buybacks”. After averaging about $125 billion per quarter in 2017, S&P 500 stock buybacks surged to $200 billion per quarter in 2018 and 2019.
And what happened to the other roughly $3-$4 trillion plus US corporations never repatriated? They hoarded the remaining $3 to $4 trillion profits in their offshore subsidiaries to avoid taxes. Another loophole allowed them to convert their cash profits from overseas operations into short term financial securities held offshore, on which they didn’t have to pay any profits.
And there was another way they avoided taxes: they manipulated their internal pricing—i.e. what US located operations charged or paid their foreign subsidiaries. They paid their foreign subsidiaries higher prices for components or final products, thereby shifting profits offshore where they were booked at lower tax rates, which also raised costs in the US and thus lower profits taxed at the higher rate.
The 2018 Trump tax act also raised the amount US multinational corps paid to foreign countries that they could then deduct from their US taxes owed.
The point is these offshore rules and loopholes that grossly reduced the total tax cuts by at least $2 trillion over ten years, 2018-28, that were grossly under-estimated or were not accounted for in the 2018 Trump official $1.9 trillion tax cut cost estimates.
In summary, phony assumptions about a decade of future GDP growth, reduced taxation on repatriated profits, and loopholes reducing taxes due on their offshore subsidiary operations all meant US multinational corporations’ tax cuts were far greater than reported. These assumptions and loopholes meant the 2018 cuts were $4.5 trillion not the ‘official’ $1.9 trillion.
Thus total tax cuts for 2001-19 were $14.6 trillion.
Thereafter followed the 2020 Covid fiscal stimulus package during Trump’s last year in office, 2020. Taxes were cut another $950 billion as part of the ‘CARES Act’ fiscal stimulus passed by Congress March 2020 and another $260 billion in tax cutting in the emergency ‘Consolidated Appropriations Act’ passed that December as the US economy faltered again.
That $1.2 trillion in 2020 tax cuts was followed in 2021 by Biden’s subsequent ‘AMERICAN RELIEF PLAN’ fiscal stimulus which cut taxes by a further $640 billion.
In 2022 Biden thereafter shifted some of the unspent relief for social programs in his American Relief Plan and redirected the funds to a new round of three business investment stimulus programs costing $1.7 trillion: the Infrastructure Act, the Chips & Modernization Act, and the misnamed Inflation Reduction Act which was mostly tax cuts and subsidies to energy companies, alternative and fossil fuel. Those three 2022 business investment Acts together cut taxes by another roughly$500billion.
Adding all the tax cuts from 2001 thru 2024, both parties—two Republican and two Democrat administrations— together cut taxes by almost $17 trillion!
No one should therefore be surprised that Trump 2025 is cutting taxes again by another $5 trillion—and once more mostly for business, investors and wealthiest households. A massive tax cutting has been going on for a quarter century since 2001. (One can argue the trend extends even further back, to Reagan’s 1981 and 1986 tax cuts and Clinton’s 1997-98 cuts).
It’s all part of the long term Neoliberal era (1979-present) fiscal policy: cut taxes on the rich and their corporations, offset the cost of the tax cuts in part with social spending program cuts, increase spending on defense and wars, and ignore the effects of all that on budget deficits and national debt that result in rising interest payments to US bondholders to $1 trillion dollars per year.
Long term historical studies show conclusively that tax cuts, and reduced tax revenues from slow economic growth, fraud, legal avoidance, are responsible for 60% of budget deficits.
The other major forces driving US budget deficits and national debt since 2001 are the $9 trillion spent on foreign wars in the first quarter of the 21st century; the two big bailouts of 2008-09 ($787 billion +)and 2020 ($3.1 billion) and 2021 ($1.9 billion); the chronic price gouging by health and insurance corporations escalating the costs of government health support programs (Medicare, Medicaid, Schip, ACA); and rising interest payments on the national debt to investors (US and foreign) purchasing US Treasury securities.
So loss of tax revenue from 25 years of tax cuts and slower long term economic growth ($17 trillion), the $9 trillion thrown away in forever wars since 2001, the bailout costs ($5.8 trillion), and healthcare price gouging ($0.5 trillion?) together explain most of the current $36.2 trillion US national debt.
In short, a fiscal train wreck has been running down the tracks for at least the past 25 years and Trump’s $5 trillion ‘Big Beautiful Bill’ (BBB)—along with $trillions more for defense and wars—are shifting that train into another higher gear.
Trump, Budget Deficits and National Debt
US budget deficits have been averaging $2 trillion annually and rising since 2016. They are projected to rise another $2 trillion in 2025 even before Trump’s tax cuts take effect this year.
The national debt is just the accumulation of annual budget deficits. In 2000 the US national debt was $5.6 trillion. After eight more years it nearly doubled to $10.7 trillion. It then did double under Obama to $20 trillion by end of 2016. Trump added $7.8 trillion in the four years of his first term and Biden added another $8.5 trillion in just four years more. By the end of his Biden’s term in December 2024 the national debt had risen to $36.2 trillion.
By the way, as that rises to $38 trillion by year end 2025 and $56 trillion by 2034, it does not include the Federal Reserve Bank’s balance sheet debt (now $8 trillion) or state and local governments’ debt load of several trillions$ more.
Future Consequences
It’s ironic Trump has chosen to call his tax cuts and defense spending hikes proposal the Big Beautiful Bill—or BBB as Congress refers to it. For in the world of business finance, BBB refers to the worst run corporations that are overloaded with high risk debt (triple B grade). Triple B rating makes them the most financially fragile and at greatest risk of default and bankruptcy.
While it’s not likely the USA federal government can ever go bankrupt or even default on its annual payments of $1 to $1.7 trillion to bondholders of the national debt. All it needs do is ‘print’ more money, either by adding accounts to the Federal Reserve electronically—or perhaps in the near future by creating digital currency. But while that may not mean bankruptcy, it could very well mean a collapse of the value of the US dollar globally. That in turn could result in the abandonment of the dollar as the global reserve and trading currency. And that in a collapse of the recycling of US dollars back to the USA by foreign holders of excess dollars. In such case, the US annual budget can’t be financed, requiring then massive spending cuts and tax hikes. In other words, the end of the US global empire.
Trump’s tax cuts and spending bill is just another iteration of Neoliberal fiscal policy, this time on steroids. But Neoliberal fiscal policy is broken. That is, it does not produce the same stimulus to the real economy, real investment, and GDP growth that it had in decades past. Increasing magnitudes of fiscal stimulus is required in order to generate the same, or even smaller, real GDP growth.
What fiscal policy does result in increasingly is a stimulus to financial asset markets, in US and globally, and thus a continued rise in stocks, bonds, forex, derivatives and other financial instruments’ price. Or the tax cuts are redirected by multinational corporations that receive them to offshore investment and operations. In other words, to subsidize the expansion of US capital expansion offshore. Both the financialization and globalization of investment are characteristic of trends in the 21st century capitalist economy. A similar effect applies to US monetary policy: more and more of the Federal Reserve’s injection of money into the economy gets diverted to financial markets and to offshore.
Perhaps the best evidence of this is the $10.7 trillion in fiscal and monetary stimulus by Congress and the Federal Reserve injected in 2020-22. It should have produced a massive GDP growth expansion in 2022-24. It produced a mere historical average of barely 2%.
All of the media, economists, and government officials’ about the Trump tax cuts and BBB Act stimulating the real economy—i.e. wages, jobs, investment, etc.—is just economic hype. The 2018 tax cuts didn’t. Nor did Obama’s and Bush’s before that. Trump’s current BBB Act won’t do any different.
Fiscal and monetary policy in the late Neoliberal era—in the 21st century American capitalism and global economic empire—are failing. Nevertheless, America’s elite are doubling down on their tax cutting for the rich and their wars of defense of Empire.
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