Republican plans will cost trillions. Can they pay for them?

Never mix up the debt and deficit again
Never mix up the debt and deficit again

President Trump and Republicans want to make lots of changes to taxes, health care, defense and infrastructure. Expensive changes.

But many Congressional Republicans also want to achieve the fiscal holy grail: a balanced budget in 10 years. The most conservative among them want a balanced budget amendment to the Constitution and have been willing to risk government shutdowns and national default just to secure spending cuts.

"We believe government should not live beyond its means," House Speaker Paul Ryan said last week at the GOP retreat in Philadelphia.

But here's the problem: The changes Republicans are considering could add trillions to the debt. And paying for all of them will be a major challenge, if not practically impossible, say some fiscal experts.

As it is, U.S. debt is already projected to grow by roughly $9.4 trillion in the next decade, according to the Congressional Budget Office.

Here's the GOP to-do list:

Build a wall: $12 billion to $25 billion

Republican leaders estimate the wall that Trump wants built along the U.S.-Mexican border will cost $12 billion to $15 billion. But outside experts believe it could be as high as $25 billion.

Trump, of course, has said repeatedly he would make Mexico pay for it. But Mexico isn't keen on that. So unless and until that happens, Congress will have to authorize money to build the wall.

Normally, Republicans demand that new spending be offset with spending cuts elsewhere. But Ryan indicated in a Politico interview last week that lawmakers will authorize a supplemental request from the White House -- i.e., "emergency spending," which doesn't have to be offset under legislative rules.

Democrats, however, have already indicated they will try to block that funding in the Senate.

Partially repeal, then replace Obamacare: Full cost unknown.

It's difficult to put a price tag on repeal-and-replace.

First, the current assumption is that lawmakers will repeal Obamacare partially: Get rid of the taxes and mandates immediately, then delay the repeal of the Medicaid expansion and insurance subsidies by up to two years. The estimated savings would be $550 billion over a decade, according to the Committee for a Responsible Federal Budget. (Full repeal, by contrast, would increase deficits by between $150 billion and $350 billion.)

Second, Republicans have yet to propose a replacement plan. That plan will cost money, wiping out any savings from partial repeal and very likely adding to deficits if it provides the coverage accessibility and affordability that Republicans say it will.

Reform the tax code: $3 trillion to $7 trillion over a decade

The reduction in revenue might hew closer to $3 trillion over a decade if lawmakers stick with House Republicans' proposal, according to estimates from the Tax Policy Center. But if they follow Trump's proposal, the price tag could double.

One reason why the House Republicans' tax reform blueprint would cost less is because they would change how imports and exports are taxed. The measure is estimated to raise more than $1 trillion.

But it's not clear if Trump will sign on to that change.

Both Trump and House Republicans, meanwhile, believe their changes would generate economic growth to replace at least some of the revenue loss from any tax cuts.

Invest in infrastructure: $200 billion to $1 trillion over a decade

Here the cost to federal coffers will depend on whether lawmakers choose to rely on direct spending of revenue as well as borrowing; or if they choose to raise money for public/private partnerships.

Increase defense spending: $100 billion to $430 billion over 5 years

Many Republicans want to increase defense spending above the current budget caps in place.

Fiscal conservatives might only want to raise it by $100 billion over 5 years, while major defense hawks -- like Sen. John McCain -- may push for increases north of $400 billion, according to Katherine Blakeley, research fellow at the Center for Strategic and Budgetary Assessment.

That range doesn't include any "emergency" money for overseas contingency operations that Congress often approves. Such spending doesn't have to be paid for.

Trump indicated that more defense spending is a priority, budget concerns aside.

"I want a balanced budget eventually. But I want to have a strong military. To me, that's much more important than anything," Trump said on Fox News' "Hannity" last week.

Paying for it all

So how will Trump and Republicans do everything they want without increasing deficits, let alone balance the budget in a decade?

For starters, they're opposed to increasing tax revenue, except through economic growth. While growth is helpful, it's not sufficient.

Second, most spending growth in the future will be in so-called mandatory spending -- that is, spending on Medicare, Medicaid, Social Security and interest on the debt. Trump has said he doesn't want to touch Social Security and Medicare at all. And Republicans who want entitlement reform don't want to affect current retirees' benefits. So that pretty much rules out much in savings in the first decade.

Third, the administration and Republicans talk a lot about cutting "discretionary" domestic programs -- which constitute the smallest part of the federal budget and are not primary drivers of debt.

Lastly, there's Trump himself, who says he's more concerned with boosting the economy for now.

"So a balanced budget is fine. But sometimes, you have to fuel the well in order to really get the economy going. And we have to take care of our military," he told Fox.

Factors like these convince Democratic budget expert Stan Collender that "if you're going to be surprised on deficits, it'll be on the high side."

Social Surge - What's Trending

Mortgage & Savings


LendingTree

Newsletter

CNNMoney Sponsors