WASHINGTON — The Republican overhaul of the tax code sets the stage for years of politically fraught debate over what the government should provide for its citizens and how much it should demand in taxes.

President Trump and Republicans in Congress are celebrating the $1.5 trillion legislation as a big tax cut for workers and businesses. And for the time being, it is that – 80 percent of the country will pay lower taxes next year.

But the short-term gains come with a cost: the legislation also makes the country’s debt problem even worse, in all likelihood forcing policymakers in coming years to make difficult decisions about spending cuts, tax increases or both.

The debate could touch on some of the most value-laden questions facing the nation – what type of financial security to provide the elderly, what safety net services should be offered to the poor, and how much the government should try to shrink economic inequality.

The challenging landscape is partly the result of choices Republicans made with their tax bill and partly the result of deeper economic forces in the economy. They decided to cut taxes without offsetting spending cuts, driving up the deficit.

But the country is also going through a profound demographic shift in which millions of baby boomers are retiring from the labor force and joining the rolls of Medicare and Social Security.

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The nation already owes $15 trillion to investors and foreigners. Even before the tax bill, the country was on track to hit $25 trillion in debt in the next decade, according to the Congressional Budget Office.

That would be the highest in modern American history. The tax bill adds another $1 trillion to $2 trillion to the total.

“We are just dooming ourselves to a larger tax increase or spending cuts in the future,” said Marc Goldwein, senior policy director for the Committee for a Responsible Federal Budget. “At some point our leaders are going to look at our finances – or the markets will force them to – and say this is unsustainable.”

Republicans are already previewing how they intend to address the debt. They say they are looking as soon as next year to begin an overhaul of the entitlement system – Medicare, Medicaid and Social Security – in hopes of limiting spending.

They are also seeking to target the safety net, pledging to curb eligibility in an effort to encourage people to seek work instead of relying on government assistance.

“We are going to focus next year on people. On getting people from welfare to work,” House Speaker Paul Ryan, R-Wis., said Tuesday on the House floor.

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Republicans are not unified on these questions. Trump promised not to touch Medicare and Social Security, two programs that are popular among his base of working-class white voters.

Democrats, meanwhile, say they expect to roll back significant elements of the tax plan if they gain power in the future. Democrats have taken issue with the plan’s disproportionate benefits for the wealthy and corporations.

House Minority Leader Nancy Pelsoi went as far as to call the bill “Armageddon.”

“I think the big problem with it is it increases deficits by at least $1 trillion, largely to finance a giant tax cut for the wealthy and corporations,” said Lily Batchelder, a tax law professor at New York University and former Obama administration official.

Democrats might not have a chance to restore some of those taxes unless they recapture the White House in 2020, but there is precedent – President Obama and congressional Republicans agreed to end the George W. Bush tax cuts for the wealthiest Americans in a fiscal pact forged on New Year’s Eve 2012.

Still, asking Americans to stomach spending cuts or tax hikes can prove difficult. Technically-speaking the tax-cut legislation is supposed to trigger an equivalent amount of spending cuts under a congressional rule enacted in 2010 out of concern for the mushrooming federal debt. Congress is widely expected to wave the rule.

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And while Republicans set a significant part of their package – provisions affecting individuals – to expire in 2025, to comply with a Senate rule limiting the impact of legislation on the deficit, they say their expectation is those tax cuts will be extended, bringing the price tag of the tax bill well beyond $1.5 trillion.

For the next eight years, however, the Republican tax bill itself gives the vast majority of Americans a tax cut. Only 5 percent will pay more next year, according to the nonpartisan Tax Policy Center analysis of the final bill, and most of those are people earning six-figures who live in major cities like New York and San Francisco.

“It’s not the kind of disaster many in the media have made it out to be,” says economist Tyler Cowen of George Mason University. “There’s a good chance it will prove popular next year once people see their taxes go down.”

Whatever the future holds, it’s clear the Republican Party’s decision to increase the deficit to cut taxes is a departure from recent precedent. Republicans started the year promising to fix America’s corporate tax code, but to do it in a way that was deficit neutral.

A big fiscal deal nearly achieved by Obama and then-House Speaker John Boehner, R-Ohio, would have raised taxes while cutting spending – modeled after the bipartisan Simpson Bowles Commission that had made similar recommendations.

Even President Ronald Reagan’s tax overhaul in 1986, which many Republicans regard as the gold-standard, was structured to be revenue neutral. The new bill took a far different approach.

“The bill is very consistent with Republican ideology that the solutions are all in the private sector,” said William Gale, a senior fellow at the Tax Policy Center and former staff economist at the Council for Economic Advisors under President George H.W. Bush. “Businesses, corporations and pass troughs are getting big breaks at the ultimate expense of the government’s ability to address any of the pressing social or domestic issues.”

There’s widespread agreement that in the short term, the tax bill will grow the economy a bit faster.

The question is what happens after the initial bounce. Republicans argue that upswing will continue for many more years, as businesses invest more.


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