President Trump and Republicans are pushing for a $4.5 trillion tax cut bill. They aim to offset a portion of these tax cuts by slashing government spending by $2 trillion, including cuts to Medicaid and SNAP amounting to $800 billion. Employing government spending reductions to “compensate” for tax cuts worsens an already unsound economic policy. If Republicans intend to lower taxes, Democrats’ best move is to demand that these cuts aren’t “paid for.”

Trump’s standout economic achievement in his first tenure was the 2017 Tax Cuts and Jobs Act, which scaled down individual and corporate tax rates. Several 2017 provisions are set to expire this year, which explains the urgency to extend them now. A primary Democratic argument in 2017 focused on how the tax bill deepened government deficits. Evaluating tax policy in this manner is fundamentally flawed.

The prevailing belief that government operations resemble that of a household, requiring tax revenue to spend, fosters the misconception that spending hikes or tax cuts must be “paid for” by generating new revenue or making budget cuts elsewhere. Although Congress has implemented rules mandating deficit-neutral legislation, nothing in our monetary framework mandates that spending and taxation be intertwined. Spending and tax policy are distinct macroeconomic tools with diverse functions geared towards managing the economy. Thus, they should be assessed independently based on their economic impact.

Tax and spending policies are established differently—taxation via tax laws and spending through appropriations. A self-imposed regulation links the two. The idea that spending and taxation policies lead to a deficit’s formation is trivial and cannot be determined beforehand, only discerned at the fiscal year’s end. The crucial aspect is whether they aid the government in achieving its policy objectives.

Government deficits aren’t equivalent to private-sector deficits. The U.S. government can’t go bankrupt as its obligations are in the dollar, a currency it prints and controls. The U.S. cannot deplete dollars or default due to excessive debt. Such a scenario is highly improbable, even as asserted by the conservative Federal Reserve Board Chair Alan Greenspan. The argument that taxes must eventually rise to offset the government debt isn’t backed by historical data. Tax rates on wealthy individuals and corporations have been consistently lowered post-World War II in the U.S. This exemplifies that taxation is predominantly a policy and political decision. Moreover, the U.S. government has neither defaulted nor encountered high interest rates on its debt despite a continuous rise in the debt-to-GDP ratio. The U.S. dollar’s status as the global reserve currency remains unaffected.

When appraising tax policy desirability, deficits should be disregarded. It is necessary to evaluate if proposed tax cuts will foster income and excessive spending leading to inflation and if they adversely impact income and wealth inequality. Since the 2025 bill intends to extend provisions from 2017, it might not have a substantial inflationary effect. However, Republican tax policies are likely to exacerbate income and wealth inequality, as seen with the 2017 tax bill. This, not the budget impact, renders the bill unsound economically.

Permitting tax cuts to add to the deficit might be a contentious notion, but it pales in comparison to the negative implications of the Republicans compensating for them by cutting Medicaid and SNAP. Historically, both Democrats and Republicans have passed deficit-increasing legislation through reconciliation, akin to the initial Trump tax cuts. Present tax cuts remain partly unpaid, as the $4.5 trillion tax revenue reduction is only offset by $2 trillion in spending reductions. It is acceptable for the government to run deficits in its currency without adverse effects on the economy. In contrast, cutting government spending will not only harm program beneficiaries like SNAP and Medicaid but will ripple through the entire economy by reducing national income.

Considering that tax cuts are likely to pass with or without Democratic support, the best strategy for the Democrats is to negotiate with the Republicans to let the tax cuts remain “unpaid.” This course of action allows the Republicans to enjoy the benefits while safekeeping Medicaid and SNAP—at least temporarily.