The Tax Cut Scam: How It Explodes the Deficit and Drains America

The Deficit Is a Serious Problem—But Tax Cuts Are Making It Worse

The national debt and budget deficit are serious issues. There’s no debate about that.

Deficits should be managed responsibly, ensuring the country remains financially stable while still investing in what drives long-term economic growth. But the approach we’ve seen repeated for decades—cutting taxes for the wealthy, watching the deficit explode, then using that deficit as an excuse to slash critical programs—is anything but responsible.

There’s a saying: The definition of insanity is doing the same thing over and over and expecting different results. Yet, every time the GOP takes power, they roll out the same tax cuts, making the same promises. Every time, the deficit surges, and economic growth remains unchanged. The evidence is overwhelming, yet the cycle continues.

This isn’t about partisan politics. It’s about facts. I’d like to believe that sound economic policy is something both sides of the aisle could agree on. But once you examine the data, the pattern is hard to ignore.

This happens each time tax cuts are rolled out. The deficit surges. The numbers tell a clear story—a truth that the electorate and policymakers should stop ignoring.

To bring full clarity, if we visualize it this way, the trends become inarguable:

Do Tax Cuts Grow the Economy? The Data Says No.

The argument for tax cuts has always been simple: lower taxes mean more money in the hands of businesses and individuals, which leads to investment, spending, and economic expansion. This is the foundation of supply-side economics, the theory that has shaped Republican tax policy for decades.

But the data tells a different story.

There is no consistent correlation between tax cuts and GDP growth. If tax cuts were a reliable driver of economic expansion, we would see sharp increases in GDP following every major tax reduction. Instead, GDP continues along its natural trajectory, largely unaffected by tax policy changes.

More often than not, GDP declines are tied to recessions, financial crises, or external economic shocks—not tax rates. The early 1980s recession, the 2008 financial crash, and the COVID-19 economic downturn all had significant impacts on GDP, none of which were caused by tax policy.

Even when GDP does rise after tax cuts, it is not at an accelerated pace. Economic growth remains steady or follows pre-existing trends, making it difficult to argue that tax cuts are the cause. 

The numbers make it clear: tax cuts are not a reliable engine for economic growth. If they were, we would see unmistakable GDP booms every time they were enacted. But we don’t.

The GDP moves in cycles, slightly up, slightly down, and largely at a consistent trajectory, responding to recessions and recoveries—not tax cuts.

Do Tax Cuts Create Jobs? No Evidence Supports That.

Tax cuts are often sold as a way to boost employment. The logic seems straightforward: lower taxes give businesses more money, allowing them to expand and hire more workers. Politicians repeat this claim every election cycle, promising that tax cuts will lead to more jobs and lower unemployment.

But the data tells a different story.

• There is no consistent correlation between tax cuts and declining unemployment. If tax cuts truly created jobs, we would see clear, immediate drops in unemployment following every major tax cut. That pattern does not exist.
• Unemployment follows economic cycles, not tax policy. The biggest shifts in unemployment happen during recessions and recoveries. The 2008 financial crisis sent unemployment soaring, and the post-pandemic recovery brought it back down. Tax rates had little to do with either.
• Sometimes, unemployment rises after tax cuts. Coinciding with the 1981 tax cuts under Reagan, unemployment surged to nearly 10%, before falling again. The Bush tax cuts in the early 2000s did not prevent rising unemployment in the aftermath of the dot-com bubble and the 9/11 attacks, before a year or two later when unemployment began to naturally decrease again.

Businesses do not hire more workers just because they have lower tax bills. Hiring is driven by demand, economic stability, and labor costs—not tax rates. When demand is strong, businesses hire. When the economy slows, they cut jobs, no matter how low their tax rates are.

It’s clear unemployment is little impacted by tax cuts, with lags in changes by a year or two, or sometimes even increasing. No correlation can be observed.

Do Tax Cuts Help Wages? Also, Again, No.

Tax cuts are often pitched as a way to put more money in people’s pockets, not just by reducing what they owe but by increasing wages. The argument is that when businesses pay less in taxes, they pass those savings on to workers through higher salaries and better benefits.

That’s the claim. The data doesn’t back it up.

• Wages have not consistently risen after tax cuts. If cutting taxes directly boosted wages, we would see clear increases following each major tax reduction. Instead, wage growth has remained slow and inconsistent, with no obvious link to tax policy.
• Labor market conditions determine wages, not tax rates. The biggest factors influencing wage growth are the supply of workers, the demand for labor, and broader economic conditions. When unemployment is low and workers have leverage, wages rise. When job markets are weak, wages stagnate—regardless of tax policy.
• Inflation adjustments and cost-of-living changes matter more. Wage gains often come from cost-of-living increases, minimum wage adjustments, or union negotiations rather than corporate tax savings.

In reality, businesses do not automatically raise wages when they receive a tax cut. Instead, they often use the extra money for stock buybacks, executive bonuses, or reinvestment in automation. Worker pay remains an afterthought.

*note – Median Household Income began being tracked as a metric in 1984.

Wage growth follows labor market conditions—not tax cuts.

What Do Tax Cuts Do Consistently? Explode the Deficit

Every major GOP tax cut has led to the same outcome: a larger federal deficit. This pattern isn’t theoretical or occasional—it happens every time.

• Cutting taxes doesn’t eliminate government expenses. The costs of running the country—defense, infrastructure, social programs—don’t disappear when taxes go down. When revenue drops, the government has to borrow more to cover the gap.
• Tax cuts don’t shrink government; they just create a shortfall. The federal government still needs to function, so when tax cuts reduce revenue, deficits grow.
• The deficit then becomes an excuse for spending cuts. The same politicians who pass tax cuts later argue that the government is spending too much. Their solution? Cuts to infrastructure, healthcare, education, and social safety nets.

It’s a predictable cycle. Lower taxes, higher deficits, and then calls to reduce public services. The end result isn’t a stronger economy—it’s underfunded programs and long-term financial instability.

It’s clear: tax cuts drive deficits higher, every single time.

What Correlations Do We See?

Now that tax cuts have been ruled out as a reliable driver of GDP growth, job creation, or wage increases, it’s worth asking: what actually does correlate with economic trends?

Before diving in, it’s important to remember that correlation does not mean causation. Just because two trends move together doesn’t mean one causes the other. However, strong correlations can help identify patterns and offer insight into how different economic factors interact.

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Deficit Spikes Correlate with Economic Downturns

• Data: There is a strong negative correlation (-0.75) between deficits and GDP.
• What this means: When the economy struggles, the government often increases spending to stimulate recovery, leading to higher deficits.
• Why?
  • Recessions slow economic activity, reducing tax revenue.
  • Governments respond by borrowing more to stabilize the economy through stimulus programs, unemployment benefits, or emergency spending.
• Conclusion: Deficits aren’t inherently bad. What matters is why they occur. When deficits increase as a response to economic downturns, they are often necessary to prevent deeper economic collapse.

This does not mean deficits cause recessions. In most cases, deficits grow because of recessions, not the other way around. But the correlation tells us that deficit spikes are often a sign of economic trouble.

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Deficit Spikes Also Correlate with Wage Declines

• Data: There is a moderate negative correlation (-0.62) between deficits and median household income.
• What this means: Rising deficits tend to coincide with wage stagnation or decline.
• Why?
  • Deficit spikes often happen during recessions, which also hurt worker wages as businesses cut costs.
  • Government spending in recessions, such as stimulus programs or social assistance, prevents a complete collapse but doesn’t necessarily drive immediate wage growth.
  • Wages recover more slowly than GDP after a downturn, leaving workers struggling even as the broader economy stabilizes.
• Conclusion: The biggest driver of wage growth is not tax policy but broader economic cycles and worker bargaining power.

This does not mean deficits cause lower wages. Just like with GDP, the connection works the other way—wages tend to stagnate when recessions hit, and recessions are when deficits increase.

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No Meaningful Correlation Between Deficits and Unemployment

• Data: There is a near-zero correlation (-0.05) between deficits and unemployment.
• What this means: Unemployment rates fluctuate independently of deficit levels.
• Why?
  • Unemployment rises when recessions hit, not when deficits grow.
  • Government deficit spending sometimes stabilizes employment through infrastructure projects or stimulus checks, but it doesn’t necessarily create sustained job growth.
  • Businesses hire based on consumer demand and market conditions, not on government debt levels.
• Conclusion: Cutting the deficit will not create jobs. Job growth depends on economic expansion, labor market demand, and consumer spending—not deficit reduction.

This does not mean deficits have no impact on unemployment. Some deficit spending, like infrastructure projects or stimulus payments, may help stabilize employment during downturns. But overall, unemployment is more influenced by recessions, market trends, and business decisions than by government borrowing.

These correlations offer an important lesson. Deficit spikes are not random, nor are they always the result of reckless spending. They tend to occur during recessions, when tax revenues fall and the government increases borrowing to stabilize the economy. Meanwhile, cutting deficits does not create jobs or increase wages—those outcomes depend on broader economic forces.

Understanding these relationships is crucial. The deficit is a tool, not just a number. What matters is how and when it grows, not just that it exists.

So, Why Does This Scam Keep Happening?

If tax cuts don’t drive economic growth, wage increases, or job creation, why do they keep getting pushed?

The answer is a mix of ideology, political strategy, and financial incentives. The data may disprove the effectiveness of tax cuts, but other forces keep them alive.

• A commitment to smaller government. Many conservatives believe in reducing the role of government, and tax cuts provide a way to limit funding for public services. Once revenue is slashed, spending cuts can be justified as a necessity rather than a choice.
• Outdated economic thinking. Supply-side economics became the dominant Republican philosophy in the 1980s, and despite decades of evidence disproving its effectiveness, many still believe it works. The idea that tax cuts always grow the economy remains deeply embedded in political rhetoric.
• A political win with delayed consequences. Voters like keeping more of their money, and politicians know tax cuts are an easy sell. The long-term damage—rising deficits, cuts to essential programs, economic instability—comes later, often when another administration is left to clean up the mess.
• A financial benefit for the most powerful. The biggest winners of tax cuts are corporations and the ultra-wealthy. Campaign contributions flow to those who promise to keep the cycle going, ensuring tax cuts remain a priority no matter how often they fail the broader economy.

Let’s return to the beginning

The reality is clear: tax cuts don’t deliver on their promises. The facts don’t support them, the numbers don’t justify them, and the long-term consequences outweigh any short-term gain. But as long as ideology, political convenience, and corporate influence continue to drive policy, they’ll keep happening—unless people demand better.

We Can Fix the Deficit, But Not Like This

The deficit is a real issue, and it needs to be addressed. That much is not up for debate.

But continuing the cycle of tax cuts that overwhelmingly benefit the wealthy while driving up debt is not a solution. It’s a failed experiment, repeated over and over despite clear evidence that it doesn’t work. If tax cuts truly led to sustained economic growth, higher wages, or lower deficits, we would see it in the numbers. Instead, we see the opposite.

A responsible fiscal policy should focus on long-term stability, not short-term political wins. It should reduce deficits in a way that strengthens, rather than weakens, the foundation of the economy. That means maintaining the programs and infrastructure that drive future growth—not gutting them to pay for tax breaks that don’t deliver.

There are solutions:

• Stop giving massive tax cuts to those who don’t need them. The wealthiest individuals and corporations do not need more incentives to hoard wealth while deficits climb.
• Invest in programs that create long-term economic growth. Education, healthcare, and infrastructure lay the foundation for a strong economy. Cutting them is not a path to prosperity.
• Hold leaders accountable. Congress must be pressured to stop pushing reckless tax policies that deepen inequality and destabilize the economy.

The cycle stops when we make it stop. The data is clear, and the numbers don’t lie. The question is whether we’re willing to demand better.

Sources Include

Federal Reserve Economic Data (FRED) – Fiscal Year Federal Surplus or Deficit
https://fred.stlouisfed.org/series/FYFSD

Bureau of Economic Analysis (BEA) – Gross Domestic Product (GDP) Data
https://www.bea.gov/data/gdp/gross-domestic-product

Federal Reserve Economic Data (FRED) – Median Household Income
https://fred.stlouisfed.org/series/MEHOINUSA672N

Federal Reserve Economic Data (FRED) – Unemployment Rate
https://fred.stlouisfed.org/graph/?g=wEx7

Federal Reserve Economic Data (FRED) – GDP Historical Data
https://fred.stlouisfed.org/series/GD