President Trump and Republicans aim to enact a bill that slashes taxes by $4.5 trillion, partly offsetting this through cuts in government spending by $2 trillion, such as reducing Medicaid and SNAP by $800 billion. Using spending cuts to balance tax reductions can worsen an already flawed economic policy. If Republicans wish to cut taxes, Democrats should consider insisting that they don’t need to be “paid for.”

Trump’s most notable economic achievement in his first term was the 2017 Tax Cuts and Jobs Act, which reduced tax rates for individuals and corporations. With many 2017 provisions set to expire soon, there is a rush to extend them. In 2017, Democrats mainly criticized the tax bill for deepening the government deficit, but this perspective may not be the right one to assess tax policy.

The prevailing belief equating government spending with household finances often leads to the misconception that spending hikes or tax reductions must be offset with new revenue or budget cuts elsewhere. Although Congress mandates deficit-neutral legislation, our monetary system doesn’t inherently require spending and taxation to be tied together. These are separate macroeconomic tools that must be analyzed individually based on their impact on the economy.

Tax policy and spending policy are established through different processes — taxes via tax law and spending through appropriation. Linking the two is a self-imposed rule. The focus shouldn’t be on whether spending and taxation policies will result in a deficit, but rather whether they enable the government to achieve its policy objectives.

Government deficits are distinct from private-sector deficits. The U.S. government, having obligations in its own currency, cannot go bankrupt and can always fulfill its debt obligations. Concerns about the need to raise taxes to address government debt don’t align with historical trends, as tax rates on the wealthy and corporations in the U.S. have often been reduced. The central argument that the U.S. should raise taxes to cover government debt doesn’t reflect actual conditions.

Tax policy evaluation should shift towards understanding whether the proposed measures might boost economic activity excessively, potentially fostering inflation, and if they contribute to income and wealth inequality. While the 2025 bill is expected to extend 2017 legislation provisions without major inflationary effects, Republican tax policy could exacerbate income and wealth disparity, making it detrimental economic policy.

Allowing tax cuts to add to the deficit may seem controversial, but the alternative — Republican-backed reductions to Medicaid and SNAP to “pay for” them — could be worse. Both Democrats and Republicans have previously approved legislation increasing the federal deficit, and the current tax plan isn’t entirely offset by spending cuts. Permitting tax cuts without compensating reductions could be an optimal approach for Democrats.

Running deficits in a country’s own currency, like the dollar, doesn’t have adverse economic consequences, while slashing government spending could negatively impact individuals dependent on programs like SNAP and Medicaid, influencing the wider economy. With tax cuts likely to be enacted regardless of Democratic support, a potential negotiation to allow unpaid tax cuts while safeguarding Medicaid and SNAP could benefit Democrats.

Yeva Nersisyan holds the position of economics department chair at Franklin & Marshall College.