the increase In the absence of spending changes, tax cuts are likely to
raise the federal budget deficit.3 The increase in federal
borrowing will likely reduce national saving, and hence
the capital stock owned by Americans and future national
income. In most economic environments, the increase
in the deficit is also likely to raise interest rates. These
changes – lower national saving and the associated
increase in interest rates – create a fiscal drag on the
economy’s ability to grow (Congressional Budget Office
2013; Economic Report of the President 2003; Gale
and Orszag 2004a; Engen and Hubbard 2004; Laubach
2009).