republican lawmakers may stomach larger deficits from a republican president, but signs of tension are emerging as president-elect donald trump looks poised to stand by promises to slash taxes while spending more on big-ticket items, such as infrastructure and the military. budget deficits<u+00a0>fell from 2010 until last year but are on track to climb in the next decade, even before factoring in new spending proposals or revenue-reducing tax cuts. <u+201c>you can<u+2019>t just like spending that your party wants and dislike spending that the other party wants,<u+201d> says rep. mick mulvaney (r., s.c.), who rode to office in 2010 on the tea party wave. still, mr. mulvaney and other congressional republicans say tax-cut-induced deficits<u+00a0>aren<u+2019>t the same as ones brought on by increased spending, in part because they believe the former can<u+00a0>generate growth in ways that<u+00a0>recoup lost revenues over time. this suggests the gop will be willing to<u+00a0>tolerate<u+00a0>higher deficits in the short-run under mr. trump because the party is largely united on overhauling corporate and individual income taxes.<u+00a0>democrats say there is no proof tax cuts pay for themselves. and reduced revenues, they worry, could be used to justify big cuts to safety-net programs like food stamps and medicaid. for republicans, the bigger fight will be over mr. trump<u+2019>s proposed infrastructure plan. the president-elect has been passionate about rebuilding roads and ports but sketchy on the details of how to pay for it, stirring concerns among republicans who are uneasy over approving a costly stimulus program. <u+201c>a fairly nonideological donald trump will bump up against some fairly ideological members of the house conference,<u+201d> says rep. charlie dent (r. pa.), a moderate republican who didn<u+2019>t back mr. trump. under current policy, the congressional budget office sees the budget deficit of 3.2% of gross domestic product holding around those levels for the next four years. by the end of mr. trump<u+2019>s first term, deficits would rise to 5.3% of gdp under the house republicans<u+2019> tax plan, and to 6.8% under mr. trump<u+2019>s proposal, according to an analysis by cornerstone macro, a research firm. the last two times republicans reclaimed the white house from democrats<u+2014>in 1981 and 2001<u+2014>they also successfully pushed for large tax cuts. deficits nonetheless rose during their administrations. mr. trump inherits a much weaker fiscal position than presidents ronald reagan and george w. bush did. when mr. reagan took office, the congressional budget office projected the u.s. would run a surplus of 2% of gdp over the coming five years, while in 2001, they projected even larger surpluses of 3.3%. by contrast, the u.s. is now running rising deficits, and the federal debt stands at about 77% of gdp, compared with 25% in 1981 and 31% in 2001. concerns about deficits over the past few years have faded because economic growth remains disappointing and because washington took several steps to cut spending and increase taxes after deficits jumped in 2009. deficits have also fallen below projections in recent years due to a surprising decline in the growth rate of health care spending and because interest rates have been lower than projected. mr. trump and his advisers have brushed aside deficit worries and say many forecasts don<u+2019>t account for growth that may result from their entire economic agenda. without stronger economic growth, they say the country won<u+2019>t stand a chance turning back deficits facing stiff demographic headwinds from the retirement of the baby boom generation. already, mr. trump has forsworn any changes to the largest future drivers of spending, social security and medicare. <u+201c>is trump going to get a little deference because he<u+2019>s in the same party? perhaps,<u+201d> says mr. mulvaney. mr. trump has acknowledged potential divisions with his own party while also playing them down.<u+00a0>he told the new york times last week he hadn<u+2019>t realized his plan for <u+201c>a very large infrastructure bill<u+201d> was <u+201c>not a very republican thing.<u+201d> then he added, <u+201c>let<u+2019>s see if i get it done. right now they<u+2019>re in love with me, ok?<u+201d> mr. trump<u+2019>s advisers have floated different ideas, including an infrastructure bank or a plan to use tax credits to spur up to $1 trillion in spending by private developers. critics say that idea wouldn<u+2019>t help many of the nation<u+2019>s most critical needs and would leave out large pools of tax-exempt capital. other advisers say they are open to recycling a proposal made by president barack obama and democratic nominee hillary clinton to pay for infrastructure with one-time revenues from taxing multinationals<u+2019> profits stashed abroad. mr. trump<u+2019>s chief strategist, stephen bannon, has echoed arguments made in recent years by left-leaning economists who supported more spending to boost growth. <u+201c>with negative interest rates throughout the world, it<u+2019>s the greatest opportunity to rebuild everything,<u+201d> mr. bannon said in a recent interview with the hollywood reporter. <u+201c>shipyards, ironworks, get them all jacked up. we<u+2019>re just going to throw it up against the wall and see if it sticks.<u+201d> write to nick<u+00a0>timiraos at nick.timiraos@wsj.com
donald trump<u+2019>s spending push rankles fiscal conservatives  - wsj
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