A new Economic Policy Institute report finds that extending Trump’s tax cuts for the rich and corporations would likely cause more damage to working families and the U.S. economy than previous rounds of tax cuts.

Republicans in Congress are considering financing the $4 trillion needed to extend Trump’s Tax Cuts and Jobs Act (TCJA) through either deficit spending—like they did in 2017—or through massive spending cuts, including to key social safety net programs like Medicaid.

Unlike previous rounds of Republican tax cuts in 2001, 2003, and 2017, there is no way to finance these extensions without causing noticeable economic pain to the majority of U.S. households.

Earlier tax cuts could be deficit-financed without doing harm to the economy because they were enacted during times when too-slack spending in the economy was leading to low interest rates, low inflation, and rising unemployment. This meant that the cuts actually provided some useful boost (no matter how inefficient or tilted to the rich) to growth. But today’s environment is different—the economy does not need macroeconomic stimulus. Unemployment has been at or below 4.2% since 2021, and inflation and interest rates are substantially higher. This means that large, deficit-financed tax cuts would put upward pressure on inflation and interest rates, slowing growth and causing pain to households.

If policymakers want to avoid deficit-financing the tax cuts and instead rely on spending cuts, this would do even greater damage to the economic security of working families. Further, spending cuts at the scale needed to finance the TCJA extensions would at minimum require the Federal Reserve to aggressively cut interest rates to avoid a recession, and could quite easily overwhelm any attempt by the Fed to buffer the economy from their effect, leading to recession and job losses. At best, the Fed would squander all of its recession-fighting ammunition solely to absorb spending cuts that were passed entirely to finance a windfall to the richest households. Nothing about this would be smart economics.

“This time, no matter how tax cuts for the rich are financed, the result will be pain for most working families. The bill for keeping taxes low for the most privileged is fast coming due,” said Josh Bivens, EPI chief economist and author of the report.