The BBB. I have some good news and some bad news.
The so-called Bib, Beautiful bill (hereafter BBB) is a major disappointment.
With republican control of both houses of congress and the presidency, one would have thought that this was one of the few chances to get federal spending under control. When Trump came into office the first time, the Federal deficit was $20 trillion. Then came Covid and Biden. The deficit ballooned to $36 trillion. Now the BBB will push it up by $5 trillion more. Yes I know that the Congressional Budget Office – one of my old employers – estimated an increase of “only” $2.4 trillion over the next decade. But that number assumes that the tax decreases extend only through the current administration. Making them permanent adds another $2 trillion. Counting interest the total number is $5 trillion. And this mind you is from the republicans!
The republican mantra is always the same: tax decreases will stimulate growth which will reduce the deficit. However, there is no significant tax decrease in the BBB. It is only preventing the Trump tax cuts from expiring. Therefore, there should be no additional stimulus forthcoming. A MAGA apologist has chided the CBO for its projections saying that its model is flawed. The attack on CBO is not based on a critique of the model but on a critique of the voting of CBO staff. It is alleged that no CBO staffer has voted republican since 2000 (I left in 1985) so how can CBO be “nonpartisan.” It must be that all those democrats would construct models that favor democrats and not republicans, never mind all the criticisms from democrats when the CBO estimates their budget numbers. The MAGA-guy probably doesn’t know that the CBO director is appointed jointly by the speaker of the house and the president pro tempore of the senate. When I was at CBO, the director was Rudy Penner, a republican. Currently, the director is Philip Swagel, who is not surprisingly also a republican. Another “nonpartisan” group is the Committee for a Responsible Budget which provides in-depth analysis of federal budgets. Their estimates are virtually the same as CBOs. So the onus is on the MAGA-guy to produce his model with its assumptions and parameters which show a reduction in the debt. Not happening.
Elon Musk filed for a divorce from Trump citing irreconcilable differences when he called the BBB a “disgusting abomination of pork spending.” I know that Musk may have had personal reasons for attacking the bill. Some say it is because the bill cuts the EV tax credit. But Musk had said earlier that Tesla didn’t need the tax credit and anyway it no longer qualified due to the number of vehicles sold. As Musk tweeted “I’m sorry, but I just can’t stand it anymore. This massive, outrageous, pork-filled Congressional spending bill is a disgusting abomination. Shame on those who voted for it: you know you did wrong. You know it.” Musk tweeted further “It will massively increase the already gigantic budget deficit to $2.5 trillion (!!!) and burden America citizens with crushingly unsustainable debt” and added a USA budget deficit chart.
The markets seem to believe CBO, Musk and not the MAGA-guy. US debt has been downgraded. The recent Treasury bond auction was deemed a failure because the rate that cleared the market was over 5 percent, increasing the cost of interest payments on the debt. The 30 year Treasury is also above 5% while the 10 year is 4.6 percent and inching higher.
But the BBB is a typical DC budget, only this time from the republicans rather than the democrats. It has basically left entitlements unchanged despite all the gnashing of teeth over Medicaid and has all the tweaks to the tax code that inhabit every budget bill. The Medicaid cuts makeup a miniscule $880 billion over 10 years. As Stevie Wonder says “What the fuss?” That is the good news. The bad news is that if the Trump tax cuts are not extended, the net result will be a $4.5 trillion tax increase that will help kill any chance of economic growth. Certainly there must be someone in the administration brave enough to tell the president that his oppressive tariffs will help kill growth rather than kindle it as he always proclaims. So it is likely that the market reaction to the bill not passing may be worse than the reaction if it passes. Such is the world in which we live.
At the start of Trump Part 2, I said that there was no need for Elon Musk and DOGE. Doesn’t every agency have inspector generals? What are they doing to earn their money? Why didn’t Trump command that all cabinet members use their inspector generals to ferret out waste and fraud? Moreover, why didn’t he ask each cabinet member to bring him a budget that was 15 percent smaller than the previous year’s budget? He would then submit those numbers to the House budget committee and tell them to operate within those parameters and bring back a BBB that was at a minimum 15 percent smaller than the previous year’s.
Yes there would be a lot of screaming and shouting. Yes the democrats would repeat their standard mantra of “balancing the budget on the backs of the poor.” Yes Trump would have to work overtime to shore up wobbly republicans. But at least he would have made the effort. As it now stands, there are only a handful of republicans that have the guts to openly oppose Trump. Resistance is building in the senate starting with Rand Paul and Ron Johnson. Trump is losing support in the house, even among those who voted for the bill like Majorie Taylor Greene. But where are the so-called fiscal hawks? Where are Chip Roy, Ralph Norman, Andrew Clyde, Anna Paulina Luna and Byron Donald? Where is Tim Burchett?
Over one of the doorways at the senate is the inscription “Annuit coeptis” (God has favored our undertakings). In the house chamber it is “In God we Trust.” In reality as I once wrote that the inscription above the doors to the congress should read “Lasciate ogne Speranza, voi ch’intrate” – abandon hope all ye who enter here.
Is that why I have this feeling of foreboding?
haroldblackphd.com 