My reaction to our present political situation is disappointment. I’m disappointed with both of our political parties.
The Republicans accomplished a veronica (definition 3) in passing the “big beautiful bill”. Unfortunately, they were more motivated to extend the tax reforms of the first Trump administration than they were to improve on them. They didn’t rebuild the U. S. military, basically cutting military spending in real terms. Their “cutting” of Medicaid isn’t nearly as draconian as their political opponents would have you believe but they will certainly make for good campaign ads for the 2026 midterms. My concerns about the BBB are that I suspect it isn’t likely to spur investment much if at all but it will reduce consumption, particularly in combination with import duties.
I’m no happier with the Democrats. We are in circumstances which if not unique are at least unusual. I don’t believe we’ve had a situation in which the the president’s political party controlled both houses of Congress by such small numbers in my lifetime—I think the closest was when Woodrow Wilson was president. Under the circumstances, I think the Democrats should have produced an alternative budget proposal. That has been the practice within recent history. Instead they opposed any proposed budget. That doesn’t tell us much about what they support only what they oppose. We already knew they detested Trump.
Past assessments of allowing the tax cuts of Trump’s first term to expire, for example from the CBO, have suggested doing so would cause a reduction in GDP in the short term but that continuing to run at a deficit would enhance growth in the long term. I continue to look for complete assessments of the consequences of the enacted budget from reliable sources. Those I have read to date are partial assessments, typically not including both the spending and tax portions of the legislation.
Judging from yesterday’s presser, the real problem is that Trump is every bit as demented as Biden. The neocon march to war with both Russia and China continues. Expect to see some American outrage in East Asia soon.
My understanding is that the Medicaid cuts are deferred until after the midterm elections, which suggests at least some Republicans think it would be a political issue if cuts came earlier. I looked at the list of nine Illinois hospitals at risk of closing due to the cuts, and seven of them are in cities w/ under 10k population, one with a population under 1k. Certainly can see why they’d be at risk, but they are likely not serving many to begin with.
I went looking for it but couldn’t find the last time the party out of power presented a real budget. It’s actually pretty common for the party to publish some abbreviated form of a budget, which Dems did this time, but I cant find presenting an entire detailed budget. You must have that info since you suggested it so would you mind sharing. I think my Google-fu is lacking.
I think maybe the best you can do is look at past results. Past GOP tax cuts have had minimal effects on growth. Predictions that lowering tax rates will result in more revenue have almost always failed. I also think the uncertainty factor is going to catch up with us. Are we having tariffs or not, on who and how much?
As an aside I am at Chautauqua this week and this morning Schake from AEI and Brookings discussed foreign policy making it a point to go over both the good and bad things Trump is doing/has done. It was pretty entertaining.
Steve
As I pointed out this is an historic situation. We haven’t had a Congress held so narrowly by the party that held the White House in over a century. Another way in which this is an historic situation is that we’ve never had debt:GDP this high before and we appear to be nearing an inflection point.
Have we forgotten the 107th and 117th Congress. The 117th (2021-2023), the Democrats had a 51-49 majority in the Senate and 222 seats in the House (same as Republicans started in Jan of this year) — so a narrower majority. In the 107th Congress (2001-2003), Republicans had a majority in the Senate only via the VP’s tie-breaking vote until they famously lost it when Sen Jeffords switched parties, in the House Republicans only had 222 members to start that Congress.
This isn’t a rare occurrence, its the 3rd time in 25 years.
Actually what’s interesting on the fiscal front is the tariffs. They are on track to raise $250 billion this year, and about $330 billion / year (because tariffs really started around April). Roughly speaking, that’s the equivalent of a 5% value added tax on everything.
It is some “Veronica” that the perception is Republicans have “cut” taxes when in the aggregate (with tariffs included), there hasn’t been much cutting. Its also makes me conclude the tariffs aren’t going anywhere, there’s too much revenue at stake. Either the courts are going to give their approbation or Congress will write them into law.
We have yet to see the full effects of tariffs, especially as Trump keeps changing them. We should expect to see a degrowth effect which will decrease other revenue. Plus we have yet to see the full response of other countries as they wait to see what finally happens. This is really a corporate income tax and it’s hard to see that as being especially good for an economy. Yes, it will be passed on to the consumer, but resulting in higher prices. Mind you we wont have inflation it’s just that stuff will cost more. If prices go up interest rates will stay up (even if Trump fires Powell) so interest rates payments in the budget will remain high.
Steve
I would just point out that most people don’t care about inflation; they care about prices. Tariffs don’t cause inflation but they do produce price increases—that’s the point of tariffs.
Just as a reminder I don’t support Trump’s tariff agenda. I think we should ratchet up our tariffs on goods imported from China for geopolitical reasons but eschew tariffs on goods from other countries, particularly Canada and Mexico.
Curious. Agreed.
Dave. How do you pull that off? Totally agree philosophically. How can these 3 N American countries, who should be in lockstep, actually do it? Interests are not totally aligned. And we have the consumer market.
NAFTA was a step in the right direction. Now we need to go back in that direction. IMO we should be doing more trade with Mexico and Canada rather than less. Whether we like it or not we are moving in the direction of a single economy for the U. S., Canada, and Mexico.
In the case of Mexico in particular there needs to be more oversight than at present. That alone may affect how much trade we do with Mexico.