At Politico Caitlin Emma provides a preview of what the agenda of an incoming Republican Congress is likely to be:
Roy is also a member of the Republican Study Committee, the largest caucus of House GOP lawmakers. It released a budget plan in June that proposes making Trump-era individual tax cuts permanent and gradually raising the eligibility age for Social Security and Medicare, among other major changes.
As should be needless to say I have severely mixed feelings about that. I suspect that when push comes to shove the only thing that Republicans will be able to agree on will be that taxes should be cut.
IMO the “Trump-era individual tax cuts” were fiscally irresponsible and our economic situation is worse now if anything.
Additionally, I am waiting with bated breath for the Social Security Trustees’ 2023 report. I can’t help but imagine that the nearly 10% increase in Social Security Retirement Income payments will result in moving the exhaustion of the trust fund forward. Labor force participation rates are significant in that, too. The only real question will be whether exhaustion is one year or two years closer.
And this must play a role as well:
Find more statistics at Statista
When Social Security was put in place in 1935 full SSRA was 65 and life expectancy was 60. Now they are 70 and 79, respectively. Obviously, the program is no longer serving the purpose for which it was intended but has expanded in scope substantially. On the one hand pushing the full Social Security retirement age back to 84 would be inhumane but leaving it at 70 doesn’t look workable, either. I think what we really need is multiple different public retirement programs but that’s probably politically impossible.
The Medicare trust fund is in even worse shape. The insolvency date is 2028. There should be little doubt that it, too, is in need of reform but that will be even harder politically.
In the end I’m guessing that the Republican leadership will chicken out on entitlement reform but push making the Trump tax cuts permanent.
I don’t know if it is comforting; but I suspect neither the Biden White House or a hypothetical Republican Congress or even a combination of the two will be in control of fiscal policy in the next couple of years.
Fiscal policy is going to be driven by James Carville’s famed “bond market vigilantes”. For a preview, look over the pond at the UK; where a bond market tremor torpedoed Liz Truss’s budget plans and then forced Ms. Truss’s resignation in 44 days.
I will keep pointing this out, if the Federal Reserve doesn’t restart QE and keeps interest rates at 4%+; the cost to the Federal Government is $300+ billion / year from a loss in seigniorage and an increase in interest in the debt; that’s before factoring a possible recession’s impact on the budget.
https://www.washingtonpost.com/business/2022/10/13/debt-interest-rates/
It is likely the markets will force the Biden administration and the next Congress to both raise taxes and cut spending, despite whatever desires they may have.
our LaS DJT will Permanentize His Glorious tax cuts so the Righteous and Wealthy can recover the economy from Demons of Depreciation. In doing so he will ensure Blessed Income for our Beloved Seniors.
°® klampit
That is among the reasons that I opposed Trump’s tax cuts and Paul Krugman’s pleas to borrow for federal projects of various sorts. Eventually the bill would come due. That appears to be happening now.
We should keep in mind that borrowing is moving future consumption into the present. That is hard to justify when it looks like future generations will be poorer than the present ones.
I don’t think anything will happen until there is a crisis that cannot be ignored. And each party is probably secretly hoping that the other party is in power when the crisis hits.
Curious,
There is also the issue of what will happen to the budgets of state and local governments, which could be even uglier and force the feds to borrow more money to help states out.
Social Security and Medicare (and all welfare) benefits will not be cut, nor will the retirement age be raised, nor will the FICA and Medicare taxes be increased. The shortfalls will be met from general revenues and borrowing.
There will be a great of pressure to cut spending in other areas. The biggest target will be defense spending. Shutting down our war against fundamentalist Islam and our proxy wars against Russia (and soon China) will save at least $100 billion per year, our spending on Ukraine alone just this year. But a deep cut of 50% or more in our baseline defense spending is desirable.
All our overseas bases could be closed. In fact, our treaty commitments to NATO, Japan, et al. should cancelled. The Marine Corps should be eliminated in toto or sharply reduced in size. The carrier force should be cut. New programs like the B-21, the Ford class, etc should be cancelled. A large reduction in strategic forces is necessary.
There are some cuts possible in domestic programs, too. The Departments of Education and Interior are possible targets, and the scientific research programs of various agencies are largely superfluous. Moreover, there is a very high degree of redundancy in our welfare programs, which are also grossly overstaffed. A recent article in the WSJ argued that welfare spending brings the annual income of poor families (individuals?) to $30,000 per year.
There are a great number of politically popular but actually inane programs that must be cancelled. That includes the entire Green/Global Warming Agenda (rank superstition all), high speed rail, all public transit other than buses.
Of course, nothing will change. Annual deficits will explode. How about $5 trillion per year? $10 trillion? How about $1 million bank notes?
Our delusional Ruling Class will most likely drive our economy into the ground, into a Second Great Depression. Of course we are now on course for a major world war, which would necessarily be nuclear, so maybe Social Security and Medicare trust financing isn’t reall important.
Tax cuts is the only thing they will try to seriously pass but they will need to offer Biden something to get those. No idea what they can offer without pissing off the base. My guess is a token effort at it then they give in to the bond vigilantes a bit but even there not sure what they are willing to cut that Biden will accept or agin, their base. Probably Medicaid.
So what they will mostly do, just like when Obama was POTUS, is spam a lot of fake investigations that somehow never actually find anything but keep the base angry. (They only have 2 years so I dont think we see 8 investigations of the same thing.) They will also vote to repeal the ACA another million times or make up something to try to impeach Biden. If they can identify a likely successor to Biden they will try to start a fake investigation on them.
Steve
The next Congress is unlikely to face one but the next president is highly likely to face “a crisis that cannot be ignored”—insolvency of the Medicare trust fund.
Tax cuts, even assuming the GoP wins the Senate and that Biden would commit political seppuku by signing a GoP-sponsored tax cut bill, Democrats will temporarily fall back in love with the filibuster and block it. I wouldn’t be surprised to see a tax cut bill pass the House as a virtue-signaling measure, though.
Obviously desired by budget planners and the Fed would be a balance between moderate inflation with low interest rates and high growth, at least adjusted for inflation.
I also anticipate the need for a VAT.
Wouldn’t it be ironic if it was a Republican congress that instituted that.
I don’t think tax cuts will necessarily be a key feature of a Republican Congress. What is driving voter discontent are school issues, rampant crime, an out of control border, and cost of living increases because of Biden’s spending and poor energy policies. Since the House holds the purse, I think under Republican control it will stonewall funding Biden’s domestic/foreign agenda, holding the line on increasing the debt ceiling, and cease giving more money or armaments to Ukraine. School reform, reversing CRT curriculum, returning sexual and gender discussions/decisions to parents, more focus on improving academic skills and possibly decreasing funding to the NEA.
There will probably be investigations into the malfeasance of the DOJ under Merrick Garland, Mayorkas Homeland Security Secretary, Fauci, the troubling and conflicted finances and foreign payoffs of the Biden Family. Whistleblowers may feel more confident in revealing the corruption embedded in the intelligence depts. For 2 long years the country has been held hostage under stringent vaccine mandates, unnecessary loses of small businesses, struggle sessions between schools and parents, decreases in neighborhood and street safety – a general hollowing out of optimism around the country. That’s why middle America, the working classes and traditional families are so angry and fighting back.
https://www.dailymail.co.uk/news/article-11336417/Joe-Biden-complicit-six-alleged-white-collar-crimes-634-page-watchdog-report-claims.html
Maybe, just maybe Justice will finally catch up to the Biden family.
Jan: holding the line on increasing the debt ceiling
You do realize that’s insane? The global economy would crash if the U.S. refused to raise its debt limit.