The economic consequences of a large abominable bill

Sometimes, small details tell a bigger story. February 6, a few weeks later Donald Trump Back at the White House, he met with Republican lawmakers to discuss his tax and spending plans. He hopes to expand the huge pro-business tax cuts that the Republicans pushed for during his first term and proposes a pair of more populist suggestions for his 2024 campaign: Exemption of tips and federal taxes in social security payments for seniors. But with the budget deficit accounting for about 6.4% of GDP, it’s a high figure, historically the president and other Republican leaders are under pressure to find revenue increases and spending cuts that will offset the cost of policy.

Shortly after the meeting, White House press secretary Karoline Leavitt told reporters that the government hopes to remove the infamous tax loophole, which some of the country’s wealthiest financiers have benefited for decades. The vulnerability is called a deduction with benefits, allowing managers of hedge funds and private equity funds to classify certain incomes as investment gains with tax rates far below regular income, thus reducing all of their tax liabilities. Getting rid of it not only provides the expected benefits of raising funds, but also provides the opportunity to improve Trump’s populist qualifications.

The announcement probably surprised hedge funds and private equity giants, some of whom contributed greatly to the president’s campaign. At first glance, they have real reasons. Although Trump is not known as a rigid supporter, carrying interest deductions is a stain on the tax law, even the well-known Trump-backed hedge fund billionaire Bill Ackman has previously described it precisely in these terms. In short, it seems like Trump would do something that the former party government exited: for hedge funds and private equity halls.

Of course, this did not happen. When House Republicans passed a thousand pages of a large bill bill in May, it actually contained everything else Trump asked for – tax cuts, a big increase in defense budget, new funds for funding ice and Border Patrol – but no mention of eliminating interest in carrying. There is no mention of any in the amendment to the bill. The Senate almost passed July 1st, Vice President JD Vance The draw was broken and a settlement bill was voted two days later. After Trump signed the final legislation on Friday afternoon, hedge funds and private equity managers could return to their July 4 pool party and make sure the fireworks show up as they know another administration failed to entrust the pathetic loophole to history.

From a macroeconomic perspective, this failure is not a big consequence. According to the Congressional Budget Office, considering the interest carried as regular income would have an additional income of about $13 billion over a decade. This is a drop in the ocean compared to the $3.4 trillion in new debt that the CBO estimates Republican bills will create in the same period. However, from a political and symbolic perspective, the survival of the inference with interest shows a lot.

He has portrayed himself as a gilded mass gilded Avengers since Trump landed on the Trump Tower’s escalator a decade ago. exist Republican National Congress In Milwaukee last July, Vance famously said: “Ladies and gentlemen, we have finished catering to Wall Street and we will be committed to this worker.” The results of the November election show that the Republican Party has indeed made progress in the working-class areas. But what remains of Trump and Vance’s promise after Friday’s signing ceremony?

A study from Yale University’s Budget Laboratory provides the answer to this question. It found that the Senate bill is not far from the final version of the legislation passed, which would reduce the financial resources of households by the lowest twenty percent of income distribution by about $700 a year and increase household resources by 0.1% per year, an increase of $100,000 a year. As I pointed out a few weeks ago, the bill is Reverse transcription hood mechanism.

The committee’s analysis of the federal budget, an independent oversight agency, provides another way to parse the gap between Trump’s rave remarks and reality. It shows that the most expensive element in legislation to date (with $4.6 trillion in a decade) was the first tax break issued by the President when Paul Ryan was the House Speaker. These measures cut corporate tax rates, lowered nearly three points from the highest income tax rate, and gave businesses “passing” their income for the purposes of tax filing, such as the Trump Organization. Pay Trump’s latest tax cuts and his pet spending allocation, which includes an additional $15 billion for military projects and about $7.5 billion ice Operations, including building more immigration settlement centers and hiring more ice Agents – Add it to the tag, add it to about $5.5 trillion.

Needless to say, Republicans on Capitol Hill and the White House have not worked hard to reduce this huge amount of money. After granting hedge funds and private equity partners to pass, they relentlessly bring benefits to people on the other side of the range. By providing nearly $1 trillion in funding for Medicaid, the system covers more than 70 million low-income U.S. adults and their children, and also cut subsidies on Medicare policies purchased by Obamacare exchange, which found more than $1.2 trillion in savings. They also cut about $14 billion in nutrition assistance programs from nutrition assistance programs (formerly known as food stamps) and student loan programs and other commitments to education. In order to save about $54 billion, they abolished Joe BidenClimate action is damn tax credits for buying electric vehicles and business investments in clean energy systems and green manufacturing.

The composition of the large abominable bill shows that it is an ugly mixture of economics and authoritarian populism that is always suffering. When Trump spoke of the bill, he highlighted taxes such as waiters and other workers who rely on skills, initiated the creation of the Golden Dome missile shield and greatly expanded the anti-transplant police state he had already flourished. The latter’s prospects are particularly shocking: according to the Brennan Justice Center, ice Will become the largest federal law enforcement agency. However, in terms of actual expenses, the rich portion of the bill is getting bigger and bigger.

Oren Cass, founder of the conservative think tank American Compass economist,,,,, He joked that the bill was “zombie regenerationism” or “zombie Ryanism.” If it proves to be the last significant piece of tax-and-spending legislation passed while Trump is President, a possibility that is far from remote, he could go down in history—or at least in fiscal history—not as the disrupter and agent of change that he likes to see himself as but rather as someone who simply extended the agenda of Ronald Reagan, Grover Norquist, and Paul Ryan to its logical conclusion: utter incoherence and irresponsibility.

Even some beneficiaries provided by the bill, including deductions for retaining additional benefits, criticized the bill. Ray Dalio, who founded the large hedge fund Bridgewater Associates, posted on LinkedIn, “Debt now has about six times the money earned, accounting for 100% of GDP, and about $230,000 per U.S. household, which will rise to 7.5 times, about 7.5 times, about 130% of GDP, and $425,000 per household.” Dalio added that if no steps were taken to change the trajectory, “there could be a big and painful disruption.”