by Erick-Woods Erickson
President Trump’s One Big Beautiful Bill Act has passed the House of Representatives. There were times it looked like it would die. But, in the end, all but two Republicans voted for it. It passed by just a single vote. The vote went so late into the early hours of the morning that Congressman Andrew Garbarino of New York fell asleep and missed the vote.
The theory behind the bill is that tax cuts coupled with deregulation will stimulate the economy, generate tax revenue, and help deal with the increasing problem of the national debt exceeding one hundred percent of our gross domestic product. Interest payments on the debt now exceed even defense spending. No country has sustained this and just about every country that reached this point began a period of decline.
History is not in our favor on this. But every cut had a constituency. Moderate Republicans did not want cuts to President Biden’s green new deal subsidies. Liberal Republicans demanded an increase in the federal deduction for state and local taxes (SALT). Fiscal conservatives wanted more reformed to Medicaid and SNAP to undo the massive expansions Democrats doled out during COVID.
Now the Senate will get its turn. Some Republican Senators want no reforms to Medicaid. Others want more reform. Some Republican Senators want a reduction in the SALT deduction. Others want to save the green new deal while others want to kill it all now. It is a remarkable thing to watch Republicans, who failed to kill Obamacare after campaigning on doing so now preserve much of Joe Biden’s green new deal after campaigning so aggressively to kill it.
Yet again, we are witnessing Republicans only being interested in fiscal conservatism when they are out of power. We are, yet again, witnessing Republicans preserve signature Democrat initiatives they campaigned on killing. We are, yet again, watching our system work as designed. It is a messy process where the President, who the media insists is a tyrant, has to compromise, along with everyone else, in order to get something passed. It is not perfect. It is the process.
The problem, however, is the future. Bond markets suggest jitters about the future with interest rates increasing. To be sure, they are not the nine percent rates of the Reagan era, but they are rising. The debt is headed well above our gross domestic product. Last year, in a conversation with then Senate Republican Leader Mitch McConnell, he told me we would meet the fiscal cliff before we solve the problem because neither side is prepared to confront the issue until the crisis is upon us.
We could avoid the crisis very easily. We should reform entitlements. The entitlements are what are killing us. Raising the age of retirement for social security, restricting beneficiaries of medicare and medicaid, restraining SNAP, etc. all would help. During COVID, the Biden Administration expanded access to government services to people well above the poverty line and to illegal aliens. Republican attempts to rein in those expansions have been met with opposition even from some Republicans. Eventually, the programs will be cut and taxes will probably go up too. The present is not sustainable.
While Republicans hash out their reconciliation plan and hope to spur economic growth, the world is not waiting. China continues its aggressive military build up. The Russians are hoping the United States retreats from the world stage and walks away from Ukraine. Iran continues its quest for a nuclear weapon. Here at home, the Republicans are touting an increase in defense spending, but it actually is a real reduction because the growth is far less than the rate of inflation in costs.
Ronald Reagan knew he could bankrupt the Soviet Union. He set the nation on a path of increased national debt knowing the American economy was robust enough to handle it. It worked. But the economy of today is not as robust as the Reagan economy. The debt is much, much higher. Republicans are set to add more to the debt than Joe Biden, despite not now dealing with COVID. China thinks it can now bankrupt us. These are dangerous times.
