Transcript
Speaker: Hello and welcome to Sips and Substance, where we distill politics down to its essence. I'm Justin. We have Jonathan over here. Hello. And this week we are going to talk about the one big, beautiful bill.
Speaker: And that's the budget reconciliation bill that the House just passed. And we're going to be talking about, you know, why it's not a particularly good bill and what it does in terms of cuts and how it affects the deficit, what it says about our current state of politics and the long-term effects of the bill.
Speaker: Now, but before we move on to beer talk, ah we wanted to just sort of mention a little bit of show business. You may have noticed that we were off last week and we plan to take more breaks during the summer.
Speaker: You know, if the Supreme Court and Congress get break, I think we should have a break too. You're here. And at the end of the day, you can't be plugged into politics all the time.
Speaker: It's good to, you know, go outside, touch grass and just sort of forget about it. Even though politics is important, it's just nice to have a break. So we encourage everyone to also have a break and you know what? Turn off those podcasts.
Speaker: Certainly all the other ones.
Speaker: but So for today's episode, I have one of my favorite beers, actually. i was very excited to see this in our local beer store. It's Three Floyds Dreadnought. um It's a an Imperial IPA from Three Floyds. It's a very strong beer, so it's it's good for for stomaching um the discussion of the big, beautiful bill. It's 9.5% alcohol, so it's not a beer you're going to be pounding. It's it's kind of a sipping beer, but it's very solid beer. it's got you know it's It looks like a strong beer because it kind of is. there's a really strong malt backbone here.
Speaker: um where the extra alcohol comes from and a lot of hops. So it has a great hop aroma. It's not it's if I had to say but pick between the two it's more like a west coast IPA because it's not sweet right it's it's dank and bitter um but just balances very finishes very smoothly and very balanced because of all the the hops in it now one of the the nice things about a really well done imperial IPA is it doesn't taste like oh my god it's full of alcohol it's very smooth so can kind of creep up on you so just know what you're drinking if you're having one of these there's a lot of good ones
Speaker: on all parts of the country. um Imperial IPA is great stuff, not your traditional summer beer, but um if you're going to be doing digesting some bizarre politics, good stuff to have. And I couldn't pass it up because like I said, it's one of my favorite beers, one of the first three Floyd's beers I ever had. And it it sold me on three Floyd's just right from the start.
Speaker: Well, it's not summer yet, but I do want to mention Memorial Day, which is sort of the traditional start of summer. even though it's not the summer solstice. For those of us who aren't baseball fans, my traditional summer is early on earlier on, but that's okay too.
Speaker: I just want to have a quick mention about Memorial Day. you know I know that many people are going to be having barbecues, and enjoying the three-day weekend, but I want everyone to remember what Memorial Day is celebrating.
Speaker: It's celebrating the people who died serving our country. So for a lot of folks, it's a very somber day. You'll often see veteran cemeteries, folks putting flags there, flowers, what have you.
Speaker: And just keep that in mind. Yeah, I think that's worth noting. I mean, it's I think, you know, it is used interesting useful to note, I think, that it started off as a remembrance of the Civil War, right? And When I was a kid growing up in our little town in Ohio, we had parades. You know, we had Memorial Day parades and where we're celebrating veterans. So the barbecue thing and the celebration kind of works with that.
Speaker: um And I'm, you know, I don't think we want to be telling people go out and be somber and mourn. Enjoy your Memorial Day. But give a thought to why we have Memorial Day. I think everybody has time to at least do that. So on to some quick hits before we get into the meat and potatoes of the one big, beautiful bill.
Speaker: I know you want to mention a couple things about your favorite secretary of all time, RFK. Oddly, I have bad things to say about RFK. um Again, specifically this time, ah he if you haven't been following the news, good for you.
Speaker: um But he's come out and said, you know what? You're not going to be able to get a COVID booster unless you're 65 over. or have some sort of underlying condition that would make it important.
Speaker: um And the reasoning for this is the best part, because the American public is not convinced of the word of the worth of this. And that's how I want to have my public health done, right? I want the average imbecile from MAGA to be able to tell me what's an effective use of healthcare care resources, because that's really what you want to do.
Speaker: um And it shouldn't surprise any of us, except maybe, I'm losing his name again. What's his name? Oh, Cassidy. Yeah. Where is he right now? Where is he to assure us that none no we're not going to lose access to any vaccines?
Speaker: We're not going to have any problem with vaccines. And we're going to vote for RFK because he's going to uphold you know the public health stance that we already have. because that doesn't seem to be the case. I'm just curious what's going on with in his world, because I haven't heard him come out and speak against this.
Speaker: Seems to be OK. Seems to be perhaps he was a bit of a hypocrite when he said that it was important to do these things. I would love to see the AMA go after his license, but they don't do that kind of thing, unfortunately, um because he's a sham as both a doctor and a senator to tell us that he's concerned about this and that to let this crap happen.
Speaker: um That's my rant of the week about him. Unfortunately, he's going to give us plenty more. The other thing I think it's worth, couple things worth mentioning. Trump is going after Harvard again.
Speaker: um He's really still concerned about all the anti-Semitism at Harvard. And so now they're telling Harvard, you can't enroll um foreign students. um Interestingly enough, this the very next day, which is today when we're when we're recording, the judge has already said, in fact, no, you can't do that.
Speaker: And put a and put a stop to that order. um But I think it's also worth considering sort of this whole administration approach to, oh, we have to stop anti-Semitism at Harvard. and Just thinking about that, ah i did I checked out the numbers, but 25% of the undergrads at Harvard are Jewish.
Speaker: and And if you're not aware, that's a lot bigger than the population of Jews in the country, where 2.5% of the population, ah a little less, actually, I think 2.4% of the population is Jewish.
Speaker: So if Harvard is discriminating against Jews, they're not doing a very good job of it. Right. And not to say that I think, you know, I think it's horrible. Some of the abuse that Jewish students have received at the hands of some of these protesters.
Speaker: That's something we should stop. And. um ah The new Harvard president, who is actually Jewish, has done some taken some steps to do this. But to say that there's institutional race anti-Semitism at Harvard is just preposterously ridiculous.
Speaker: but Because again, Jews are represented at Harvard at a 10 times rate than what they're represented in the country. um Which also kind of begs the question that I think I might ask the Trump administration if I was a Democrat right now.
Speaker: If you're, why are you focusing so much on the imagined antisemitism at Harvard when an actual antisemite happened to penetrate a Jewish event and kill two Jewish people in Washington, DC?
Speaker: Maybe focus more on real antisemitism than trying to gin up fake antisemitism might be more important for our country. Yeah, hear, hear to that. I do think it's also interesting how quickly this, i don't want to say got resolved, right?
Speaker: But there was a temporary re restraining order imposed by the judge. And this happened within 48 hours. Less. it was, I thought it was, I thought it happened.
Speaker: They announced it yesterday and got the thing today. It wasn't. We're still within 48 hours, but so also the point is it's very quick. Two of going to court, right. They went to court and boom, there it is. like yeah And I think this just shows, you know, traditionally speaking, the courts have given some deference to the executive branch and Congress in how they operate.
Speaker: And the courts are now looking at what the Trump administration is doing, and they know that they're full of shit. And so they are handing these out and they're being much more heavy handed. And recent Supreme Court rulings have also suggested that, that the Supreme Court is very unhappy with the Trump administration and how the Trump administration is basically thumbing their nose at the courts.
Speaker: Yeah. And I think one of the I don't just I'm going to jump the gun here a little bit and mention something from the big, beautiful bill is that in in reaction to that, at least in part, they snuck in a little provision that's going to make it harder for courts to hold people in contempt for violating orders.
Speaker: So. Not a coincidence that that that that's in there, right? The Trump administration sees that courts are pushing back and they're gonna try to do their best to head that off at the pass before we get there. Last little quick hitter I wanna mention very briefly is that tariffs are back.
Speaker: um Trump has announced that he's gonna put in 50% tariffs on Europe because negotiations aren't getting anywhere. And he's actually singled out a company. He says he's going to put 25% tariffs on iPhones if they're not made in the US, which to me is just unbelievable.
Speaker: I've never in my life, I don't think there's an instance in US history where a president has singled out one company for tariffs. Do you think of it? I can't think of any examples.
Speaker: No. And I imagine ah there's some constitutional concerns there. You would hope. We had TikTok you know bring up some of these constitutional concerns when they were.
Speaker: But at least there was a law. This is just Trump saying, punishing Apple. and What? How is this a thing? But I imagine we will see some sort of litigation around that. And hopefully, because we should.
Speaker: But this is just what's coming down the line. Things that attracted my attention this week in the quick hitters. All right. So let's go to our main segment, the one big, beautiful bill. And, know, we're not using that facetiously.
Speaker: That is literally what the act is called, the one big, beautiful bill act. So just putting it out there. In case you were worried that we're not sophomoric enough as a country, here you go.
Speaker: I still think it sounds better than build back better though. Well, I'm going to disagree with it It's the stupidest bill I ever heard. Because at least you are building back better. yeah At least you are. It's dumb. It eludes me.
Speaker: Perhaps it's my age. I don't know. Before we get into the substance of the bill, we want to give a little bit of background, some nomenclature. So oftentimes we find that people conflate the terms deficit and debt.
Speaker: And we just want to make sure that Debt is the total amount that we've borrowed and deficit is the difference between revenue and expenditures. Yeah, I think an easy way to think of that about that, the way I think about it, is the deficit is the current debt from this year.
Speaker: the debt The total debt is the sum of all the deficits we've ever run. Right. So each year we add to the we add a deficit. We spend more money than we take in and we add that amount to the debt, which just grows.
Speaker: And then i want to mention the budget reconciliation rules, also known as the Byrd rule, because this is how these things are going to get passed. They just require a simple majority in both the Senate and the House, as long as they adhere to the Byrd rule.
Speaker: So what is the Byrd rule? You can't increase the deficit outside a 10-year budget window. So permanent provisions, they need to be offset with other permanent provisions.
Speaker: Now, the other things, you can just add whatever you want, as long as it relates to the budget within that 10 year period. Now, when you do that though, you often create fiscal cliffs.
Speaker: So one thing that we're about to hit in terms of fiscal cliff is the expiration of the tax cuts and jobs act, also known as the Trump tax cuts. They were able to get that done back in 2017 and they had to expire. Was it ah this year or the end of next year?
Speaker: One of those. And they need to resolve that right now. Otherwise, most people are going to see a tax increase. That is a fiscal cliff. Another rule is you cannot touch Social Security.
Speaker: So if you're looking for cuts, can't touch Social Security. And you can't add any... policy provisions that don't affect the budget or they're sort of incidental to the budget. So for example, Democrats under Biden, they tried to tie some immigration reform to a reconciliation bill. They said, okay, well, if we add more green cards or more work visas, act in ah that's going to bring in more tax revenue and it's going to reduce emergency services, so on and so forth.
Speaker: And the Senate parliament, the Senate parliamentarian said that it wasn't primarily the budgetary nature. And so had to be axed. So I think we should spend a couple more minutes on that, because I think it's important to note that some of the things in there, the parliamentarian has already said, you can't do that.
Speaker: And there's some other things in the Senate this year where the parliamentarian has said, no, this doesn't apply. For example, I think was just yesterday, the Senate... voted on a strictly majoritarian, 50%, you know, regular majority without filibuster proof um that California can't regulate its own emissions, right?
Speaker: um in in but In terms of requiring um a switch to away from gas powered cars to electric cars, right? And so Democrats are a little upset, a lot upset, because Republicans are going around the filibuster in a bunch of different ways. um So,
Speaker: Wouldn't surprise me to see them ignore the parliamentarian again and push some of this stuff through that isn't really budget focused. Yeah. so So one of the things that you mentioned ah earlier on was that taking away the contempt power from the court. Right. Right. Yes. That is going to be removed in the Senate.
Speaker: Well, will it or won't it? It's hard to say. i would be shocked if that that went through. But we'll we'll see. hope i hope you're not shocked. i really hope I really hope that they pull that out because that's that's a big one, I would think. um but And again, as I recall reading that that one is one of the the parliament, that there would be a problem with the parliamentarian. has nothing to do with the budget, right?
Speaker: But there're they're showing an inclination to not officially tank the filibuster, but to kind of wink and tank the filibuster when it suits them. So we'll see what happens with that.
Speaker: And the last thing, I just want to stay away from silly analogies that compare you know the US government to a household. Oftentimes you'll have people say, oh, well, we have so much debt. Can you imagine if you had credit cards this high and this and that?
Speaker: And the reality is well, people can't print their own money. The US s government can. So I just don't think these analogies are particularly helpful.
Speaker: you know Maybe they can crudely explain you know some concepts about borrowing too much money and the impacts to budgets, but it's it's a stretch. Well, I'm going to be a little yes and no on that. Yes, I think it's a stretch when you get into it.
Speaker: But I think, unfortunately, the level of understanding that most Americans have of these budget tools, you're not getting past the analogies. with They can maybe figure out, they can follow along the analogies with the household, but...
Speaker: with some caveats. So yeah, it doesn't really work, but yeah, if you start explaining the details of the budget and the, and the, the allocating, yeah, appropriations process to most Americans, it's just going to go right over the heads that are containing some glossed over eyes.
Speaker: Well, we won't do that here. Let's open it. So at a very high level, what the Committee for a Responsible Budget has said is that this bill is going to cost us $3 trillion dollars over 10 years.
Speaker: So we're going to talk about the motivations behind the bill, what it does, political ramifications, and sort of the long-term effects. So Jonathan, why don't you talk about the motivations?
Speaker: Yeah, I think it's useful to start at the motivations here because then maybe you can kind of follow along a little bit better on on what they're actually doing. Right. And and i think that there are two main motivations here.
Speaker: Right. um That Trump wants to and the MAGA group wants to reward core constituencies. Right. And what does that mean? Well, There are things in there that are good for Trump.
Speaker: Right. He's rich. He doesn't want to pay taxes. He's got a lot of stuff going on in crypto. He wants fewer regulations in crypto, things that make him happy. They also, in traditional Republican style, reward rich people.
Speaker: Right. lot of the Trump tax cuts reward reward rich people. A lot of the the regulations they want to get rid of. They're going to help the rich people that own corporations. Right. um And they're certainly rewarding the ideologues, right? All the people that wrote the Project 2025 stuff and their ilk, they're getting everything they want, more or less.
Speaker: um And to a lesser extent, very lesser extent, they're rewarding trying to reward the MAGA faithful a little bit. at least in enough to keep them happy and keep them from complaining. As we'll get into later, some of these actual policies, they're not going to be so great for the average rank and file of the MAGA group.
Speaker: But I mentioned them last because they're kind of least important, I think, when when they think about who they're trying to reward. So at the same time, right, they're also, in addition to rewarding their side, they want to punish the other side. And if you've been paying attention at all, you know that Donald Trump is very much motivated by wanting to punish his and his enemies, actual or perceived, right? um And number one, he wants to punish his punish immigrants.
Speaker: And hey, one of the few areas of the budget where we're going increase spending is increased spending to get rid of more immigrants. So money to that. um And in traditional Republican style, he wants to fuck the poor.
Speaker: And they're doing that very well. right They're cutting all kinds of services for the poor, not least as Medicaid, but also with things having having to do with student loans, which ties very nicely into the next group that he wants to screw, which is the educated.
Speaker: right Educated people break overwhelmingly for Democrats. right So one solution to that is keep people from getting educated. If you can cut down on student aid, loans and grants, you can keep people from getting educated, especially the poor.
Speaker: um So that fits right in there with it. um They're also punishing anybody who's associated with environmental progress by cutting off as many subsidies um and programs as they can think of.
Speaker: They're out. um So the environment can basically go screw, um which is all part of the, all of this is part of their larger project, which is, hey, we're going to own the libs. And I think it's important to point out, like, hey, this is politics. People, you know, it's an adult game. It's not played, you know, with with sparring gloves. People are going at each other. It's like, well, yeah, yes, that's true.
Speaker: But this is quite a departure from what happened under the last two Democratic presidencies. Both Obama and Biden really went out of their way to try to have some sort of bipartisan um accord and some bipartisan policies.
Speaker: Now, Obama was similar summarily rejected a lot of times by McConnell um and ah Biden as well. But at least there were some bipartisan efforts and some bipartisan consensus on a lot of the important bills.
Speaker: um Trump doesn't care. With the slim majorities that he has, he's not looking to have some sort of any kind of compromise. He wants to jam things through that are going to screw the other side and help his side in his mind.
Speaker: Yeah. And again, this is also a departure from Trump. One, Congress, you know whatever you want to say about them, they were more responsible back then. than they are now.
Speaker: Just different times. We live in a different world. Yes. John McCain is now dead and nobody has come along to replace him. All the anti-Trump Republicans in the Senate, for example, they pretty much left.
Speaker: And the best you get is um Susan Collins being concerned and Lisa Murkowski saying she's scared and then not do anything about it. So who knows what the Senate's going to do? so So what does this bill do?
Speaker: There are over a thousand pages in this bill and we can't possibly cover every little aspect of it. you know like Like any bill, there are gonna be some things that are good. There are gonna be a lot of things that are bad. So for instance, they're expanding the childhood tax credit. So many would argue that's a good thing.
Speaker: They are doing some adjustments ah to the corporate tax code to help spur R and D. Okay, that's that's fine. But we want to focus on just the major components of the bill and the long-term effects.
Speaker: And also want to mention that there are some pretty funny things in there too. So they have new accounts that can grow and a tax-free basis ah for your kids.
Speaker: And they are called the Money Account for Growth and Advancement. Not true. Not true. That's fake news. They changed the title to Trump Accounts. What? Oh, man. man.
Speaker: I like it as MAGA. but no So now you have to have a Trump account for your kid. ah All right, fine. And also in similarly funny news, although maybe it's not, maybe I'm a little wrong.
Speaker: They've eliminated the tax on silencers because, you know, it should be cheaper to get a silencer. Wouldn't that be fun if everybody had a silencer? Oh, there'd be less noise. Yeah.
Speaker: So I think the most important thing about this bill, though, is it raises the debt ceiling. And we've talked about this before, that the debt ceiling is this, don't want call it a looming crisis because it almost always gets solved.
Speaker: But we always walk up to the edge of the cliff when it comes to the debt ceiling. And according to the Treasury Department, I think they have until August, maybe early September. And so they want to get this signed by mid-July.
Speaker: so So that's one of the most important things about this bill. And again, was just just to not to say that we told you so, Democrats, but we told you so, that they were going to do this. And the time to make a stand was earlier this year on whether or not you should keep the government open and keep it funded.
Speaker: And you really you thought, oh, yeah, well, we need to do this because things are going to. you didn't. This was the time to make a stand because your other option, which was with the debt ceiling, they were going to do with reconciliation. And look at this.
Speaker: They're doing it with reconciliation. So the Democrats are just getting walked over and they set themselves up to do it. Another aspect is that they're continuing the Trump tax cuts. So we mentioned earlier that we had this sort of fiscal cliff where the Trump tax cuts were gonna expire and everyone's taxes are gonna go up.
Speaker: Well, now they're gonna do the same thing again here. The SALT Caucus, so these are Republicans in say New Jersey, New York, California. We really need another acronym for this. Cause every time you say that I'm thinking of strategic arms limitation treaty because I'm old. State and local taxes.
Speaker: So they got a pretty big win. So I believe the SALT deduction now is about $10,000. ten thousand dollars Now it's going to be increased to $40,000. So that's good for me, but probably not good for the rest of the country.
Speaker: That's good for people in New York. Now, the one that's going affect the most people, though, is the slashes to Medicaid. So they're going to cut costs by about $700 billion over 10 years.
Speaker: And There are two ways that they're doing this. One is that they're trying to reduce the Obamacare subsidies. So in case you don't remember, the Obamacare subsidies basically said to states, hey, if you expand Medicaid, we're going to cover 90% of costs.
Speaker: That's a great deal. And so what the what this bill does is it's trying to adjust that formula so that states have more of a burden for their Medicaid expansion.
Speaker: Now, I haven't heard the final... way this is going to work out. But there was a lot, there's, there's a lot of states that expanded Medicaid that put in their bill, their laws, that if the federal government cuts the funding, they're going to pull back on the Medicaid.
Speaker: So I assume that's going to kick out some number of people just there. Right. Yeah. And so the other aspect, and I think this is the more substantial one, is that they're adding Medicaid work requirements. Right.
Speaker: Now, I think on its face, you talk to the average person and you say, hey, we're going to make sure that in order to qualify for government funded health care, just need to be putting in some effort and look for a job, make sure that you have a job as if you're able bodied.
Speaker: Right. And that's what the Republican messaging is right now. And the reality of the situation is that work verification is a huge pain in the ass for the average person.
Speaker: I'm sure. We've all dealt with the the government in some way, the amount of forms that we have to file. And it's a real pain. If you miss something, then there's a good chance that you'll lose your health care.
Speaker: And the CBO, they believe that about 13 million people are going to lose their health care due to this red tape. And that is by design.
Speaker: Yeah, it's not a bug. That is certainly a feature. And again, you you talk to people, one, I don't think people really understand what's going on. they think it's Because in the abstract, yeah, if you can work, you should.
Speaker: Makes sense, right? um It's just not always that easy, right? A lot of people, and I know you did some interesting research on this and got us the numbers, 12% of people who aren't working are taking care of family members. 10% are ill or disabled, and 6% are attending school.
Speaker: Now, they they do have some sort of exemptions in there, but again, you've got to go through the paperwork You have to jump through the hurdle the hurdles here, ah jump over the hurdles. And it's just it's assumed that, hey, if you haven't don't have it filled out right, you're out.
Speaker: And the idea of throwing 13 million people off their health care just because, hey, you know what? We can do that. I just don't get it, right?
Speaker: We're going to have cut tax cuts made permanent for rich people so we can fuck the poor. And again, Republicans are like, yep.
Speaker: Yeah. I mean, I don't know what else there is to say about that. I mean, whatever you think about our fiscal situation, i think to do it in a way that's purposely evasive is wrong. If you really believe that we need to reform entitlements and say, Hey, you know what?
Speaker: We need to cut medica Medicaid, Medicaid. Well then have that discussion. Don't say, Oh, we're not cutting Medicaid. We're just doing this and that. And, and, It's just wrong, I think. It's purposely evasive.
Speaker: But the they reason they're doing that is because- I think one of you are not surprised that Republicans, that politicians lie. right no no I know that doesn't surprise you, but I do agree with you that it's like it's very it's even more dishonest than usual, and which really is. It's a pretty high bar because there's a lot of dishonest dishonesty in a normal a normal day in Congress. And I agree with you that this is just it's just it's just wrong. it It doesn't it should make us uncomfortable.
Speaker: And if it doesn't make you uncomfortable enough. We're also cutting food stamps. It's like, this is where we need to take, we need to take, literally take food out of the mouths of poor people to fund tax cuts for the wealthy.
Speaker: Somehow this is okay. Yeah. So that's going to be 250 billion over 10 years. And the same principle applies ah here with food stamps. They're adding more work requirements and they're hoping that they're so burdensome that people just don't use it.
Speaker: And they're expecting about 11 million people are going to lose their benefits. And let they give this, the the best part about that, their reasoning there that really annoys me um to use a very mild term of what I really think about it is, you we're going to keep them for kids, but it's the parents, you know, the and so if you cut the food stamps to the parents, what do we think is going to happen to the food for the kids?
Speaker: yeah All that money, all those food stamps, the people who have no food for the parents, they're going give all the food to the kids? No, they're going to get crappier food and spread it among everybody. So you're going to hurt kids whether you, they do know it, but whether you will admit it or not, it's it's it's not like, oh, the kids are still fine. It's just not going to work because people live in families.
Speaker: And that's actually like ah very good segue into the immigration agenda. Because they're adding requirements that in order to get benefits, both parents need to have social security numbers. So for instance, if you're an American citizen and your spouse is and undocumented immigrant, but your children are American citizens, well, you're not going to qualify for benefits. Your whole family isn't.
Speaker: Or what happens if you're an American citizen and your spouse is in graduate school? They don't have a social security number. They're here legally. They're on a visa. their benefits are going to be cut.
Speaker: Again, not a bug. Right. and And I think, you know, the other thing I think we we skipped over that we want to talk about too is like um that, you know, they're they're going beyond the the the obvious things that they really campaigned about and really digging into all pretty much everything Biden was after, right? They're removing all kinds of stuff from the climate, anything climate related. We already talked about that briefly, but they want to cut gut the Inflation Reduction Act, which is 500 billion over 10 years, aimed towards helping um climate stuff.
Speaker: And then what I think personally is even worse is, as I again mentioned this before, they want to gut student loan the student loan and grant system, right? They want to make it harder for people, especially poor people, to get educated.
Speaker: um And I don't think we can say it's a coincidence that poor people tend to break overwhelmingly for Trump, especially if they're uneducated. And this is a way, right?
Speaker: whether or not it's intentional, and I'm sure it is, um that, hey, you know what? We can keep people out of their camp by making sure they don't go to these places its going to induc that are going to indoctrinate them into their camp.
Speaker: And lastly, I want to mention the ah accounting tricks that they're using. So the Medicaid cuts that we're talking about, they're not going to occur until December of 2026, which is really convenient timing.
Speaker: What's that's right after something. I can't quite place it. Yeah. And so what the Republican strategy here is they want to cut all these benefits, but not face the voters.
Speaker: So the voters are going to have their benefits through the midterms and then they're going to get cut. And then they're hoping that, oh, maybe if the Democrats get elected, oh, the benefits got cut.
Speaker: When the Democrats were in power, that's crazy. And there you go. And the sad thing is, it'll probably work. Well, again, i mean, that which is a good segue here, um sort of getting into sort of the big lie that underlies this whole undertaking.
Speaker: Right. It's another in a long line of the GOP trying to sell us a bill of goods about how they're going to help the economy. right Starting with Reagan and with every Republican president since, they've had these tax cuts under the guise of supply side economics.
Speaker: The idea that they claim, hey, if we cut taxes on the wealthy, then they will invest more of their money and improve the economy. And by cutting tax rates, we'll actually increase tax taxes that we take in because the economy will be so great that They'll pay more taxes, even though they're paying at a lower rate.
Speaker: And at the same time, the economy will be great for everybody. It's the trickle down theory. When the economy is great for the rich, it'll be better and better and better for the poor the middle class and the poor. And that sounds great.
Speaker: And that's the way they sell it to people. Unfortunately, it doesn't work. And it wasn't just Democrats that say, hey, this doesn't work. Right. We'll get to the evidence in a second. But the first George Bush, George H.W. Bush wasn't fooled.
Speaker: He coined the term voodoo economics because it is. It's just economics out nowhere. The idea behind it is, if you think about it, but rich people, when taxes are high, they don't invest.
Speaker: They put their money in a mattress or something um because taxes are high and they don't want to be taxed on returns. But if taxes are low, they'll invest more. That's just not how it works out.
Speaker: People invest in something, no matter what the tax rate is. Even if you just put your ah put your money in a savings account, which rich people don't do, right, There's going to be some sort of return.
Speaker: And how do we know this doesn't work? Well, what have deficits done since reagan has been in power since Reagan was in power and tried this first? They've gone through the roof. And our total overall debt has gone through the roof.
Speaker: The only person that balanced the budget in the interim was Bill Clinton. And then what happened? George W. Bush came along and had to have tax cuts. And here we are back on the the deficit and debt train. Right. It's not going to work.
Speaker: It's going to keep adding to the deficit and the overall debt because we're cutting taxes and that's all we're doing. Right. um There's no great economic stimulus this is going to do.
Speaker: It hasn't happened before. It's not going to happen again. And beyond that, with this one, there's no new cuts, right? It's just the same cuts extending. So there's no variable in here saying, hey, this will juice the economy because the economy should already be juiced by these tax cuts.
Speaker: But it hasn't happened. Our deficit and debts have kept increasing. and That's the strongest evidence against this, right? We already have these tax cuts right now.
Speaker: And if we just pass this, the status quo is not going to change. We'll still, you know, I don't want to you know make these economic predictions because we have all this tariffs and all this and that, but it should be mostly the same, all things considered.
Speaker: So where's your extra economic growth? It's not going to happen. Nope, it'll just go, the economic growth will be in the bottom line of rich people, and um including Donald Trump. um but what Which begs the question, like, how do they keep pitching it successfully?
Speaker: How stupid are we as a people that we keep believing this? And the answer, unfortunately, if you go back to Mencken, is we're pretty stupid. Right. Nobody ever lost money underestimating the intelligence of the American public or lost political office thereby, which is just true.
Speaker: Right. It sounds great. And we're so divided as a country, was splintered, that if your side says something that sounds good, you're like, yeah, I'm all in, even if it's completely and totally demonstrably false.
Speaker: Nobody's going to trust the other side who points that out to them. um Certainly on the on the the GOP side, that's proved to be true, because when you can easily show that these policies don't work,
Speaker: People are fine with it. And I know you you were we were talking couple days ago about you know how people believe in this, that they they believe these tax cuts are great, right even if it's going to cause more inflation, which is sort of the next lie, because people are both selfish and dumb.
Speaker: They don't understand what's going on here with the economics on their side because they don't want to know. And it's not necessarily that they're just stupid, but they're willfully tuning out the evidence against their side's position because it's their side's position.
Speaker: And is when you when you do that, you're susceptible to this big lie about supply side economics, but also this next lie that's coming up about inflation. And if we think back to the GOP's appeal and Trump's appeal in the 2024 election, a lot of it was inflation.
Speaker: Prices were out of control under Biden. They couldn't get things under control. Harris wasn't going to be able to figure it out. Trump's the but economics guy. He's going to solve your problem. but these tax cuts continuing them will be inflationary.
Speaker: And some studies say like as much or more than the stimulus. So, That's not going to help inflation at all. But he doesn't care. The Republicans don't care. They just want their tax cuts.
Speaker: Right. um And, you know, if you're thinking, well, there's the other things going on in the economy. Sure. Except they're inflationary, too. We're all in on tariffs. And as we mentioned earlier, he's going to fire up some more tariffs.
Speaker: That's inflationary as well. It's the idea that Trump's budget and economic plans are going to help inflation is just one wrong and two ridiculous on its face.
Speaker: But because the, the, the GOP base, the MAGA base doesn't even want to hear it. Doesn't really matter. So, so that's a good segue into sort of the long-term effects here.
Speaker: Okay. And how are the markets reacting? Well, the treasury auctions have not been good. think that's a good point. and And the problem here is that it's becoming more expensive for us to borrow.
Speaker: right Right. When we have inflationary policies, but people think our money in the long term is going to be worth less. So it becomes more expensive for us to borrow, meaning we have to pay people a higher interest rate to take our debt.
Speaker: And that makes us have even more debt. right So it's sort of a self-reinforcing mechanism of bad policy leading to more debt on our behalf.
Speaker: And Moody's, they were the last credit rating agency to remove our perfect credit rating. So everyone everyone's looking at our fiscal health and saying, yeah, I mean, it's still good. It's better than, say, Zimbabwe.
Speaker: but But that's kind of a little bar. i mean But it's no, I mean, but by Western standards, it's still really good. But there are some cracks there we're beginning to see.
Speaker: And the stock market's getting a little bit uneasy, too.
Speaker: And you know we just live in this weird time where we're so used to these low interest rates, right? so Fiscal conservatives like myself, we've always been talking about this for our whole lives.
Speaker: you know We saw the Bush administration said, eh, war in Iraq plus tax cuts. That's a bit much, but okay, tolerable. It was outrageous under Obama. Under Trump, it was kind of crazy. It's like, why are we doing the tax cuts now?
Speaker: like We should be trying to lower the deficit, you had COVID happening and that just caused massive spikes in the deficit and we just haven't solved it.
Speaker: But because we had zero interest rates or near zero interest rates, it was manageable because the total debt fundamentally doesn't matter. It's your ability to pay interest on the debt. And you know I have the numbers in front of me here.
Speaker: Obama 2014 interest on the debt was 6% of the budget. So pretty good. Bush before the financial crisis, 9% of the budget, not great. And that's where i was what I was talking about in terms of being a little uneasy with having a war plus the Bush tax cuts.
Speaker: And then Trump 2019, you had 8% the budget. Right now, The interest on the debt is 13% of the budget, and it's only going to get worse. Interest on the debt is the number two expense that we have.
Speaker: It's higher than Medicare. It's higher than Medicaid. It's higher than defense. The only thing that costs more in terms of our budget is Social Security. And if we don't get this under control, interest on the debt is going to exceed Social Security payments.
Speaker: And that's it's crazy to me. it's it And it's not likely to come under control anytime soon because the way you do this, if you're rational, is raise taxes, right?
Speaker: When the the economy is doing well and you have high debt, you raise taxes to pay it off. But in the Republican Party, the tax increase is worse than anything you can tell tell them. it would be worth I would but imagine it's it's it's on a par with treason, right? If you're in favor of a tax increase, you're basically a traitor in the Republican Party these days.
Speaker: um The last Republican to to suggest it and do it was George H.W. Bush. And we might note he was a one-term president in large part because of that. or at least in no small part because of that. right um So we we are hamstringing ourselves by not using the tools we have.
Speaker: but What we should do is when the economy is down, you lower taxes. right um When the economy is doing well, you raise taxes. If you do this in a reasonable manner, you don't run huge deficits and you don't come up with debt that takes 13% of your budget to pay for.
Speaker: um But we only do half of that. right um So we are just going to accumulate more and more debt and not be able to pay it off. And the scary thing is the CBO baseline for interest rates is 3.6%.
Speaker: I don't expect everyone to look at the 10-year treasury rates on a day-to-day basis, but they're sitting at 4.6% right now. So that 1% delta compounded over, say, 10 years,
Speaker: You know, we we keep seeing interest rates rise. So it might even be higher than 4.6% in, say, five years. Well, if our inflation rate keeps up but with the one, the tax cuts continuing and two, all the fancy new tariffs, we're going to see higher interest rates.
Speaker: I don't know how anyone can look at this bill and be like, yes, this is great. Well, no, you you do. Because if you are rich, if you own, say, an oil company, if you own other things that are favored by Trump, this is great.
Speaker: But for the overall American economy and the overall American people, not such a good deal. yeah But the long-term health of the economy, that's not goingnna affect the rich people?
Speaker: i mean, I think that they're hoping that a lot of this stuff just magically solves over the next five years. they die before it becomes bad, right? because a lot I guess that's fair.
Speaker: I know what you mean. But a lot of people if if we have one really bad economic shortcoming as a country, we tend to have a short short-term focus. The number of people that think long-term is unfortunately limited.
Speaker: And that is what one of the factors that leads us to this sort of situation. Right. And if we have another fiscal crisis like we did 2008 or COVID-19, or covid how are we going to rescue the economy?
Speaker: It's going much, much harder to do. And we might just have to impose austerity or alternatively, we just borrow way more and the debt just gets completely out of control.
Speaker: Well, we could always say we're not paying you back and cut the debt. Yeah, I mean, yeah, you could do that. You can inflate your way out of it. I mean, we can get a funny thing you could do. But yeah, these are all like insane for the United States of America.
Speaker: But yeah, and and I think it's it's useful to to point out like inflation got bad under COVID. And the stimulus was responsible and in a large part for a lot of that. Right. um But at least we started from a low baseline of inflation.
Speaker: If we start from a higher baseline of inflation and things go bad, then what are we going to do? but If we get to the, i mean, we haven't seen double digit inflation, long term double digit inflation in this country for a while.
Speaker: And inflation can get worse than that. It has in a lot of countries in not that long, that ancient history. So, you know, if we' when we're flirting with high inflation and high debt and low taxes,
Speaker: Bad things can happen if anything gets out of whack. And there you can't all you can't control the external shocks in the economy. um You just can kind of hope for the best. But that's hoping for the best is not really the way you want to design your economic policy.
Speaker: Well, I think... That's how we tend to end our podcasts on these wonderful, happy notes. I do want to mention though, that this has only passed the house. This still has to go through the Senate process, right? So a lot of this stuff is going to be stripped out. It's certainly possible that a lot of senators just say, yeah, we can't do this. We're just going deal with the debt ceiling.
Speaker: The Senate, you know, it seems a bit strange to say this, but they are more responsible than the house, but I wouldn't bank on it either. Yeah, I'm not going to put my house on the on in a wager for the Senate being rational, but we can hope.
Speaker: Yeah. So anyways, make sure you like, subscribe, tell your friends about this podcast, and we will see you maybe not next week, maybe two weeks.
Speaker: It's the summer schedule. We will see you when you see when we see you
