Donald Trump's signature policy bill is edging towards the finish line. After narrowly passing the Senate, it is back before the House and could be signed into law before the 4 July fireworks.
So what? It is essentially a tax break that redistributes money from the poorest Americans to the richest. The $4.5 trillion lost in receipts will be offset by
- stripping $1.1 trillion from healthcare spending;
- cutting federal food assistance by $285 billion; and
- treating the debt ceiling as nothing more than a mild inconvenience.
The bill's bill. The extra $3.3 trillion that is forecast to be added to America's debt pile makes the bill the costliest in US history, exceeding
- Trump's first-term $2.2 trillion Covid stimulus package;
- Biden's infrastructure and inflation reduction acts; and
- Obama's $831 billion plan to reboot the economy after the financial crash.
Regression for the rich. The Yale Budget Lab calculates that a (since amended) version of the bill would hand an average of $119,000 to someone making more than $3.3 million. Median earners would get a $760 tax cut. The poorest would lose about $560.
Rationale. Trump argues the cuts will boost growth by freeing up cash to invest in the economy. It is likely to have the opposite effect, with the increased debt load acting as a drag on GDP growth due to higher borrowing costs.
Everyone's bill. The US dollar has already had its worst start to the year since 1973. It could fall further with a rise in government debt, not just devaluing 401(k)s but creating an uncertainty about the world's reserve currency that has ripple effects everywhere.
The undoing. The biggest healthcare cuts are to Medicaid, which provides coverage to those who cannot afford it. The bill would
- require childless adults without disabilities to work, volunteer or attend school for at least 80 hours a month or lose coverage;
- deprive rural hospitals of federal funding; and
- leave roughly 11.8 million more Americans uninsured.
On yer bike. Research by KFF, a health policy group, shows that most of the 71 million people on Medicaid either can't work or are already in jobs that don't pay well and have poor employer health insurance schemes.
Coalition cracks. Getting the bill through Congress has been the toughest domestic test of Trump's second term. In May, it passed the House by a single vote. On Tuesday, the vice president JD Vance had to cast a tie-breaking ballot.
For richer, for poorer. Fiscal hawks are concerned about the debt ceiling, with Trump's former ally Elon Musk threatening to set up his own political party to oppose the bill. Meanwhile Republicans with slim majorities worry they will be punished in the midterms by blue-collar voters who feel short-changed.
Tale of two senators. Thom Tillis was one of three Republicans who voted against the bill, saying he would not stand for re-election. Josh Hawley from Missouri decried the Medicaid cuts in the NYT before voting for them anyway.
Vox pop. More than half of voters oppose the bill, compared with 30 per cent who support it. But drill down to the detail and they are split on new Medicaid measures and the extra money raised for border security enforcement.
What's more… Previous Republican presidents have lost their majorities in Congress over much more modest spending shake-ups. But this is Trump, and the Democrats are rudderless and unpopular. The US president could still come out smelling of roses.
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