The one big, beautiful bill is a step in the right direction – but it’s no fix-all.
Consider this. While the bill trims $1 trillion in service costs, its tax cuts drive up deficit projections by nearly $3.8 trillion over the next decade. Translation? Spending was cut, but not enough to cover the revenue losses. The gap remains.
And remember, this budget reconciliation maneuver applies only to mandatory spending. It doesn’t touch discretionary spending, which is governed by the appropriations process. Any shortfalls there? Still untouched.
Years of punting have brought us to the edge. We’re not over the cliff, but we’re getting closer.
Take Wednesday’s $16 billion Treasury offering in 20-year notes. Routine. But the response? Weak. Buyers showed up, but they demanded higher yields, reflecting growing concerns about the U.S. government’s creditworthiness. Treasury debt is supposed to be a safe haven. It isn’t looking so safe anymore.
Higher yields mean higher borrowing costs. That leads to more borrowing. And more interest expense just deepens the fiscal pit. The ripple effects hit the bond market, stocks, currency markets, you name it.
Yes, bond yields eased Thursday after the bill passed, and markets rebounded. But the message from the market is loud and clear: Get your house in order, or we’ll charge you for the mess.
But could the bill and its policy changes generate growth bringing in more dollars? Yes, it could happen. It might not. Either way, policymakers should treat any such growth as gravy, not a requirement to make the math work or a means to justify a blank check.
So, what has changed with this bill? Fiscal hawks like Rep. Thomas Massie of Kentucky say not much. And history is on their side – debt has risen year after year, no matter which party is in charge.
The hard truth? Fixing the problem requires political pain. Leaders must be willing to endure it. Voters must accept it.
That pain includes abandoning the dream that government can be everything to everyone. That vision isn’t sustainable, not even with aggressive taxation or a taking of wealth which some have pushed for. For perspective: the top 0.01% of Americans hold around $22 trillion in wealth. Seize it all – every dollar – and it would fund the federal government for just over three years at current spending levels. That’s not policy – it’s fantasy. It is ludicrous to think that increased income taxation at a reasonable level can fix the problem if a full taking of the wealth that generates that income can’t fix it.
The best fix? Acceptance of reality. Until government becomes a provider of last resort – not first – there’s no real path to fiscal sanity.