“According to brand-new Congressional Budget Office (CBO) numbers, the 2024 budget deficit is around $1.8 trillion. It’s heading to $2.8 trillion in 10 years, assuming a very rosy scenario. Worrisome too is that interest payments on government debt will eat up over 20 percent of revenue in 2025. As the Hoover Institution’s Joshua Rauh noted, if you remove the revenue earmarked for the Social Security Old Age and Disability Insurance program, that number jumps to 27.9 percent and rising.”
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“Three months into the term and four months after the last $900 billion COVID-19 relief bill, the Biden-Harris administration pushed through another $1.9 trillion bill. This spending was so out of proportion with the state of the economy, which faced an output gap of only $420 billion, that we suffered the worst inflation in 40 years. This wasn’t just a serious hit to the deficit—it also cost the typical family more than $10,000.
The administration then decided to push several large, unpaid-for bills. Riedl lists some: “$1.4 trillion in new spending in omnibus appropriations bills, $620 billion in student loan bailouts, $520 billion for new veterans’ benefits, a $440 billion infrastructure law, a semiconductor bill, and $360 billion in new [Supplemental Nutrition Assistance Program] and health spending forced through by executive order.”
Some economists wrongly insisted that adding debt is no big deal as long as interest rates are low. This condition certainly doesn’t apply to the Biden-Harris spending spree. Add it all up, including interest payments on the debt, and you get $5 trillion on top of what was already there.”
“is DOGE doomed to fail? Not if its architects take a more realistic approach to cutting government. Fundamental reform of Social Security, Medicare, and Medicaid will require delicate, bipartisan negotiations that are already taking place within parts of Congress. Senate Democrats will not back down from filibustering a partisan GOP Social Security plan just because Musk and Ramaswamy recommended it in a report. Nor will Congress suddenly drop its longstanding opposition to eliminating entire federal departments.
Republicans need to stop overpromising and underdelivering on federal budget policy. Congressional Republicans unrealistically promise to balance the budget within a decade while not even attempting to pass any actual legislation slowing the growth of spending. Musk promises to zero out one-third of federal spending, and Ramaswamy pledges to fire three-quarters of federal employees. It’s all bluster to compensate for ultimately doing nothing.”
“In 2021, on April Fools’ Day, Manistee County, Michigan, took the title on Chelsea Koetter’s home because of a small debt she owed on her 2018 property taxes. Unfortunately, this wasn’t a prank.
Four months after seizing her home, which she shared with her two sons, the government auctioned it off for $106,500. It kept the profit.
All told, Koetter owed the government $3,863.40, which included her initial tax debt as well as penalties, interest, and fees. She does not contest she was obligated to pay that. At issue is whether the county acted lawfully when it pocketed the remaining $102,636 after selling her house, a practice known as home equity theft.
The issue may sound familiar. In 2020, the Michigan Supreme Court ruled the practice unconstitutional after the government seized Uri Rafaeli’s home, then sold it and kept all the proceeds in excess of what he owed. His initial tax debt was $8.41.
The U.S. Supreme Court weighed in on the issue last year in Tyler v. Hennepin County, ruling unanimously that Hennepin County, Minnesota, violated the Constitution when it seized an elderly woman’s home over a debt, sold it, and kept the profit. “A taxpayer who loses her $40,000 house to the State to fulfill a $15,000 tax debt has made a far greater contribution to the public fisc than she owed,” wrote Chief Justice John Roberts, referring to plaintiff Geraldine Tyler, who had fallen $2,300 behind on her property taxes. The total came to $15,000 after penalties, interest, and fees. After the sale, the government kept what was left over—$25,000. The Court said that was illegal.
Instead of complying with a straightforward interpretation of the law, Michigan has attempted to dance around it, passing a byzantine debt collection statute that sends homeowners on a wild goose chase should they want their equity back.”
“By the end of Trump’s term, the Committee for a Responsible Federal Budget calculated, he had signed legislation and issued executive orders that, on balance, added $8.4 trillion to the national debt (including interest) over 10 years. As of last June, the corresponding figure for President Joe Biden was $4.3 trillion.
During his 2024 run, Trump expressed approximately zero concern about any of this. To the contrary, the Republican platform in effect promised more borrowing to finance “large tax cuts,” an expanded military budget, and “the largest deportation operation in American history.”
The platform also promised that Trump would “fight for and protect Social Security and Medicare with no cuts, including no changes to the retirement age.” Given the looming financial crises in those entitlement programs, which will include mandatory, across-the-board cuts to Social Security benefits in a decade, that commitment is utterly reckless.
Adding together all of Trump’s promises, the Committee for a Responsible Federal Budget estimated that his fiscal plans would add about $7.8 trillion to the national debt over 10 years. The corresponding estimate for Vice President Kamala Harris was about $4 trillion.”
His plans increase the deficit, which is inflationary.
Large and broad tariffs are inflationary.
A massive crackdown on illegal immigration will also be inflationary as without cheap labor, making products will be more expensive or won’t happen here at all–particularly agricultural goods and housing.
Trump wants to end the independence of the Federal Reserve. Trump has been in favor of lower interest rates, which will increase inflation.
“government data show immigrant labor contributes to economic growth and provides promotional opportunities for native-born workers. And a mass deportation event would cost U.S. taxpayers up to a trillion dollars and could cause the cost of living, including food and housing, to skyrocket, economists say.”
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“The latest U.S. Bureau of Labor Statistics Current Population Survey data shows that as of 2023, native-born Black workers are most predominantly employed in management and financial operations, sales and office support roles, while native-born Latino workers are most often employed in management, office support, sales and service occupations.
Foreign-born, noncitizen Black workers are most often represented in transportation and health care support roles, and foreign-born, noncitizen Hispanic workers are most often represented in construction, building and grounds cleaning.
How has immigration contributed to U.S. growth?
In 2023, international migrants — primarily from Latin America — accounted for more than two-thirds of the population growth in the United States, and so far this decade they have made up almost three-quarters of U.S. growth.
After hitting a record high in December 2023, the number of migrants crossing the border has plummeted.
The claim that immigrants are taking employment opportunities from native-born Americans is repeated by Trump’s advisers. They often cite a report produced by Steven Camarota, research director for the Center for Immigration Studies, a right-leaning think tank that seeks a reduced immigration flow into the U.S. The report combines job numbers for immigrants in the U.S. legally and illegally to reinforce the claim that foreigners are disproportionately driving U.S. labor growth and reaping most of the benefits.
Camarota’s report states that 971,000 more U.S.-born Americans were employed in May 2024 compared to May 2019, prior to the pandemic, while the number of employed immigrants has increased by 3.2 million.
It is true that international migrants have become a primary driver of population growth this decade, increasing their share of the overall population as fewer children are being born in the U.S. compared with years past. That’s according to the U.S. Census Bureau’s annual American Community Survey.
Are immigrants taking native-born workers’ jobs?
Economists who study immigrant labor’s impact on the economy say that people who are in the U.S. illegally are not taking native citizens’ jobs, because the roles that these immigrant workers take on are most often positions that native workers are unwilling to fill, such as agriculture and food processing jobs.
Giovanni Peri, a labor economist at the University of California, Davis, conducted research that explores the impact of the 1980 influx of Cuban immigrants in Miami (the so-called Mariel Boatlift) on Black workers’ employment. The study determined that the wages of Miami’s Black and Hispanic workers moved above those in other cities that did not have a surge of immigrant workers.
Peri told the AP that the presence of new immigrant labor often improves employment outcomes for native-born workers, who often have different language and skill sets compared to new immigrants.
In addition, there are not a fixed number of jobs in the U.S., immigrants tend to contribute to the survival of existing firms (opening up new opportunities for native workers) and there are currently more jobs available than there are workers available to take them. U.S. natives have low interest in working in labor-intensive agriculture and food production roles.
“We have many more vacancies than workers in this type of manual labor, in fact we need many more of them to fill these roles,” Peri said.
Stan Marek, who employs roughly 1,000 workers at his Houston construction firm, Marek Brothers Holdings LLC, said he has seen this firsthand.
Asked if immigrants in the U.S. illegally are taking jobs from native-born workers, he said, “Absolutely not, unequivocally.”
“Many of my workers are retiring, and their kids are not going to come into construction and the trades,” Marek said. He added that the U.S. needs an identification system that addresses national security concerns so those who are in the country illegally can work.
“There’s not enough blue-collar labor here,” he said.
Data also shows when there are not enough workers to fill these roles, firms will automate their jobs with machines and technology investments, rather than turn to native workers.”
“To get the debt under control, AAF points out that lawmakers cannot simply focus on the discretionary part of the federal budget—which accounts for less than 30 percent of all federal spending. Meanwhile, so-called “mandatory spending” accounts for more than 60 percent (the rest is interest payments on the debt).
Most of the mandatory spending category is made up of Social Security and Medicare, but several other programs also run on autopilot, including food stamps, federal worker retirement benefits, Obamacare’s health insurance subsidies, and veterans’ benefits.
“Mandatory spending is the biggest driver of the national debt because there is no restriction on the unchecked growth of these programs,” argues AAF’s debt report.
Among the proposals to bring mandatory spending under control, the group argues for means-testing future Social Security cost-of-living adjustments (COLAs) for individuals making more than $1 million annually, stopping President Joe Biden’s student loan cancellation plans, ending Obamacare’s insurance subsidies for wealthy Americans, and the formation of a congressional commission to propose spending cuts.
The group also calls for ending so-called “tax expenditures,” which are forms of spending hidden in the tax code—for example, corporate green energy subsidies delivered in the form of renewable tax credits.
The new document picks up where Pence left off in his failed Republican primary campaign last year. On the campaign trail, Pence talked up the importance of sane fiscal policy and condemned his former boss—Republican presidential nominee Donald Trump—for ignoring the threat posed by runaway borrowing and unsustainable entitlement programs.
Of course, Pence’s campaign never got off the ground in any meaningful sense. Former South Carolina Gov. Nikki Haley had a little more success, but there’s clearly not much of a constituency for serious talk about the debt.”
“The US debt total is reported in many ways, but the most accurate, in my opinion, is a ratio: debt held by private investors as a share of gross domestic product, net of government assets.
“Held by private investors” is an important caveat: A huge share of the US debt is held by the government itself, in vehicles like the trust funds of Social Security and Medicare. Still more was purchased by the Federal Reserve as part of its “quantitative easing” programs to fight the Great Recession and the Covid downturn.
Thus, it’s money that the federal government owes to itself. That makes it fairly unimportant, economically; it doesn’t actually limit the resources available to the government. The debt that poses the biggest worry is debt owed to non-governmental investors, who can demand higher interest rates in the future.
“Share of gross domestic product” is also an important adjustment. Dividing by the size of the economy puts the debt burden in the context of the US’s resources. Just as a big mortgage can make sense if you have a high income to pay for it, a high debt load is more manageable if the US as a whole is earning enough money to finance it. It also points to an often-neglected way to reduce the budget deficit: passing economic growth-enhancing policies, like expanded immigration by STEM workers and would-be entrepreneurs or expanding support for science.
“Net of assets” means adjusting for the considerable resources the government owns, like land and loans that it made to other people (like student loan recipients).
As of this writing, debt held by private investors net of assets represents 75.7 percent of GDP; without subtracting assets, it’s 91.2 percent. That’s not full-on debt crisis levels, but it’s high. The figure before adjusting for assets (for which data is more readily available) is the highest it’s ever been since the Treasury started keeping track in 1970. It’s much higher than it was before Covid (66.4 percent) and much, much higher than before the global financial crisis (under 30 percent).
The cost this debt imposes can be measured most directly by the interest the US pays on its debt. The Congressional Budget Office projects that the amount the US will spend on debt interest will hit 3.1 percent of GDP this year. That’s a serious expense: It’s close to what we spend on defense every year.
More worrisome, the CBO projects that the debt and interest burdens are set to increase substantially. Debt held by private investors net of assets is set to rise from 75.7 percent this year to 93.7 percent in 10 years. The agency doesn’t project that figure out longer, but does provide projections for debt held by the public, which includes Federal Reserve holdings and doesn’t subtract assets. That’s set to grow from 99 percent in 2024 to 166 percent by 2054.
What’s driving this trend? It’s not defense spending or “nondefense discretionary,” a category encompassing everything from the FBI to the National Institutes of Health. The CBO projects that discretionary spending, both defense and nondefense, will fall to historic lows as a share of the economy over the next 30 years (though this is a projection I’m pretty skeptical about, especially as the US urge to counter China militarily grows). It also sees tax revenues modestly increasing over the next 30 years, due in part to the expiration of many Trump tax cuts next year and because household incomes tend to grow faster than inflation, which means the income tax raises more money over time.”
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“the CBO sees spending on “major health care programs” (including Medicare, Medicaid, and Obamacare subsidies) growing from 6.3 percent of GDP in 2024 to 9.8 percent of GDP in 2054; Social Security is set to grow from 5.2 percent of GDP in 2024 to 5.9 percent of GDP in 2054.
Two major factors are, in turn, driving higher spending on these programs. One is that as baby boomers age the US population is getting older, meaning more people are benefiting from Social Security and Medicare and fewer are paying in. This adds 2.4 percent of GDP to federal spending by 2054, half from health care and half from Social Security. The second driver is that health care costs are projected to grow faster than the economy, independent of the aging population; this adds 2.6 percent of GDP to the federal budget by 2054.”
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“There’s an old saying in DC that the federal government is basically an insurance company with an army. That’s not exactly true, but it’s close. Social Security, Medicare, and Medicaid, plus defense spending, combined to make up about 66 percent of non-interest federal spending in 2023.
Within that mix, health care is becoming increasingly important. The Congressional Budget Office estimates that health insurance subsidies, encompassing Medicare, Medicaid, the Children’s Health Insurance Program (CHIP), the Affordable Care Act subsidies, and subsidies for employer-based coverage — will rise from 7 percent of GDP in 2023 to 8.3 percent in 2033. The biggest increase they project, by far, is in Medicare, which is swelling as the US population ages and whose patients tend to need more expensive care as they near the end of their lives. By contrast, defense spending, already far below where it was in the Cold War, is projected to keep falling relative to GDP.
Embedded in the projections of the CBO, and of the Medicare program’s actuaries too, is a prediction that per-person health expenses are going to increase in coming years, and increase faster than inflation. Over the past half-century or so that’s been the norm. Legislators have been making these programs progressively more generous in terms of the services covered, like extending prescription drug coverage in 2003, and new treatments and services keep getting developed that push costs higher. Add to that the fact that prices for most health services are higher in the US than in other rich countries and you have a recipe for spiraling expenses.
Except, since about 2011 or so, we haven’t seen that. In an almost miraculous development from a budgetary perspective, per-capita spending in Medicare has remained essentially constant for over a decade.
There’s considerable disagreement about why exactly this slowdown is happening. Some researchers emphasize technological change, arguing, in the words of Sheila Smith, Joseph Newhouse, and Gigi Cuckler, that “cost-reducing … innovation may have become more prominent relative to highly beneficial but expensive treatments” in recent years. That is, the ways we’ve improved health technology have cut, rather than raised, costs.
Melinda Buntin, a health economist who studied the slowdown first at the CBO and now as a professor at Johns Hopkins, told me in an interview she chalks up the slowdown to a fundamental mindset change in American health care. Partly as a result of the Affordable Care Act’s emphasis on “value-based” care, but partly also just due to an increased emphasis on paying for results on the part of doctors and hospital administrators, we’re seeing less wasteful use of new, expensive technologies than we used to.
Whatever the cause, the slowdown in medical costs is a hugely hopeful sign for the budget picture. Recall that the CBO projects that greater medical costs will add 2.6 percent of GDP to the federal budget by 2054. By comparison, it projects that the primary deficit (revenue minus spending, but excluding interest payments on past deficits) will be 2.2 percent of GDP. That suggests that the US could be in primary budget balance, a key sign of fiscal health, just by keeping health costs under control.
That said, it is by no means guaranteed that the recent slowdown will continue. Medical innovation continues apace, and new expensive drugs and treatments will continue to come on the market. For at least some of them, we will want the government to pay up, because they do so much to improve the lives of patients.
If there is a policy path that can keep the slowdown going, it is likely to be a combination of small steps rather than one big change. The 1% Steps project provides a great model for what this could look like: a crew of leading health economists have proposed measures ranging from fighting hospital mergers to changing how health claims are adjudicated to encouraging kidney donation that each save only a small amount of health spending, but together could do a lot.”
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“First: use tax hikes or spending cuts to offset any new spending or tax cuts. This has hardly been the norm in Congress lately, with bipartisan spending laws under both Trump and Biden costing hundreds of billions if not trillions without being remotely paid for. Those will need to be combined with tax hikes or offsetting spending cuts going forward. This also means giving up on some wilder spending visions that would require offsetting tax hikes no one is prepared to pass. Roger Wicker, the top Republican on the Senate Armed Services Committee, wants to raise spending on defense from 2.9 percent to 5 percent of GDP by the end of this decade, as part of an ambitious plan to counter China and Russia. If not paid for, this would absolutely explode budget deficits. If Wicker wants to pass the tax hikes necessary to cover the expense, god bless — but I have my doubts.
Second, take growth seriously. The point of deficit reduction is to reduce a long-term drag on economic growth, and so the best way to reduce the deficit is through actions that simultaneously enhance growth.
This is much easier said than done, of course, but expanded green cards for immigrants with science and engineering degrees seems like a no-brainer, cutting the deficit substantially over time while boosting growth. A growing literature also finds that funding for scientific research boosts productivity and economic growth. That funding doesn’t pay for itself, necessarily, but raising taxes or cutting less useful spending to boost scientific grants seems like a strong strategy. More generally, Congress should be searching for more policies in this category, ones that can boost growth however modestly at little or no budgetary cost.
Third: the coming tax fight in 2025 should be used to raise revenue, not just avoid losing it. Most of the individual tax cuts signed into law by Donald Trump in 2017 are due to expire at the end of next year. Some of these cuts, like slashing the top income tax rate from 39.6 to 37 percent, are things Democrats will absolutely want to expire. But most of them have bipartisan appeal.
Kamala Harris has pledged not to raise taxes on people making under $400,000 a year, which means keeping the expanded standard deduction and child tax credit that Trump enacted. It also means keeping his lower 12, 22, 24, and 32 percent brackets from the bill. All this and bringing back the child tax credit that Biden and Harris passed in 2021 costs about 1 percent of GDP in tax revenue by my estimations using the Committee for a Responsible Federal Budget’s tool.
Taking the debt at all seriously means that whoever’s in office next year needs to pay for whatever part of the Trump cuts they want to keep. Biden’s most recent budget contains a number of tax hikes on top earners, but notably doesn’t explicitly pay for extending the Trump cuts. Ideally, policymakers would not just pay for the extensions they want but come up with a revenue-positive package: one that doesn’t merely pay for the Trump cuts but goes further and reduces the deficit.
This won’t be easy but it’s certainly possible. Playing around with the Yale Budget Lab’s handy make-your-own-2025-tax-plan tool — which my sports-knowing editor tells me is like ESPN’s Trade Machine but for budget nerds — you can pay for the bigger standard deduction and Democrats’ desired child credit by letting all the Trump income tax rate cuts expire, letting the cuts to the estate tax expire too, raising the corporate tax rate to 28 percent, adding a new 45 percent tax bracket on the rich, and eliminating the tax break for pass-through corporations. That raises about 0.4 percent of GDP over a decade, a real bite of the long-run deficit. This does mean tax hikes on a small share of people making under $400,000 — but under the circumstances, I think that’s called for.
Fourth: Social Security should be addressed, not punted. Barring any Congressional action, the program is due for across-the-board cuts to benefits of over 20 percent starting in 2033, because payroll taxes and the trust fund will no longer be enough to pay promised benefits. This would unleash a political backlash on the part of affected seniors like nothing DC has ever seen, and Congress is almost guaranteed to do something to avoid that outcome.
The easiest way for Congress to deal with this doomsday deadline is to simply tap general tax revenues to avoid the cuts, thereby breaking the linkage between payroll taxes and Social Security benefits. They should not do this. The 2033 deadline provides one of the few forcing mechanisms that can push Congress to address the long-run imbalance between revenues and spending, and if they punt they might never get another opportunity. Democrats will push to pay for the program by raising taxes on high earners; Republicans will push for benefit cuts. Either way, the gap needs to be filled.
Congress will also get an opportunity to reform either Social Security or its sister program Supplemental Security Income to eliminate senior poverty — 14.1 percent of seniors are in poverty, a higher share than either children or working-age adults, despite the hundreds of billions the government spends on old-age pensions. That’s a travesty, and even Democratic plans to expand the program don’t address it sufficiently. It’s likely that even a relatively conservative plan could make real progress here. See, for instance, conservative Social Security expert Andrew Biggs’ plan to convert the old-age insurance program to a flat basic income for all seniors aged 62 and over, set at or above the poverty line.
Fifth and finally, Congress needs to work to ensure that per-person health spending stays roughly constant. This will likely take the form of several small reforms, along the 1% Steps suggestions, instead of another big effort like the Affordable Care Act. But precisely because the steps necessarily are more modest, the opportunities for bipartisan collaboration here are immense. See, for instance, this bill from Sens. Maggie Hassan (D-NH), Mike Braun (R-IN), and John Kennedy (R-LA) to reform Medicare billing, with support from the liberal Families USA to the Koch-backed Americans for Prosperity. Keeping health costs low might be the least unpopular way to deal with the budget imbalance, and that will hopefully spur politicians into more collaborations like this.
If Congress does all this — pays for future spending, prioritizes economic growth, raises revenue in the 2025 tax fight, fixes Social Security, and keeps per-capita health spending constant — it’ll be on track to stabilize the debt. It’s not easy. But it’s not impossible either. Bill Clinton and Congress were able to accomplish something similar in the 1990s, and now the time is ripe to try again.”
“The major proposals pitched by the campaigns of Vice President Kamala Harris and former President Donald Trump would both expand the federal budget deficit—though Trump’s plans would require significantly more borrowing over the next decade.
Trump’s proposals would add an estimated $5.8 trillion to the deficit over the next decade, according to the Penn Wharton Budget Model, a fiscal policy think tank at the University of Pennsylvania (Trump’s alma mater). Most of Trump’s deficit-increasing policies result from proposed changes that would reduce Americans’ tax burden. He’s called for permanently extending the 2017 tax cuts, which would add an estimated $4 trillion to the deficit over the next decade (unless Trump comes up with offsetting spending cuts). His plan to eliminate taxes on Social Security benefits will add another $1.2 trillion.”
“American Compass makes the case that adherence to tax cuts, deregulation and free trade have been disastrous economic policy and that government can make capitalism work better for workers and families. It calls for more restrictions on trade with China, using public capital to stoke investments in critical industries, supporting organized labor and banning corporate share buybacks. (A spokesperson for Republicans on the House select committee on China said the group has been “a strong and effective advocate for common-sense policies to stop enabling our foremost adversary.”)
Cass wrote last month that the 2017 Trump tax cuts were “an expensive failure.” American Compass argues that tax increases as well as spending cuts are needed to tame the deficit, and it released a survey showing Republican support.”