The war of words over the proposed infrastructure mega-bill spearheaded by former President Donald Trump is becoming more heated. Lawmakers are just starting to grapple with the measure’s likely economic devastation. Today, the US national debt is over $36 trillion—over $29 trillion of which are owed to investors around the globe. That’s because we believe the bill in its current form would raise the US deficit by about $3.3 trillion over 10 years. This projection places grave monetary consequences on the immediate future. This alarming trend is largely responsible for the grave fiscal outlook facing our nation.
The US deficit happens when the federal government spends more money than it brings in through tax and other forms of income. However, new estimates from the Congressional Budget Office (CBO) show just how short the proposed spending cuts in the bill fall. Unfortunately, the tax cuts would more than offset these cuts, increasing the fiscal storm even further.
As Trump tweeted just the other day, their passage is critical urgency. He cautioned that failure to do so would lead to massive tax hikes on the American people. He claimed, “If it’s not approved, your taxes will go up by 68%.” At the same time, many experts have challenged this number. They contend that above all it fails to capture what actually happens on the ground when tax policies are changed.
The Tax Policy Center’s analysis reveals that about 60% of the benefits of the proposed bill would be directed toward individuals earning above $217,000 annually. This is creating a huge backlash among critics. Specifically, they claim that the legislation disproportionately benefits high-income Americans at the expense of poorer Americans.
Mark Zandi, an economist at Moody’s Analytics, stated, “It will result in continued massive budget deficits, and a high and rising debt load.” Yet, arguably, more economists are lamenting the fiscal road that America is heading down. This concern comes from the possible passage of this bill.
The CBO’s projections indicate that failing to extend tax cuts introduced during Trump’s administration in 2017 could lead to an average tax hike of 7.5%. This sobering statistic only complicates the already simmering conversations around fiscal responsibility and a more equitable tax code.
Bobby Kogan, policy analyst, flagged what could be the true cost of Medicaid cuts tied to the bill. He noted, “The largest Medicaid cut in American history came in President Reagan’s first year in office… These Medicaid cuts would be at least four times the size.” Our worry is the impact on at-risk populations who most need access to these critical services.
Environmentalists and critics have warned against the bill, claiming its passage could signal grave consequences. Elena Patel remarked, “There is no question that this bill will result in a massive redistribution from the poorest to the richest.” Fears expressed in such statements mirror concerns that economic policies are skewed to favor wealthier Americans at the expense of those who are most in need.
Electric vehicle champion Elon Musk expressed his dismay and then lashed out on Twitter against the GOP lawmakers who supported the bill as it passed through the Senate. He even denounced it as “the worst debt increase in history.” This is a major step toward holding elected officials accountable for imprudent fiscal policies and making them reckon with the consequences.
In terms of economic impact, the CBO states that the bill would increase US GDP by slightly more than 1% in ten years. This growth is in addition to what it would be without the passage of the legislation. This estimated growth should be considered alongside the expected national debt increase.
As negotiations drag on, the House remains adamant that a Trump-redeemed mega-bill is the only way forward. The White House stated that it “prevents the largest tax hike in history” while claiming that it “removes illegal aliens, enforces work requirements, and protects Medicaid for the truly vulnerable.”
Yet, even with these claims, many economists are still reticent to applaud the bill’s expected impacts on reducing national debt and economic inequality over the long term. The increase in national debt as projected is shocking on its own. Forecasts predict that it will keep increasing every year through 2034, where it could hit $3.25 trillion.