Here we go again. This week, the Senate unveiled, honed and passed its version of the “Big Beautiful Bill,” and it’s a fiscal monstrosity. What was already an oversized mess in the House has been supersized into a $4-trillion ode to unseriousness.
This isn’t tax reform. It’s a bipartisan piñata stuffed with pork, gimmicks and — of course — debt. We’re told to cheer because the bill makes permanent a few pro-growth policies, including 100% bonus depreciation and R&D expensing. However, a few pearls in a vast ocean of bad policies are nothing to celebrate. It’s like marveling at newly painted rooms in a burning house.
We’ve been told to cheer because the bill removes or trims $147 billion of the House version’s worst handouts. But as an Arnold Ventures analysis points out, the Senate also added $186 billion to the pot. That’s a net increase of $39 billion in pork.
This is what Washington calls compromise: The House proposes $1, the Senate proposes $2, and somehow we end up spending $3. Congress is managing both to break the bank and violate its own budget rules.
With $3.2 trillion in direct costs and $700 billion in interest payments, the budget proposal would bring total new borrowing to $3.9 trillion, according to a past analysis by the Congressional Budget Office. President Biden took four years to add $4.7 trillion to the deficit.
Don’t overlook the cynicism baked into this bill. It hikes the cap on the state and local tax, or SALT, deduction (long known as a boon to the wealthy) to $40,000 (with a “phaseout” in 2029 that no one believes will happen). There are hundreds of billions in “temporary” provisions that everyone knows will be extended. There’s a deficit impact so large that even the rosiest dynamic scores can’t make the numbers add up.
This bill also blatantly violates the House’s own instructions for budget reconciliation, which recommend $2 trillion in spending offsets. The House version fell somewhat short, pairing $3.8 trillion in tax relief with $1.6 trillion in cuts. The Senate version? Nearly $4.5 trillion in tax cuts and only $1.4 trillion in spending reductions — a $600-billion breach of a deal legislators supposedly agreed to.
Republicans once talked seriously about aligning taxes and spending. They cared about economic distortion, simplicity and broadening the tax base. Now, too many just want the sugar rush of tax cuts without fiscal discipline. Meanwhile, Democrats want to vastly expand the state and pretend that billionaires alone can foot the bill. Both sides are wrong. The math doesn’t work, and the morality of the reckless spending is worse.
Those who want to frame this bill as pro-growth are dreaming. They’re relying on unrealistic economic assumptions about a short-run bump to justify the consequences of long-term debt increases — and banking on cost-disguising budget gimmicks that nobody takes seriously.
The reality is quite different. My colleague Jack Salmon calculates that if you take all the pro-growth provisions, you get about 1% extra growth — but it’s literally canceled out by the degrowth produced by the extension of the SALT cap.
Alas, debt-fueled largesse can usually be sold with the magic phrase of “tax cuts.” To be clear, tax cuts are generally great as long as Congress reduces spending. The tax code is meant to raise the revenue necessary to fund the government that Americans claim to want. If we decide that under no circumstances should Congress cut spending, then we don’t deserve tax cuts.
It breaks my heart to say this, because my wish is for a significantly smaller government, with less debt and lower taxes. People who have followed my work know that I would terminate all subsidies to private companies. I would return education and many other functions to the states and end most subsidies to them as well. I would radically means-test entitlement benefits and much more. Well-designed spending cuts are a proven way to reduce the debt-to-GDP ratio. They are the responsible path to lower taxes.
Next time, let’s not condone a system that spends massively on our generation and sends the bill to future generations, expecting them to deal with the debt crisis and inflation that will result. If Americans want big government, we have to pay for it with higher taxes and deal with the punishment of slower growth.
Legislation is a means by which politicians signal their priorities. For now, it’s clear that most of them are comfortable with harming future generations with higher taxes and inflation in order to indulge current constituents through trillion-dollar deficits, corporate giveaways, budget-rule violations and dishonest accounting. But Americans cannot afford many more “beautiful” deals that are so hideously ugly beneath the veneer.
Veronique de Rugy is a senior research fellow at the Mercatus Center at George Mason University. This article was produced in collaboration with Creators Syndicate.
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