The budget fiasco of the past three days shows Trump does not have absolute control over the Republican party.
Wake-Up Call for Trump
Trump ran into massive resistance from his own party to remove the debt ceiling as he asked. Trump called removal of the debt ceiling “VITAL to the America First Agenda.”
Defying Trump is a rude Wake-Up Call: Republicans are Willing to Defy Him.
Over the past 48 hours, 38 House Republicans rejected the stopgap spending bill that the president-elect publicly threw his weight behind after tanking Speaker Mike Johnson’s original proposal to keep the federal government running past Friday. Their defiance came even as Trump and his allies threatened to field primary challenges against GOP members who didn’t fall in line.
Then, on Friday night and early Saturday, the House and Senate passed a different version of the spending plan — one that didn’t include Trump’s demand to extend or end the debt limit.
Wake-Up Call Comments
- “Republicans campaigned on cutting spending and reducing the $35 trillion national debt. You can’t achieve that by suspending the debt limit,” Rep. Kat Cammack (R-Fla.) wrote on X on Thursday.
- Rep. Greg Lopez (R-Colo.), another Republican who opposed the bill Thursday, said in a statement that he could not back a continuing resolution “that does not consider our nation’s growing $36 trillion debt and removes the debt ceiling, creating an open check book for Congress to spend more money it already doesn’t have.”
- Rep. Rich McCormick (R-Ga.) said on X that “ending reckless spending and tackling the national debt immediately” is what will allow Trump to “shake up the status quo.”
- “We talk about MAGA, Freedom Caucus, etc., but there’s a sizable chunk of the conference that are OG Tea Partiers,” said Doug Heye, a GOP strategist and Hill alum. “Raising the debt ceiling tests the boundaries of what is otherwise an enormous influence over the party.”
- One person close to Trump, who was granted anonymity to speak frankly, worried the president-elect’s decision to use his political capital to unsuccessfully try to pass a new funding bill suspending the debt ceiling could echo back to his failed attempts to kill Obamacare early in his first term. “I’m hoping we’re not in that same spot right here,” the person said.
Some people dismiss anonymous comments. But there is nothing about the comment that remotely rings untrue.
Heck, I used that analogy already. I have commented previously that Trump wasted two years trying to undo Obamacare then lost the House after the midterms.
An Extremely Tenuous Majority
On November 30, I noted A Tiny Republican Majority in the House Will Make Legislation Difficult
How many balanced budget hypocrites do you expect to see when Trump proposes big budget deficit increases?
Here’s the deal. If there are many as two defections, Republicans will not be able to pass much of anything if Trump tries to deliver his campaign promises like no tax on tips, no tax on Social Security, and no tax on overtime.
The incumbent party usually loses seats in the midterm elections. But Republicans have zero seats to give, literally.
Trump threatened to primary Chip Roy. How stupid is other other than very. What’s he going to do, primary over 30 House reps?
What’s Dead on Arrival?
If as many as 10 (possibly even one or two), House members (or 4 Senators), are willing to stand up to Trump by insisting we pay for his promises, then at least three things are dead on arrival: No tax on tips, no tax on overtime, and no tax on Social Security.
Extending TCJA
The Peter G. Peterson Foundation estimates that Extending Trump’s TCJA Would Cost $4.6 Trillion.
The Tax Cuts and Jobs Act (TCJA) was the most significant tax law to be enacted in nearly two decades. The law lowered tax rates for individuals and businesses while overhauling many tax rules. Most of the individual tax provisions and a handful of business provisions are scheduled to expire in the next few years. As the expiration of those provisions nears, decisions about extension — in part or in whole — and the effect on the federal deficit must be considered.
The Congressional Budget Office (CBO) projects that extending the TCJA would increase deficits by $4.6 trillion over 10 years, $0.6 trillion of which would result from additional interest payments.
Extending expiring provisions of the TCJA would cost two and a half times more than the initial cost of the law.
Q: How did Republicans pass that in the first place?
A: By pretending years 8, 9, and 10 did not exist.
By that I mean TCJA expired in 7 years, not 10, so under House rules, they did not have to do 10-year accounting on the cost.
However, to get the extension to pass, Trump may have to restore State and Local Tax deductions, digging a bigger hole, which Trump promised to do.
I suspect Republicans will be willing to be hypocrites (with help from Democrats) to extends the 2017 tax cuts (which by the way did not pay or themselves as was originally budgeted).
The Penn Wharton Budget Model estimates that to eliminate the SALT cap entirely beginning in 2025, would cost an additional $1,169 billion on top of a TCJA extension over the 2025 to 2034 budget window.
TCJA + SALT
Let’s total those two items.
TCJA + SALT = $4.6 Trillion + $1.2 trillion = $5.8 Trillion
Just to pay for those two items alone, Republicans need to increase revenue or reduce spending elsewhere by $5.8 Trillion.
That would not balance the budget. A reduction of $5.8 trillion would just keep us where we are.
Hello Team DOGE
The Projected Fiscal Year 2025 Deficit is $1.9 trillion. That does not count the latest handouts from the Continuing Resolution nor unfunded Social Security payouts.
I suggest we put those back on the budget to stop the annual charade where the debt rises much more than than the alleged deficit.
To balance the budget if the TCJA extension passes, we need to come up with a minimum of $5.8 trillion plus $1.9 trillion. The total is $7.7 trillion.
Trump proposes to do that with tariffs. The value of total goods imports for 2023 were just over $3 trillion.
Assuming a 100 percent tariff on all imports, all of it collected (paid for by consumers because it’s a tax), with no retaliation, and no global economic collapse, Team Trump is still $4.7 trillion in the hole on what it has pledged to do.
[Edit: A reader accurately noted I did one year accounting on the above. 10-year accounting would be taxing $30 trillion in imports. But I also made the absurd assumption of 100% tariff collections. Factoring in retaliations, and a more reasonable tariff hike of 10 percent we are back to the math that I gave, if not worse. See addendum below for detailed analysis.]
This does not count Trump’s pledge of no tax on tips, no tax on overtime, and no tax on Social Security.
Do You Have Any Faith that Sheriff DOGE Will Reduce the Fiscal Deficit?
On December 18, I asked Do You Have Any Faith that Sheriff DOGE Will Reduce the Fiscal Deficit?
If you said yes, please read (or re-read) the above post, then think about what I said above.
Can You Balance the Budget?
If you wish to give it a go then here’s An Interactive Exercise: What Would You Do to Balance the Budget?
I balanced the budget, not that my solution would pass. But at least it was economically viable, not smoke and mirrors.
Implied Assumption
Finally, the implied assumption of Trump’s smoke and mirrors budget is no recession for at least another 10 years.
How realistic is that? Please see Two Recession Indicators, What Do They Say Now?
The sobering economic reality is Trump’s economic plan is either a known lie or blatant stupidity, no matter what savings Team Doge can concoct.
You can believe what you want, but it will not change economic reality. A rude awakening, in many ways, is guaranteed.
Addendum
A reader accurately noted I did one year accounting tariffs. 10-year accounting would be taxing $30 trillion in imports.
However, I purposely made the absurd assumption of 100% tariff collections to highlight the silliness of the idea.
Factoring in retaliations, and a more reasonable tariff hike of 10 percent we are back to the math that I gave.
For the sake of argument. Assume Trump applies a 60 percent tariff hike on China. Trade with China would approach zero. Tariff collections from China would also be zero.
Regarding USMCA, Trump threatens to break a deal affirmed by the Senate and signed by Trump.
What is the cost to the US, if Trump unilaterally starts breaking deals with allies? To threaten so is either a bluff or insanity. And unlike China which imports relatively little from the US, Mexico and Canada import much.
They can and would retaliate. So no matter how you slice tariffs, it is economic nonsense to think they will bring in significant revenue.