US House Passes Tax Bill, Sending It to Trump

Bloomberg

2 days ago

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00:00Eventually we got this. The president had said there was going to be no more negotiations. This was going to be done by the July 4th holiday. It is July 3rd in the afternoon, and at least passage of the bill is now complete. What's next? The next thing is the president plans to sign the legislation tomorrow. And you can bet that there's now going to be a giant message war between Democrats and Republicans over whether this is good for America or bad for America. We already had 8 hours and 35 minutes of Hakeem Jeffries speaking about how this was disgusting, just to use one of the phrases. But he essentially railed against this bill the entire time. What are the most contentious aspects of this bill? So the Democratic case is that this is essentially a Robin Hood in reverse religious legislation that it takes from the poor and gives to the rich. And indeed, a lot of the direct benefits from this book go to wealthy people and companies. And a lot of the safety net cuts will wind up hurting relatively low income Americans. The Republican view is, hey, there's $4.5 trillion in tax cuts here to goose the economy, get growth going, and that growth will ultimately we're down to the benefit of Americans. And in fact, we had Treasury Secretary Scott Bessant on Bloomberg TV just a few minutes ago, just before this bill was passed. And he mentioned that when the CBO was scoring the bill, it didn't even take into account any revenue from tariffs that could ultimately be up to $2 trillion, which would also help to offset some of the costs. I'm curious, how did the president win over holdouts? Because there came a time when there were no more negotiations and still the members of the House Freedom Caucus did seem to fall into line. So there were very strong disagreements on parts of this legislation, some from conservatives and some from moderate. But generally most of the Republicans were very much in favor of the tax cuts and the increases in defense spending and immigration enforcement that are the core of the bill. The disagreements were the fiscal conservatives often felt like, hey, this is going to add more than $3 trillion to the deficit. That's a lot of money. We want to see more spending cuts on the moderate side from Republicans. People who are vulnerable to challenges in swing districts were saying, hey, we're going to cut $1,000,000,000,000 from Medicaid. This is going to wind up hurting people and costing us in the election. So you had one camp saying we want to cut more spending and the other camp saying, hey, you're cutting too much. But at the end of the day, they wanted these tax cuts. President Trump has huge sway over the Republican Party. This is the one piece of legislation he wants. He cranked up the pressure and they more or less agree with the main pillars of it. Should we expect executive orders or anything like that? Was anything promised in the background that might appear over the next two weeks, two months? So there were these discussions with the fiscal conservatives in which they received reassurances about executive action. Now, they haven't detailed exactly what those promises are, so we don't know exactly. But for instance, one of them was talking about the president's going to take a very hard line on clean energy permitting and things to make sure that there aren't too many clean energy projects that became eligible for clean energy tax credits before they expire in about a year or so, particularly for wind and solar installations. There were also received assurances. So they say that the Medicaid stuff will be stringently enforced and consequently reduce Medicaid spending as much as possible. But we haven't heard that from the president and we haven't gotten, you know, very clear examples of that. And then, you know, it depends on what he actually does. Well, exactly, Mike. And to that point is this now peak Trump. Will his supporters, the MAGA supporters, see any benefits or any portions of them see any benefit from this bill immediately? And if not, what does it mean for the midterms? Well, there were a lot of the things that appeal to populists were front loaded in the beginning of the bill. So, for instance, elderly Americans will get a bigger standard deduction on their income taxes. Workers who get tips or overtime pay will get it for the next four years. A portion of that pay exempted from taxes for a lot of Americans with families. There'll be an increase in the maximum child tax credit. So there are some tangible things that help. The sort of rank and file Trump voters, and they will come early. The spending cuts will be backloaded more.