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RTÉ News
05-07-2025
- Business
- RTÉ News
Hope that gain masks pain as Trump signs 'beautiful' bill
Donald Trump signed his "One Big Beautiful Bill" in the Oval Office last night. It is possibly the most consequential thing he will do in domestic American politics in his second term. The course of America for the next few years has been set: his election promises are now the law of the land. This is a very big deal - and not just for America. It challenges Europe and China and anyone else who fancies themselves as a great economic power. "Lets see if you can keep up" is the political message from the One Big Beautiful Bill (the OBBB). The aim is to juice the US economy to a higher long term average growth level, a reworking of the fuel/oxygen mix to boost performance. If it pays off, America will grow stronger into the middle of the 21st century, pulling further away from a Europe that has been economically flatlining for more than two decades. And it will be far better prepared to take on a technologically rising China, albeit one hamstrung by its demographic implosion. It is a bold gamble, both politically and economically. But it is not cost free, not pain free. The simplest, most deadly criticism of the OBBB outcome is that it rewards the richest and strongest in America by cutting government assistance spending from the poorest and neediest. In simple terms, the top 1% of taxpayers will get tax breaks over the next decade worth $1.02 trillion. Over the same period, the poorest 15% will lose $930 billion in government funded healthcare. Yes it cuts tax on tips and monthly overtime hours, and these are aimed at people earning less than $400,000 a year, but unlike the income and investment breaks that most benefit the very richest, the small-change tax cuts are temporary, expiring when Mr Trump leaves office in 2029. The Institute of Taxation and Economic Policy, a non-partisan non-profit organisation calculated these numbers from the detailed tables compiled by Congress's Joint Committee on Taxation from the bill as it left the Senate on Tuesday night. The tax cuts that favour the very richest are a gamble on productivity growth - a big bet made with money taken from the poorest. The President hopes the gain will mask the pain. And there is a lot of masking to do. Opinion polling shows the OBBB is deeply unpopular with Americans of all sorts. Within political circles there is pain too - dozens of Republican Congressmen, and possibly a few senators - the very people who voted this bill into law last week - are at risk of losing their seats in next year's elections. It would not even fix America's chronic budget deficit problem: it spends way more than it takes in taxes, and borrows to make up the gap, piling up the national debt. It has been this way since 2021. This Budget Reconciliation Act continues with emergency level borrowing, with no emergency to be seen. The environment will pay part of the price, too: green energy subsidies are cut to fund subsidies to reopen coal mining. Subsidies for electric cars are cut too. There is even a tax on green electricity, which critics say will undermine the viability of wind and solar farms. It goes a long way to explain the visceral hostility of Elon Musk to the OBBB (and Trump). He is publicly critical of the rise in government borrowing, taking it as a personal affront after his (less than spectacular) efforts to cut spending through DOGE. He calls the OBBB "utterly insane", a "disgusting abomination" and "political suicide" for the Republicans, threatening to fund primary election challengers to Republicans who voted for the bill (which is pretty much all of them, though Mr Musk has said in reality he would focus on three or four senators and ten to twelve House members, as the most vulnerable). But even without Mr Musk's millions there is a political price coming for the Republican Party - the Big Beautiful Bill is the framing for next year's midterm election, and those who read the tea leaves of American politics say this bill has increased the number of vulnerable Republican House members - and a couple of Senators too. One of them, Tom Tillis of North Carolina, is not hanging around to find out, announcing his intention not to contest next year's election in his state, one of the more dependent on the Medicaid and food assistance programmes that are being cut. And because the government backed health insurance is being cut, the loss of income will affect the viability of rural hospitals. North Carolina has the second biggest rural based population in the country, after Texas. The state has 3.1 million people in receipt of Medicaid, and around 900,000 of them are set to lose the entitlement because of the OBBB. That is out of a total state population of 11 million. Some of those set to lose out are in the West end of the state, which was hit hard by Hurricane Helene just weeks before the election. Those folks voted for Mr Trump. Indeed the cuts will impact hardest in the kind of "Red" states that voted for Mr Trump, the rural hospital threat being more severe in most of the Red states because of the demographic spread. Mr Tillis warned his own party of a coming electoral firestorm. After years of floundering, the OBBB has given the Democratic Party something tangible to work with, a sturdy stick with which to beat the Republicans and motivate their own demoralised troops. That is why the Democrats leader in the House of Representatives, Hakeem Jeffries, stood for almost nine hours, making a last ditch speech to prevent the OBBB passing in the middle of the night, when nobody was watching. His stand won him not just a new record for longest House speech in the modern era, but more importantly kept the OBBB story fresh for the primetime TV news slots on Thursday evening. Of course nobody was listening, but it didn't matter: all the important messages came in the first 45 seconds: "I rise today in strong opposition to Donald Trump's 'One Big Ugly Bill.' This disgusting abomination, the GOP tax scam that guts Medicaid, rips food from the mouths of children, seniors, and veterans, and rewards billionaires with massive tax breaks. "Every single Democrat stands in strong opposition to this bill because we're standing up for the American people. Republicans are once again, as has been the case through every step of this journey, trying to jam this bill through the House of Representatives under the cover of darkness," he added. "But I'm here today to make it clear that I'm gonna take my time and ensure that the American people fully understand how damaging this bill will be to their quality of life," he said. And so he did. But more importantly for the Democrats, it has been a whole party effort over months that has slowly gotten through to the American people. And they do not like what they have heard. The fundamental trade at the heart of the OBBB - tax cuts that benefit the wealthiest at the expense of the poor - has played badly. An opinion poll for Fox News found 59% of Americans had an unfavourable view of the OBBB, against 38% who had a favourable view. Pew Research found 49% for the bill, 29% against it, while KFF research found 64% viewed the bill unfavourably, while 35% favoured it. Digging deeper, the KFF tables showed MAGA supporting republicans favoured the bill by 72%, but only 33% of non-MAGA republicans felt that way. Support among both camps dropped by 20% when informed of the bill's implications for health insurance and rural hospitals. For Mike Johnston, the Speaker of the House of Representatives who achieved the political feat of steering through one of the biggest budget bills in US history with the smallest parliamentary majority in the last 100 years - and in the teeth of intense internal and external opposition - there was relief on Thursday afternoon after a 36 hour sleepless marathon, as he closed the debate and called for the final vote, selling hard on his main points. "Record tax cuts for hard working Americans: Historic savings at the same time to end reckless spending. We got energy dominance coming back to power our future. We have a secure border to protect American families. "We have a strong military to restore peace through strength. And we have a government that is now accountable and responsive to the people once again, that's what we're delivering," he added. President Trump and his supporters like to say he keeps his political promises, delivers what he said he would. But with the OBBB he broke a pretty big promise: his promise not to touch public health insurance. The Congressional Budget Office shows that 10.9 million will lose their health care coverage from the Medicaid cuts and another 5.1 million will lose their health care coverage due to the Affordable Care Act (better known as Obamacare) cuts - a total of some 16 million people. Two million people will lose access to SNAP, a nutrition programme formerly known as food stamps. It is a way for some 38 million Americans to get help with grocery bills. Around 30 million of that 38 million are also enrolled in the Medicaid programme. The OBBB introduces work requirements to continue in the programme, proponents arguing that single healthy working age people should not get welfare intended for people who cannot work or who have children. But two thirds of Medicare recipients are already in work. They will have to keep proving it every six months to keep eligibility, and the constant stream of paperwork will, opponents say, grind people down and lead to them losing something they are entitled to, simply because of the paperwork involved. Because the US government programme to provide free medical insurance for treatments for pensioners does not cover long-term care, many older adults rely on Medicaid to cover their nursing home costs. It takes care of about 60% of nursing home residents. There is concern that the big cuts to Medicaid could see a number of nursing homes close down, reducing the number of places available in the system, making it harder for pensioners to find a care home. In a meeting during the last, fraught week to put some backbone into Republican House members, President Trump reportedly told them that whatever way they decided to re-jig the OBBB to get it across the line, there was one thing they were not to do: never touch Medicaid. "But sir," a House member piped up, "the bill touches Medicaid". The other compensation mechanism for the tax cuts is to raise borrowing, adding further to the US national debt by about $3.5 trillion. This will bring the total debt to around $40 trillion in ten years time. These numbers are of course meaningless to normal people (and, arguably, to budget geeks as well). In terms we got used to during the financial crisis of 15 years ago, US government borrowing is now hovering around 100% of GDP, but over the course of the next decade could top 130% of GDP (Ireland's debt ratio last year was 42%: it was 88% for the Euro area). US National debt per capita works out around $106,112. The equivalent dollar figure for Ireland is $47,746 (€40,531). It is a debt trajectory that caused Moody's rating agency to be the last of the big three to fold and remove its Triple-A rating on US debt. The cost of servicing the debt is higher than the sum the US spends on defence (currently - the OBBB plugs in a big spending splurge on defence, and on border security in the form of ICE, the controversial agency carrying out immigration raids). Government borrowing costs are creeping up, and they in turn set the borrowing costs for everyone else, notably through mortgage and business loans. The President argues that the extra growth he predicts from the OBBB changes will take care of the debt ratio, and with it concerns over interest costs, but there is still a big budget deficit in the US - the gap between what the government takes in in taxes and what it spends - a gap that is made up with borrowing. This year, it is going to be around 6.5% in the US. In Ireland there is a budget surplus, in the euro area the budget rules forbid governments to borrow more than 3% of GDP in any given year. The fiscal hawks within his own party are not happy. But with very few exceptions - Ron Paul in the Senate, Tom Massie in the House, both of Kentucky - the hawks voted for the OBBB. Fear of Mr Trump's revenge reportedly overcoming their fear of fiscal instability. OBBB also creates a possible headache for the Irish Government by injecting some fresh uncertainty into the realm of corporation tax, the fiscal heroin to which the Irish Government has developed a dangerous dependency. At the House Ways and Means Committee last month, Treasury Secretary Scott Bessent faced a grilling on various aspects of the OBBB, including the bit that legislates the US withdrawal from the OECD rules establishing a global minimum effective rate of corporation tax. The ones that took more than a dozen years of patient diplomacy to negotiate. 15% is the new global standard for big multinationals, and Ireland has raised its corporate tax rate to comply. The Biden Administration brought the US into the agreement. Now the Trump administration is taking it out, as Mr Bessent told the committee on 11 June: "For whatever reason, the previous administration chose to outsource American sovereignty on tax matters, and the Trump administration believes that is unacceptable. Many other countries would seek to pull in revenues from US multinational corporations into their treasury. "Rest assured that the provisions in the One Big Beautiful Bill to combat this are a staking out of our fiscal sovereignty. The US tax system will stand next to what is called Pillar Two, and other countries are welcome to relinquish their fiscal and tax sovereignty to other nations," he added. "The United States will not. So, this bill will allow us to prevent our corporate revenues from being drained into foreign treasuries, and that is in the hundreds of billions of dollars," he said. Exiting pillar two of the OECD is now the law of the land too. Its impact on the Irish exchequer returns is uncertain. The President has also pledged a rebirth of the American manufacturing industry, and the OBBB has measures designed to stimulate investment, such as 100% tax write offs for factories. Will it suck in money from around the world - including money allocated to expansion abroad, including in Ireland? Yesterday saw an American Chamber of Commerce report stating that 60% of member firms were planning to increase hiring in Ireland next year, with 68% already planning further investments over the next five years. Mr Bessent sold the OBBB hard to the Ways and Means Committee last month, tempting members with the prospect of a veritable dam burst of investment if it were made law: "I was with a group of business leaders earlier this week and they were telling me that they are, in fact, holding back on CapEx because they need for the tax bill to pass so that they will have certainty that 100% of the expenses will come back. "I think that we will see a sharp upward break in terms of CapEx as soon as we pass the One Big Beautiful Bill." President Trump's big bill depends on growth. Failure is not an option. Because failure in growth will unmask the pain behind the bill, and indeed will increase the pain. High borrowing when there is no emergency - such as a war or Covid - may leave little room to borrow when it is really needed. But the President is all in on his biggest gamble yet. This is it for the next three and a half years. Everything else is foreign policy - including tariff policy. And next year's election.
Yahoo
18-05-2025
- Business
- Yahoo
If the cost of food spikes, blame Washington Democrats
When Democratic lawmakers last December accidentally leaked their plans to increase taxes this legislative session, they said they needed to 'identify the villain' — a villain they assured Washingtonians was the ultrawealthy and some of 'the biggest, most profitable corporations on the planet.' Now that Democrats have passed their $9.4 billion tax increase — the largest in state history — it's clear who their villain is, but it's not the ultrawealthy or big business as advertised. After all the Democrats' talk about who needs to pay what they owe, it turns out they were talking about you. At a time when Washingtonians cite the unaffordability of housing, gas, child care, health care and groceries as their top concern in poll after poll, Democrats' new taxes will increase the cost of housing, fuel, child care, hospital care – and will add $100 million to the cost of Washingtonians' food. Making food more expensive is especially cruel: Essentials like food cannot be cut from household budgets. That's why, as representatives of local grocers and restaurant owners, we strongly urge Gov. Bob Ferguson to veto the Democrats' tax increase on food, which will be devastating to lower-income households. It represents an unfathomable abdication of concern for working families on the part of the governor's Democratic colleagues. How did this happen? Democrats said they intended to 'make our extremely bad, regressive tax system better than it is now,' using chart after chart to show how little Washington taxes wealthy individuals, broadcasting data from the Institute of Taxation and Economic Policy. Yet when it came time to evaluate who would bear the burden of their tax proposals — those at the top or the bottom of the income scale — Democrats quickly turned a deaf ear to their friends at the Institute of Taxation and Economic Policy. A recent post reminded Democrats not to 'settle for a more regressive revenue raiser,' warning that, with unwise choices, 'the state risks backsliding … and moving further away from a tax system designed with equity and sustainability in mind.' So what were Democrats' tax equity ideas? Achieving tax fairness by taxing wealth greater than $50 million? Democrats abandoned that idea. Achieving tax fairness by adding a payroll tax on income for employees at large companies who earn more than $176,100? They abandoned that idea, too. Both ideas were rejected after an intense lobbying campaign on the part of Washington's corporate leaders, including from Amazon, WaFd Bank, Weyerhaeuser and dozens more. Microsoft, leading the way, even pledged $1 million to defeat a payroll tax at the ballot. Democrats then said they could achieve tax fairness by raising the B&O tax on businesses large and small — including more than doubling the tax on business with revenues over $250 million per year. The Institute of Economic Tax Policy called this idea 'fundamentally different from a tax fairness perspective' from the payroll tax proposal, which would only impact the top 20% of income earners. The B&O tax proposal would burden the bottom 80% of income earners. Democrats chose this one. Now (paying close attention to the corporations mentioned above), Democrats did create some exemptions in their plan. These include computing, financial services and timber — as well as airplane sales and the sale of oil. Democrats declined to clarify their rationale for these exemptions. But, for the very same reasons cited by the Institute of Economic Tax Policy — namely, that the B&O tax is 'a sales tax by another name' — we urged Democrats to exempt food wholesalers and distributors, too, offering amendments on five separate occasions. Democrats rejected them. Restaurants and independent grocers play a vital role in ensuring access to fresh food for Washington's communities. But we cannot pledge $1 million to beat this tax increase at the ballot. When suppliers' costs go up, our members' costs go up, and they simply don't have the margins to absorb these costs themselves. The average restaurant in Washington operates on a 1.5% margin, while the average independent grocer operates on a 1.1% margin. Washington's menu prices are 12% higher than the national average. Our grocery costs are the fourth highest in the nation. Democrats' tax increase on our industries represents one-third of the average restaurant's margin and nearly half of the average independent grocer's margin. This is neither equitable nor sustainable. Lawmakers missed their chance this year to rein in runaway spending, choosing instead to add to out-of-control costs already overburdening Washington families. Yet it's not too late to undo their most unconscionable decision of all making food more expensive for Washingtonians. Gov. Ferguson, please act. Anthony Anton, of Tacoma, is president and CEO of the Washington Hospitality Association. Tammie Hetrick, of Olympia, is president and CEO of the Washington Food Industry Association.
