What A-list economists are saying about Trump's tax bill as Musk rebels against it

Business Insider

a day ago

Elon Musk has departed his role as a "special government employee" in Trump's White House — and he's using his time outside the administration to hammer the GOP spending bill that's a cornerstone of the president's agenda.
"This massive, outrageous, pork-filled Congressional spending bill is a disgusting abomination," Musk wrote on X earlier this week. Trump responded by saying Musk's criticism of the legislation is "disappointing."
President Trump's tax bill will likely face a vote in the Senate in the coming weeks after passing the House in May. It would reduce the tax rates of lower-income workers, particularly those earning less than $107,200, and eliminate taxes on tips, social security, and overtime.
The bill would also cut spending on social programs like Medicaid and SNAP benefits, which provide food assistance to low-income Americans.
Like Musk, investors and economists are seemingly concerned that the bill will cause the national debt to balloon and further widen the US budget deficit.
The non-partisan Congressional Budget Office said this week that it would grow the deficit by $2.4 trillion over the next decade . Trump and his allies have pushed back, arguing that higher economic growth from lower taxes would help boost government revenue.
Here's what top economists are saying about the bill.
Phillip L. Swagel, director of the Congressional Budget Office
Despite the lower tax rates for low earners, Swagel said in a May 20 letter that the bill would negatively impact poorer Americans.
"CBO estimates that household resources would decrease by an amount equal to about 2 percent of income in the lowest decile (tenth) of the income distribution in 2027 and 4 percent in 2033, mainly as a result of losses of in-kind transfers, such as Medicaid and SNAP," he wrote.
"By contrast, resources would increase by an amount equal to 4 percent for households in the highest decile in 2027 and 2 percent in 2033, mainly because of reductions in the taxes they owe."
William McBride, chief economist at the Tax Foundation
McBride, along with several colleagues at the non-partisan Tax Foundation think tank, said in a May 23 report that while the bill would support economic growth, it wouldn't be enough to offset the revenue loss from tax cuts.
"Our preliminary analysis finds the tax provisions included in the House-passed bill would increase long-run GDP by 0.8 percent," the report said. "The bill's tax and spending changes would increase the 10-year budget deficit by $2.6 trillion from 2025 through 2034 on a conventional basis before added interest costs. On a dynamic basis, accounting for economic growth, the deficit would increase by $1.7 trillion over ten years before interest costs."
It continued: "The bill's tax provisions alone would reduce federal tax revenue by $4.1 trillion from 2025 through 2034 on a conventional basis before added interest costs. On a dynamic basis, accounting for economic growth, the revenue reduction would fall by nearly 22 percent to $3.2 trillion over 10 years before added interest costs."
6 Nobel Laureates
Six Nobel Prize-winning economists — including Daron Acemoglu, Simon Johnson, Peter Diamond, Paul Krugman, Oliver Hart, and Joseph Stiglitz — said in a June 2 letter that the bill would worsen wealth inequality in the US.
"The combination of cuts to key safety net programs like Medicaid and SNAP and tax cuts disproportionately benefiting higher-income households means that the House budget constitutes an extremely large upward redistribution of income. Given how much this bill adds to the U.S. debt, it is shocking that it still imposes absolute losses on the bottom 40% of U.S households," the letter said.
"The House bill addresses none of the nation's key economic challenges usefully and exacerbates many of them," it added.
Ken Rogoff, professor of economics at Harvard University
Rogoff, former chief economist at the IMF, cast doubt on the notion that the bill would boost growth in a piece for Project Syndicate this week.
"Trump and his acolytes argue that his "big, beautiful bill" will supercharge economic growth, generating enough revenue to make up for sweeping tax cuts. But history offers little support for such claims," he wrote.
"While both Democratic-led spending sprees and Republican-backed tax cuts have fueled the growth of US debt over the past two decades, tax reductions have accounted for the lion's share of the increase. Moreover, the notion that tax cuts pay for themselves was already discredited in the 1980s, when President Ronald Reagan's tax cuts led to soaring deficits rather than self-sustaining growth."
He added: "Will America's rising debt ultimately trigger a full-blown crisis? Perhaps, but a continued upward drift in long-term interest rates is more likely."
Desmond Lachman, senior fellow at the American Enterprise Institute
Lachman, a former IMF official who currently works for a conservative-leaning think tank, said in a June 4 post that rising bond yields, a declining dollar, and appreciating gold prices could be harbingers of an economic crisis brought on by Trump-driven policy volatility.
Trump's tax bill is adding to investors' fears due to its inflationary implications. But one of its clauses undermines confidence in the reliability of the returns on Treasurys, he said.
"That bill includes a clause that has to be sending shivers down foreign investors' spines. According to Section 899, the US Treasury can impose additional taxes of up to 20 percent on income earned by foreign entities from countries that enact taxes deemed 'unfair' to US interests."