6 Nobel prize-winning economists wrote a letter opposing Trump's budget bill: 'We have grave concerns'
The multitrillion-dollar tax and spending package House Republicans passed last month is heading to the Senate, with lawmakers hoping to pass a finalized bill by July 4.
If passed in its current form, the bill — dubbed the "One Big Beautiful Bill Act" — would, among other measures, make President Donald Trump's 2017 tax cuts permanent and add new tax breaks for tipped and overtime workers as well as older Americans.
The bill's critics are hoping it may see some change's in Congress's upper house. Those include six Nobel-prize winning economists, who this week penned an open letter published through the Economic Policy Institute, a nonpartisan think tank.
"As economists who have devoted our careers to researching how economies can grow and how the benefits of this growth can be translated into broadly shared prosperity and security, we have grave concerns about the budget reconciliation bill passed by the U.S. House of Representatives on May 22, 2025," the letter says.
The economists' main issue: cuts to Medicaid (the federal and state health-care program for low-income and disabled Americans) and the Supplemental Nutrition Assistance Program (formerly known as food stamps), which they see as essential for American families.
The House version of the bill would cut Medicaid spending by $700 billion and slash SNAP by $300 billion — the largest cut in either program's history.
"These steep cuts to the social safety net are being undertaken to defray the staggering cost of the tax cuts included in the House bill, including the hidden cost of preserving the large corporate income tax cut passed in the 2017 tax law," the letter says. "But even these sharp spending cuts will pay for far less than half of the tax cuts (not even including the cost of maintaining the corporate income tax cuts of the 2017 law)."
These and other critics of the bill cite research that estimates the law will add to the national deficit — to tune of about $3 trillion to $5 trillion over the next decade, according to the Committee for a Responsible Federal Budget — while failing to lift up low-income Americans.
"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 says.
It remains to be seen if spending cuts will remain in the bill as-is.
"Overall, the [Senate] bill is not going to be that much different," Howard Gleckman, senior fellow at the Urban-Brookings Tax Policy Center, recently told CNBC, but added that he expects "a lot of debate" about the Medicaid provision in particular.
One set of provisions — making the tax rates and brackets from the 2017 Tax Cuts and Jobs Act permanent — would maintain the status quo for taxpayers. That law's tax cuts, which were set to expire at the end of the year, included a major hike to the standard deduction, which "greatly simplified the tax code for millions of taxpayers," say analysts at the Tax Foundation.
Proponents of the bill say these and other tax cuts will spark U.S. economic growth and laud the administration for delivering on several campaign trail promises.
When it comes to cutting spending on social programs, Trump sees the reductions as an exercise in government efficiency. "We don't want any waste, fraud or abuse," he said in a recent Newsmax interview. "Other than that, we're leaving it."
The economic Nobelists don't see it that way.
"The House bill addresses none of the nation's key economic challenges usefully and exacerbates many of them," they write. "The Senate should refuse to pass this bill and start over from scratch on the budget."
,
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Los Angeles Times
7 minutes ago
- Los Angeles Times
Voters wanted immigration enforcement, but not like this
Many voters elected President Trump to end border chaos. Illegal immigration remains low, but voters' opinions of his immigration policies as a whole have soured. The reason is that they view Trump's actions away from the border as just more chaos. Americans aren't against enforcement. But not like this. So what's the root problem — and what's the real fix? The public's perception of chaos stems from the fact that Trump's policies appear arbitrary. Under President Biden, no one knew why people were getting into the country. Now no one knows why people are getting thrown out. Under Biden, people came illegally or chaotically. Now people are being deported illegally or chaotically. The public cares about order in both directions. America shouldn't be doomed to oscillate between two types of chaos. Instead, we need to reembrace the antidote for chaos: the rule of law. In popular speech, the 'rule of law' often just means following whatever the government says. But our nation's founders meant something else entirely. For them, the rule of law was the opposite of the 'rule of men' — which leaves government dictates, and the fate of residents, to the leaders' whims in the moment. The founders saw the rule of law as general predictable rules publicly known to and applicable to all. As James Madison wrote, 'Law is defined to be a rule of action; but how can that be a rule, which is little known, and less fixed?' For Madison, the hallmark of the rule of man was 'instability' (i.e. chaos). The separation of powers provided the Madisonian cure. 'The accumulation of all powers, legislative, executive, and judiciary, in the same hands,' he said, 'may justly be pronounced the very definition of tyranny' because 'the life and liberty of the subject would be exposed to arbitrary control.' Arbitrariness is just chaos by another name. During Biden's term, much of the border chaos traces to the fact that immigrants never really knew what the rule was. On paper, it was illegal to cross between ports and legal to cross at them. In reality, at least from 2021 to 2023, ports were mostly closed, and about half of the illegal crossers were allowed to stay. Moreover, the actual determination of who got in and who got tossed was made by agents at the border, not based on asylum statutes passed by Congress or any other known rule. This was the rule of man, not the rule of law, and the chaotic results were readily apparent. Unfortunately, the chaos has not dissipated — it's only moved locations: from the border to the interior. The basic framework of Trump's interior enforcement is that it is whimsical and arbitrary. It is not about 'merit,' not about public safety threats, not even about people here illegally or about 'noncitizens,' as Trump is seeking to strip U.S. citizenship from people and remove U.S. citizenship for many U.S.-born children.. There's no articulable rule. Consider that Trump is arresting highly educated, lawful immigrant students for op-eds written long ago. Setting aside the 1st Amendment, the founders would be — or actually were — equally aghast at the 'subjecting of men to punishment for things which, when they were done, were breaches of no law, and the practice of arbitrary imprisonments.' The rule of man is back, and it's as chaotic as ever. Trump has empowered agents to strip immigrants of lawful status and immediately deport them. They are even arresting lawful immigrants based on secret criteria (like forbidden tattoos) and sending them without due process to a foreign prison. Judge. Jury. Executioner. R.I.P. Madison's definition of tyranny. All this is unnecessary. Restoring the rule of law can end the chaos. That starts with clear, consistent and predictable rules. The immigration rules were, before Trump, notoriously known as 'second only to the Internal Revenue Code in complexity.' The policies rapidly change from administration to administration and even from month to month. The U.S. needs straightforward, transparent policies on immigration. When the government accuses someone of being in violation of the law, clear rules would enable rapid implementation in accordance with due process. This enforcement would naturally channel people into legal ways to enter and live in the United States. Once someone is granted a legal way to enter, that decision should not be reopened — absent some significant new facts. America can end the immigration chaos. This vision of an immigration policy animated by the rule of law is achievable, but no one in government has focused on achieving it. David J. Bier is the director of immigration studies at the Cato Institute.
Los Angeles Times
7 minutes ago
- Los Angeles Times
Candidates for California governor face off about affordability, high cost of living in first bipartisan clash
SACRAMENTO — In a largely courteous gathering of a half dozen of California's top gubernatorial candidates, four Democrats and two Republicans agreed that despite the state boasting one of the world's largest economies, too many of its residents are suffering because of the affordability crisis in the state. Their strategies on how to improve the state's economy, however, largely embraced the divergent views of their respective political parties as they discussed housing costs, high-speed rail, tariffs, climate change and homelessness on Wednesday evening at the first bipartisan event in the 2026 governor race to replace termed-out Gov. Gavin Newsom. 'Californians are innovators. They are builders, they are designers, they are creators, and that is the reason that we have the fourth largest economy in the world,' said former Rep. Katie Porter., a Democrat from Irvine 'But businesses and workers are being held back by the same thing. It is too expensive to do things here. It is too expensive to raise a family. It is too expensive to run a business.' Conservative commentator Steve Hilton, a Republican, argued that state leaders need to end the 'stranglehold' of unions, lawyers and climate change activists on California policy. 'I've been traveling this state. Everywhere I go, it's the same story, this heartbreaking word that I get from every business I meet, every family is in such a struggle in California,' he said, with a raspy voice he explained immediately upon taking the stage was caused by a sore throat. The candidates spoke to about 800 people at a California Chamber of Commerce dinner at an 80-minute panel at the convention center in Sacramento. The chamber's decision on who to invite to the forum was based on which ones were leaders in public opinion surveys and fundraising. Making the cut were former Senate President Pro Tem Toni Atkins, Riverside County Sheriff Chad Bianco, Hilton, Lt. Gov. Eleni Kounalakis, Porter and former Los Angeles Mayor Antonio Villaraigosa. The sharpest exchange of the evening was between Kounalakis, a Democrat, and Bianco, a Republican. After the candidates were asked about President Trump's erratic tariff policies, Kounalakis cited her experience working for her father's reat estate company as she criticized Bianco for arguing for a wait-and-see approach about the president's undulating plans. 'You're not a businessman, you're a government employee,' she said to Bianco. 'You've got a pension, you're going to do just fine. Small businesses are suffering from this, and it's only going to get worse, and it's driven, by the way, it is driven by Donald Trump's vindictiveness toward countries he doesn't like, countries he wants to annex, or states he doesn't like, people he doesn't like. This is hurting California, hurting our people, and it's only going to make things worse, until we can get him out of the White House.' Bianco countered that Kounalakis and the other Democrat gubernatorial candidates are directly responsible for the economic woes facing Californians because they have an 'unquenchable thirst' for money to fund their liberal agenda. 'I just feel like I'm in the Twilight Zone. I have a billionaire telling me that my 32 years of public service is okay for my retirement,' he said. 'It's taxes and regulations that are driving every single thing in California up. We pay the highest taxes, we pay the highest gas, we pay the highest housing, we pay the highest energy.' The Democrats on stage, though largely agreeing about policy, sought to differentiate themselves. The sharpest divide was about whether to raise the minimum wage. On Monday, labor advocates in Los Angeles proposed raising it in Los Angeles County Atkins reflected most of her fellow Democrats' views, saying that while she wanted to see higher wages for workers, 'now is not the time.' Villaraigosa said that while he believes in a higher minimum wage, 'we can't just keep raising the minimum wage.' Kounalakis, though, said not increasing the minimum wage would be inhumane. 'I think we should be working for that number, yes I do,' she said. 'You want to throw poor people under the bus.' California's high cost of living is a pressing concern among the state's voters, and the issue is expected to play a major role in the 2026 governor's face. Nearly half feel worse off now compared with last year, and more than half felt less hopeful about their economic well-being, according to a poll released in May by the UC Berkeley Institute of Governmental Studies that was co-sponsored by The Times. Nearly exactly a year before the gubernatorial primary next year, the event was the first time Democratic and Republican candidates have shared a stage. It was also the first time GOP candidates Bianco and Hilton have appeared together. Although the state's leftward electoral tilt makes it challenging for a Republican to win the race – Californians last elected GOP politicians to statewide office in 2006 — Bianco and Hilton are battling to win one of the top two spots in next year's primary election. The pair expressed similar views about broadly ending liberal policies in the state, such as stopping the state's high-speed rail project and reducing environmental restrictions such as the state's climate-change efforts that they argue have increased costs while making no meaningful impact on the consumption of fossil fuels. A crucial question is whether President Trump, who both Bianco and Hilton fully support, will eventually endorse one of the Republican candidates. The gubernatorial candidates, some of whom have been running more than a year, have largely focused on fundraising since entering the race. But the contest to replace termed-out Gov. Gavin Newsom is growing more public and heated, as seen at last weekend's California Democratic Party convention. Several of the party's candidates scurried around the Anaheim convention center, trying to curry favor with the state's most liberal activists while also drawing contrasts with their rivals. But the Democratic field is partially frozen as former Vice President Kamala Harris weighs entering the race, a decision she is expected to make by the end of the summer. Harris' name did not come up during the forum. There were a handful of light moments. Porter expressed a common concern among the state's residents when they talk about the cost of living in the state. 'What really keeps me up at night, why I'm running for governor, is whether my children are going to be able to afford to live here, whether they're going to ever get off my couch and have their own home,' she said.
Los Angeles Times
7 minutes ago
- Los Angeles Times
What ‘China shock'? Trade didn't wreck the U.S. economy
When Donald Trump first campaigned in 2016, he capitalized on a potent narrative: that China's rise gutted American manufacturing, leaving countless blue-collar communities devastated. Known now as the 'China shock,' that idea paved the way for a dramatic resurgence in protectionism, culminating in sweeping tariffs including Trump's controversial 'Liberation Day' duties. Yet we continue to learn just how shaky the theory's foundations are. Pioneered by economists David Autor, David Dorn and Gordon Hanson, the China shock trope suggests that American regions heavily exposed to Chinese imports suffered significantly greater job losses than did less-exposed areas. Populists seized upon it to argue that China's 2001 accession to the World Trade Organization caused millions of job losses in the U.S. and social disintegration. But a theory's easy and outsized application to policy does not settle questions about its accuracy. That's what American Enterprise Institute scholar Scott Winship wanted to determine in a recent comprehensive review that set out to prove whether the China shock reduced American manufacturing employment. By examining alternative studies and methodological adjustments, Winship contends that the negative effects of trade with China have been significantly exaggerated and that populist narratives blaming this trade for U.S. economic decline aren't supported by rigorous evidence. The originators of China shock examined how Chinese imports affected certain U.S. locales compared with others — not with the entire country — based on initial industry composition and employment size. By these metrics, areas heavily exposed to Chinese imports showed disproportionately worse manufacturing job losses. However, Winship points out that even if we accept these estimates, the findings suggest only relatively modest employment effects. To put things in perspective, Winship gives the example of two hypothetical commuting zones with 200,000 working-age residents and 20,000 manufacturing workers. Data from the theory's proponents indicate that moving from low (10th percentile) to high (90th percentile) exposure to Chinese imports would result in a loss of roughly 2,700 manufacturing jobs — just a 1.4 percentage point drop in overall manufacturing employment. While significant, this does not convincingly explain the community decline, social disruption, and populist backlash often blamed specifically on Chinese trade. In addition, Winship flags multiple methodological issues. Once other economists revised the proponents' methods, the estimated negative impact shrank dramatically. Various follow-up studies found the China shock effect on manufacturing employment to be 50% smaller than initially claimed. Further research revealed that job losses in exposed areas were often offset or even outweighed by employment gains in other sectors. One detailed Census Bureau study even found that firms with greater Chinese import exposure increased manufacturing employment, reallocating jobs to more efficient domestic production lines enabled by cheaper imports. Moreover, the steady decline in U.S. manufacturing employment began decades before China's WTO entry. Between the late 1970s and 2000, factory employment had already decreased substantially, mostly because of technological advances and shifting consumer demand. Notably, there was no sudden acceleration of this decline after China joined the WTO. The rate of manufacturing job losses remained consistent with earlier trends, undermining claims that Chinese trade uniquely devastated American manufacturing. Furthermore, former manufacturing workers generally did not face permanent unemployment. In fact, unemployment rates among this group were lower in recent years compared to the late 1990s, before the peak of Chinese imports. Many workers transitioned successfully into other sectors, belying the notion of an enduring displacement crisis. It's also worth noting that there are around a half of a million unfilled manufacturing jobs today. Despite these realities, the exaggerated narrative persists as a political force. Trump's tariffs — taxes on American consumers raising prices on everyday goods from cars to clothing — have greatly increased economic uncertainty. American manufacturers reliant on imported components face higher input costs, dampening their competitiveness and causing unintended layoffs. In fact, evidence from Trump's first term showed that his tariffs often hurt American firms more than their foreign competitors. With broader and higher tariffs, we can only fear the worst. Instead of doubling down on tariffs and isolation, we need to empower U.S. workers to adapt to economic changes, whether caused by trade or economic downturn. Economists have shown that to the extent that workers sometimes don't recover from shocks, it tends to be a failure to adjust because of obstacles erected by government. Winship's critical reassessment of the China shock clarifies the actual, limited role Chinese imports have played in manufacturing-employment trends. The real 'shock' America faces in 2025 is not from Chinese imports, but from a resurgence of misguided protectionism based on a misdiagnosed problem. The path forward harnesses trade's real benefits rather than chasing economic illusions. 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.
