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Time of India
5 days ago
- Business
- Time of India
Trump's $5 trillion tax gamble sparks GOP revolt, market jitters; and a rare rebuke from Elon Musk
President Donald Trump is facing mounting resistance from Republican senators, financial markets, economists, and even Elon Musk, over his multitrillion-dollar tax cut plan, which critics say could explode the national debt and rattle an already wary economy. Tired of too many ads? go ad free now The House recently passed Trump's proposed tax and spending cuts, but analysts say they would add over $5 trillion to the national debt in the next decade if made permanent, according to the Committee for a Responsible Federal Budget. Investors, meanwhile, are reacting with skepticism: the interest rate on a 10-year Treasury note is now around 4.5%, a dramatic jump from the 2.5% rate when Trump's 2017 tax cuts became law. Growth vs. Reality The White House insists that economic growth will offset the tax cuts' cost. Stephen Miran, chair of the Council of Economic Advisers, said the economy would grow at an average of 3.2% annually — far above the Congressional Budget Office's 1.9% projection — and that tariffs would generate enough revenue to shrink the deficit. 'The deficit is a very significant concern for this administration,' Miran said. But outside economists aren't convinced. Jason Furman, a former Obama adviser, said the plan is 'mostly not growth- and competitiveness-oriented tax cuts' and warned that high long-term interest rates could stunt economic growth. Kent Smetters of the Penn Wharton Budget Model called the White House's forecasts 'a work of fiction,' while Yale economist Ernie Tedeschi said the tax cuts merely maintain existing breaks and won't deliver meaningful growth: 'It's treading water.' Tired of too many ads? go ad free now Musk: 'I was disappointed' Even Elon Musk, who once served in Trump's now-defunct 'Department of Government Efficiency,' expressed disapproval. 'I was disappointed to see the massive spending bill, frankly, which increases the budget deficit… and undermines the work that the DOGE team is doing,' Musk told CBS News. White House attacks critics White House press secretary Karoline Leavitt tried to blunt the criticism, accusing the Congressional Budget Office of relying on 'shoddy assumptions.' 'The blatantly wrong claim that the 'One, Big, Beautiful Bill' increases the deficit is based on… scorekeepers who have historically been terrible at forecasting,' she said. House Speaker Mike Johnson joined the offensive, saying the CBO 'always underestimates' the economic boost from tax cuts. Still, Trump acknowledged that the lack of offsetting spending cuts was a political compromise: 'We have to get a lot of votes. We can't be cutting.' Senate resistance grows But GOP senators aren't all on board. Senators Rand Paul and Ron Johnson have both raised red flags, and Paul warned Sunday that at least four Republican senators are ready to block the bill unless it is modified. 'The GOP will own the debt once they vote for this,' Paul said on CBS's Face the Nation. That's a serious threat in a Senate where Republicans hold only a three-seat majority. Debt at $36 trillion and climbing The broader context adds urgency: the U.S. national debt has surpassed $36.1 trillion, and future pressures from Social Security and Medicare loom large. Brendan Duke of the Center on Budget and Policy Priorities said the timing couldn't be worse: 'Lawmakers would be dealing with Social Security, Medicare and expiring tax cuts at the same time.' And while Trump says tariffs will help pay for the tax cuts, legal experts point to recent court rulings that cast doubt on his emergency declarations to impose sweeping import taxes. 'It's our turn to prosper,' Trump said in April. 'Use trillions and trillions of dollars to reduce our taxes and pay down our national debt, and it'll all happen very quickly.' But with debt, interest rates, and internal GOP tension all rising, Trump's economic bet may face its toughest test yet.
Yahoo
16-05-2025
- Business
- Yahoo
GOP tax bill would shrink incomes for low earners: Analysis
Many different think tanks and legislative analysts in Washington have been sounding the alarm that the GOP bill to cut taxes and spending has greater advantages for wealthier taxpayers than it does for working Americans. But one group is projecting lower earners will not only receive smaller benefits from the bill but will actually be financially worse off when the individual rate cuts and benefit reductions are taken together. The analysis from Penn Wharton Budget Model found that people in the second income quintile, making between $17,000 and $51,000 per year, will see a net reduction in their incomes of $705 as a result of the GOP tax package. The effects for that income group get worse over time. The average 1.5 percent income reduction in 2026 expands to a 2 percent reduction by 2033 for a net income reduction of $1,200. That's compared to an $845 gain in 2026 for people making midrange incomes of between $51,000 and $93,000 per year. For people in the top quintile of the income spectrum, the total gains in 2026 are more than $468,000. While more comprehensive than the distributional breakdown of the GOP tax package from the Joint Committee on Taxation (JCT), the Penn Wharton analysis is in keeping with the JCT's official score, which is limited to the tax effects of the package and excludes the monetary benefits of federal social programs. People in the second income quintile in the JCT analysis will see a $24 billion reduction in their taxes while middle-quintile earners will get a $50 billion reduction, fourth quintile earners will get a $106 billion reduction, and the top fifth of earners will get a $385 billion reduction. Since people at the lower end of the income spectrum make greater use of social programs like food stamps and federal health care, which are on the GOP chopping block, than those at the upper end, the result is a net decrease in income for lower earners as opposed to simply a smaller share of benefits, the Penn Wharton analysis appears to show. Other analytical groups in Washington have been making similar points about the benefits of the package being skewed to the rich. 'House Republicans' budget and tax proposals would lead to nearly 14 million people losing health care coverage by 2034 and would raise costs for millions of working families,' the Center for American Progress wrote Tuesday. Economist Dean Baker of the Center for Economic and Policy Research noted to The Hill the legislation's continuation of the so-called carried interest loophole, which benefits hedge fund and private equity managers. 'They left the carried interest deduction in place, an absolutely unjustifiable tax break to some of the richest people in the country, that even Trump wanted changed,' he said. Millions are set to lose public health insurance as a result of the GOP bill, with 7.1 million people projected to lose Medicaid and Children's Health Insurance Program access in 2028 alone. Millions more are expected to lose coverage as a result of codified changes to the Affordable Care Act (ACA) and the failure to extend ACA subsidies. Americans will also lose access to food stamps as a result of the legislation, which seeks to put work requirements on some people who are enrolled in the program. Previous estimates for the effect of work requirement proposals — which critics often describe as paperwork requirements more than actual work requirements — showed reductions of between 3 million and 3.5 million people from food stamps, according to the Congressional Budget Office. The Republican bill is far from a done deal. Deficit hawks on the Budget Committee voted down their portion of the bill Friday, demanding steeper cuts and incurring the ire of President Trump. 'We don't need 'GRANDSTANDERS' in the Republican Party. STOP TALKING, AND GET IT DONE!' Trump wrote online. Five Republicans voted no on the measure: Josh Brecheen (Okla.), Chip Roy (Texas), Ralph Norman (S.C.), Andrew Clyde (Ga.) and Lloyd Smucker (Pa.). Smucker said he hoped to resolve the disagreement quickly and have another vote Monday. Copyright 2025 Nexstar Media, Inc. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.
