The Democrats Big Beautiful Distortions - July 2

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By Kim Strassel at the Wall Street Journal:

Senate Republicans squeaked through Donald Trump’s megabill on Tuesday, 51-50, and cue the onslaught of misleading claims from Democratic opponents and their Beltway copywriters.
The bill is far from perfect, and is facing headwinds from fiscal conservatives in the House. But it bears no resemblance to the critics’ description of a bill that puts the nation on “a new, more perilous fiscal path,” or enacts “the largest cut to [the] U.S. safety net in decades,” or pushes household energy bills “higher over the next decade,” or loses the country 900,000 jobs, or mostly “benefits the rich.”

This is partisan spin masquerading as analysis. A guide to surviving the disingenuous coverage:

A tax “cost”: The left and the media are suddenly worried about spending (as they are only when Republicans run things) and wailing that the bill will add $3.3 trillion to deficits over a decade, a figure plucked from a recent Congressional Budget Office “score” of the bill. But this figure rests on the bizarre claim that simply keeping our existing tax regime—in place since 2017—beyond this year will somehow “cost” trillions. In reality, the bill will save at least $500 billion over the next 10 years. This remains less than what House fiscal conservatives want, thus the potential trouble for that vote.

A debt bomb: Critics are specifically pointing to the bill’s tax provisions as the driver of new “debt” and risk of a “debt crisis.” But aside from including a few temporary perks like a reduction of taxes on tips and overtime (which are offset by spending reductions), the bill is mainly extending the tax status quo. The real driver of debt has been—and remains—Joe Biden’s blowout spending on entitlements and climate, which this bill at least begins to scale back. And speaking of a debt crisis, few things would more rapidly push the U.S. closer to one than the economic downturn that would accompany a $4.5 trillion tax hike at the end of this year—which is what happens without this bill. Trump’s legislation should spur growth, in part by making a few key business provisions permanent, bolstering tax certainty.

A benefit to the rich: Again, the bill largely extends existing tax policy. To the extent it makes modifications, many of these are boons to lower- and middle-income families. Those include a larger standard deduction, an expansion of the child tax credit, reductions in taxes on tips, overtime and Social Security benefits, and a new deduction for auto loans. Nearly all of these phase out for—or are unavailable to—itemizing and higher-income earners. One exception is the increase in the state and local tax deduction to $40,000, though this perk will flow primarily to higher-income residents in blue states. And while the business community does benefit from the bill, that isn’t a handout to “the rich” but to the economic engine that employs average Americans.

An attack on the social safety net: Repeat and repeat again: Republicans are not cutting spending on Medicaid or food stamps; the House and Senate bills merely slow those programs’ (unsustainable) rate of growth. Republicans accomplish this by implementing modest work requirements for able-bodied adults, by pushing back on a scheme states use to inflate federal Medicaid spending, and by asking states to be more diligent in identifying fraud. Our recent breakdown of the CBO forecast of who would “lose” Medicaid by 2034 shows a population of able-bodied adults who aren’t complying with the work requirement, illegal migrants, and people who qualify for other subsidized coverage.

Hiking energy prices: Opponents are furious over the bill’s new restrictions on Biden’s slush subsidies for green energy, moaning that it will “gut” some of the “fast-growing sources on the grid,” potentially hiking prices and killing renewable-sector jobs (or even our AI future). Yet those industries aren’t growing because they are more advanced or more cost-effective; quite the opposite, they are challenging to add to the grid, expensive, and unreliable for many high-energy needs (like artificial intelligence). They are growing entirely because government is floating them with obscene subsidies, in the process undercutting and diverting capital away from cheaper, more functional and more durable fossil-fuel production. Demand for natural-gas turbines remains enormous, and with Trump deregulation, fossil-fuel plants will quickly fill any gaps and provide an equal or better opportunity for jobs.

An amusing aspect of all this griping is that, were Democrats in charge, they’d be passing a bill that shared the megabill’s core feature: an extension of nearly all the current tax rates (save the top rate for higher earners). And they would be truly busting budgets, piling yet more dollars into distortionary green subsidies and government programs. Strip away all the drama, and the GOP megabill is legislation that provides tax certainty, makes an investment in the military and border, and institutes some modest reform to runaway entitlement spending.