issue: Fiscal Policies

Ritz on CSPAN: Democrats and Fiscal Policy

Posted on by Alex Terr

Economic and public policy analysts familiar with Democratic policy talked about how Democrats can assert fiscal responsibility in both their policies and messaging. The panelists addressed topic including how Democrats can differentiate themselves on the campaign trail when discussing fiscal issues, the growing national debt, Social Security solvency, and how Democrats could use fiscal elements of Republicans’ One Big Beautiful Bill Act to their advantage when campaigning in the next election. This discussion was part of the Center for New Liberalism’s 2025 New Liberal Action Summit.

 

A Better Way to Fix the Pandemic Premium Tax Credit Than Income Caps

Posted on by Alyssa Brown

One of the biggest obstacles to ending the government shutdown is partisan disagreement about how to address the looming expiration of a pandemic-era expansion of the Affordable Care Act’s (ACA) premium tax credit (PTC). Established in 2014, the PTC gave subsidized health insurance to Americans who didn’t receive it through their employer or the government. The American Rescue Plan (ARP) made this program substantially more generous, including to higher-income households that were never supposed to receive assistance under the original ACA. Democrats want to continue the pandemic PTC expansion in its entirety, while most Republicans want it to expire.

A bipartisan consensus appears to be emerging that the way to better target assistance moving forward and end the shutdown is to impose an income cap on eligibility for the PTC. Unfortunately, this compromise would restore the biggest flaw in the original ACA design that ARP solved: the benefit cliff. Before ARP expanded the PTC, households with income greater than 400% of FPL were not eligible for the ACA subsidy. That meant a single extra dollar of income could trigger thousands of dollars in higher premiums — an abrupt cutoff that discouraged work. Bringing back an income cap today would leave households vulnerable to sudden increases in health-care costs as a penalty for working. 

Instead of repeating past mistakes, a better approach would be to establish a gradual phase-out of benefits for households as their income increases. This would smooth out the benefit cliff established under the ACA and avoid giving windfalls to high-income households.

Under PPI’s preferred approach, households with incomes under 300% of FPL would be eligible for the same expanded subsidies next year that they are today. But rather than capping health-care premiums at a certain percentage of recipients’ income, premiums would steadily increase as household income increases. As a result, high-income households’ subsidies would taper off as their earnings increase, thus reducing unnecessary benefits for high earners without recreating the benefit cliff. Subsidies would also fully phase out at lower income levels than they do today.

If lawmakers are concerned about high-income households still qualifying for subsidized health insurance, the best solution is to adjust the phase-out such that a household’s premiums are set to increase starting at a lower level of income. Accordingly, PPI proposes that the phase-in threshold gradually decreases for each of the next two years — similar in concept to a recent proposal from Sen. Mike Rounds (R-S.D.) to gradually phase down the credits back to pre-pandemic levels. But PPI’s proposal preserves free health insurance for families in poverty while still requiring reasonable contributions from middle-income households that can afford it, and lowering benefits for high-income households that don’t need the support.

Along with providing generous support to those who don’t need it, the other problem with simply extending the pandemic PTC expansion is that it is expensive, costing at least $23 billion per year. Rather than cutting health-care costs, it merely shifted the burden onto taxpayers. Fortunately, there are solutions that will both pay for the proposed expansion — letting taxpayers off the hook — and cut health-care costs in the long run. 

Medicare Advantage, which allows seniors to receive their Medicare benefits from private insurers, costs taxpayers tens of billions of dollars per year because certain loopholes allow insurance companies to make patients appear sicker than they actually are, which artificially increases their government reimbursements. The No UPCODE ACT would end this practice and save at least $125 billion over 10 years, according to the Committee for a Responsible Federal Budget. Medicare also currently pays far more for services provided in hospital outpatient departments than in independent physician offices, a disparity that encourages hospitals to buy up clinics and drive consolidation — raising costs for patients and taxpayers alike. Adopting site-neutral payments could save $175 billion over the next decade.

Together, these two reforms would fully offset the cost of PPI’s proposed PTC expansion extension on a permanent basis. By eliminating the benefit cliff under the original ACA and establishing gradual phase-outs, PPI’s plan would prevent middle-class families from experiencing a sudden loss in benefits, ensure the poorest families remain protected, and avoid unnecessary tax subsidies for high-income households. These values reflect the goals of the ACA: affordable coverage and strong work incentives. Now is an opportunity for Democrats to push Republicans to adopt thoughtful reforms to the PTC. Millions of Americans are depending on them to get it right.

Ritz for Forbes: Consecutive Continuing Resolutions Could Lead To Deep Spending Cuts

Posted on by Alyssa Brown

Disagreements over the future of pandemic-era health insurance subsidies are threatening to prevent Congress from passing a continuing resolution (CR) needed to prevent a government shutdown on Wednesday. But all the focus on health care has drawn attention away from the effects of the CR itself, which could lead to lawmakers unintentionally imposing some of the deepest spending cuts in modern history.

Congress is supposed to pass 12 appropriations bills each year to fund the roughly 30% of government spending that doesn’t operate on autopilot. When lawmakers fail to pass a new appropriations bill before the previous one expires, they use CRs to temporarily continue government funding using the previous year’s funding levels and policy directives. From 1998 to 2011, CRs covered about one-third of the average fiscal year. But Washington’s dependence on them has risen in recent years: the federal government has been funded by a CR nearly half the time since 2011. And in four years — 2007, 2011, 2013, and 2025 — a CR lasted the entire year, meaning Congress simply declined to pass an appropriation bill.

Now, Congress may rely on a year-long CR yet again to continue avoiding the plethora of policy issues more directly related to the appropriations process than the expiring health-insurance subsidies (which are considered mandatory spending not normally part of the appropriations process). That approach would be unprecedented because Congress has never before gone two consecutive years without passing any original appropriations bills. And there are serious consequences to operating the government at funding levels set more than 18 months ago.

Read the full article in Forbes.

Stablecoins Will Lessen Community Lending

Posted on by Alyssa Brown

After the recent passage of the GENIUS Act, stablecoins — digital assets used for transactions and pegged to the value of the dollar — are expected to become a more common financial tool. The stablecoin market has grown from about $12 million in 2020 to just over $250 billion today.[1] After the Genius Act, JP Morgan projects that it could hit $500 to $750 billion in the next few years.[2]

The law includes many guardrails on stablecoins, with the non-ironic intention of protecting the stability of today’s financial structure. One important issue is whether deposits will flow out of existing banks into stablecoins. That could have significant consequences, including fewer community lending obligations and less credit and investment for small businesses, farmers, and homeowners across the country.

In August, the GENIUS Act became the first major U.S. law focused on the regulation of “payment stablecoins.” The bill is designed to enhance consumer protection, promote innovation, create confidence in the stablecoin marketplace, and protect the financial system.

Payment stablecoins have the following characteristics:

  • Means of Payment/Settlement: Its primary purpose is to function as a medium of exchange for settling transactions.
  • Stable Value: The issuer is obligated to convert, redeem, or repurchase the stablecoin for a fixed amount of monetary value (e.g., U.S. dollar).
  • Reserve Requirements: Issuers are typically required to maintain reserves backing outstanding payment stablecoins on at least a 1:1 basis. Stablecoins can also be pegged to other international currencies, such as the Euro, the Yen, or the Yuan.

In addition to the above, payment stablecoins are prohibited from paying interest/yield solely for holding or using the coins or tokens. There are a number of rationales for this ban.

First, payment stablecoins are by law not securities, commodities, or traditional deposits, and as such face far lighter regulation. If they were allowed to accrue interest, they would more closely resemble the above, but without the financial regulation that protects consumers and the broader financial system. For example, deposit accounts at banks are insured up to $250,000 by the Federal Deposit Insurance Corporation (FDIC), while stablecoins are not. This means that if used by customers to store their savings, those customers would not be insured against loss should the stablecoin issuer go bankrupt or default.

Second, policymakers were concerned about oversaturation of supply.  There is already considerable competition in the depository marketplace — almost 9,000 banks and credit unions are currently in operation in the U.S. In recent years, that number has declined significantly due to consolidation and, in part, because of a decline in demand. The growing number of nonbank financial institutions has also diminished the demand for insured depository institutions.

Third, the authors of the law wanted to prevent financial instability and the outflow of deposits from insured depository institutions that are more highly regulated and an essential source of lending to communities, small businesses, and homeowners. Technology that allows consumers to bypass banks — otherwise known as disintermediation — could threaten lending to key business sectors that, in turn, could hurt economic growth and innovation.

Yet despite efforts to protect commercial banks and credit unions from the significantly less regulated stablecoin sector, it is not difficult for crypto companies and others to skirt around the prohibition.

For example, some companies, like Coinbase, are exploring ways to offer rewards to stablecoin holders, emphasizing that such rewards are not technically “interest” and are offered for reasons other than merely holding the stablecoin itself. The company already offers a 4.10% reward rate for customers who hold the popular stablecoin USD Coin, also known as USDC. The coin’s issuer, Circle, shares interest revenue from the assets that back USDC with Coinbase. Because of the potential to circumvent the new law, a significant amount of the $18.5 trillion in deposits at U.S. banks and credit unions could flow out of insured depository institutions and into payment stablecoins. A Treasury report from April 2025 estimates that roughly $6.6 trillion in deposit outflows could occur with higher usage of stablecoins (particularly if issuers could offer yields similar to bank accounts), representing a 36% decrease in the total amount of bank deposits.[3]

This level of outflows would be incredibly challenging for banks to weather. Traditional FDIC-insured depository institutions would be forced to compete for an increasingly scarcer amount of funds. This chasing of deposits would be potentially good for depositors in the short term, as banks would be forced to offer higher yields on savings and checking accounts. But over time, this would lead to considerable consolidation within the industry as banks either merge or declare bankruptcy — with smaller community banks likely bearing the brunt of the impact.

This, in turn, would undermine an important source of economic dynamism: community lending. Community banks use deposits to originate approximately 60% of all small business loans and 80% of agricultural loans nationally. The decline in the number of small banks, more scarce deposits, and reduced competition amongst credit providers will all lead to less credit for households, local businesses, and farmers. In many areas, less lending will lead to fewer jobs. For example, small businesses are important employers in rural areas, employing 62% of all workers.[4]

This impact will be especially acute in rural and low-income areas with few credit options, since an outflow in deposits will hinder lending for the Community Reinvestment Act (CRA). Under the CRA, banks are encouraged to meet the credit and community development needs of their entire communities, especially low- and moderate-income (LMI) neighborhoods. Banks are evaluated on their performance in providing loans, investments, and services to these communities, and these evaluations are used when they apply for mergers or other changes to their deposit facilities.

Especially since the Clinton administration’s 1995 reforms to the law, CRA has dramatically increased lending, investment, and basic banking services to underserved communities. The evidence shows that the changes made to CRA coincided with a rise from $1.6 billion in 1990 annual commitments to $103 billion in 1999.  Over that roughly same period, the number of CRA-eligible home purchase loans originated by CRA lenders and their affiliates rose from 462,000 to 1.3 million.

Today, CRA continues to benefit communities around the nation. For example, there have been nearly $5 trillion in CRA-qualifying mortgages and small business loans made from 2010 to 2024, according to an analysis by the National Community Reinvestment Coalition. In 2023 alone, CRA lending accounted for roughly $387 billion in small business and community development loans.[5] Furthermore, this is a substantial portion of all lending that depository institutions do in these areas, accounting for nearly 77% of outstanding small business loan dollars and 35% of outstanding farm loans.

Yet unlike deposits at banks, stablecoins have no community lending obligations. While it is not certain exactly how much damage a one-third decline in deposit levels would do to CRA’s vital source of credit, history does give us a reason for concern. At the end of 1980, money market mutual fund assets were only about $135 billion. Today, that number is closer to $5 trillion, making it second only to banks among financial intermediaries. The main advantage mutual funds had in the early years was the industry’s ability to offer higher interest rates than banks because of regulatory limits on insured depository institutions. This led to explosive growth throughout the decade and a substantial level of deposits shifting from banks and thrifts into money market mutual funds, weakening these institutions and undermining the goals of CRA. While successful reforms in the 1990s helped soften the impact, the underlying shift in deposits nevertheless cut the amount of funds available for investment in underserved communities.

CONCLUSION

To ensure financial stability, policymakers have a responsibility to ensure that the GENIUS Act’s prohibition on interest-bearing stablecoins is effective. The delineation between payment stablecoins and stablecoins that would offer interest was carefully thought out and was placed into the law for a reason — to protect large outflows of deposits from insured depository institutions that are the backbone of lending to small businesses and homeowners. The Federal Reserve and other regulators should proceed cautiously as they develop regulations to implement the GENIUS Act, heeding Congress’s mandate to balance the innovation and efficiency gains that stablecoins offer with protecting deposits and the critical lending they enable. Finally, Congress may want to revisit and enact legislation that closes any loopholes created by the GENIUS Act that would undermine insured depository institutions and the communities they serve.

 

[1] Rafael Nam, “Why There’s So Much Excitement Around a Cryptocurrency Called Stablecoin,” National Public Radio, July 15, 2025, https://www.npr.org/2025/07/15/nx-s1-5467380/crypto-stablecoin-genius-act-congress

[2] “What to Know About Stablecoins,” JP Morgan, September 4, 2025, https://www.jpmorgan.com/insights/global-research/currencies/stablecoins.

[3] Dylan Toker and Gina Heeb, “Why Banks Are on High Alert About Stablecoins,” Wall Street Journal, July 18, 2025, https://www.wsj.com/finance/currencies/why-banks-are-on-high-alert-about-stablecoins-2f308aa0?mod=Searchresults&pos=2&page=1.

[4] Michelle Kumar and Justice Antonioli, “Small Businesses Matter: Increasing Small Business Access to Capital in the Digital Age,” Bipartisan Policy Center, April 29, 2024, https://bipartisanpolicy.org/report/small-businesses-matter-capital-access/.

[5] “Findings from Analysis of Nationwide Summary Statistics for 2023 Community Reinvestment Act Data Fact Sheet,” Federal Deposit Insurance Corporation, 2023, https://www.fdic.gov/findings-analysis-nationwide-summary-statistics-2023-community-reinvestment-act-data-fact-sheet.

Ritz for Forbes: On Social Security’s 90th Birthday, A New Idea To Solve Its Shortfall

Posted on by Max Sherrill

Since it was signed into law 90 years ago today, Social Security has become the most successful antipoverty program in American history and the foundation upon which most Americans plan their retirement. But changing demographics and policy mistakes have weakened that foundation and put the program on track for a crisis before the end of the next president’s term. Policymakers must act quickly to strengthen the program without imposing an unfair burden on vulnerable seniors or working Americans.

At its conception, Social Security was designed to be an “earned benefit” — workers pay a dedicated payroll tax on wages up to a certain level, and once these workers reach retirement age, they receive benefits to replace some fraction of the wages upon which they were taxed. But in practice, funds paid in by today’s workers are used to pay the benefits due to today’s retirees. And every year since 2010, the program has spent more on benefits than it raised in dedicated revenue because the ratio of workers to retirees is worsening as our population ages.

Unfortunately, today’s policymakers have only compounded the problem. Last year, bipartisan majorities in Congress voted overwhelmingly to give higher-income retirees already receiving public pensions the opportunity to draw more generous benefits. And earlier this year, Republicans siphoned off a portion of the program’s revenue stream in their “One Big Beautiful Bill.”

Keep reading in Forbes.

Ahead of its 90th Birthday, PPI Offers Innovative Blueprint to Secure Social Security’s Future

Posted on by Alyssa Brown

WASHINGTON — Ninety years ago this Thursday, President Franklin D. Roosevelt signed the Social Security Act into law, creating a promise that American workers could count on a measure of dignity and financial security in old age. But changing demographics, decades of political neglect, and recent policy missteps have put that promise in jeopardy, with 24% benefit cuts automatically taking effect before the end of the next president’s term if Congress fails to act.

To mark this anniversary and confront the crisis head-on, the Progressive Policy Institute (PPI) today released “Reform That Rewards Work: A New Vision for Strengthening Social Security’s Intergenerational Compact,” a sweeping proposal to rescue the nation’s most important retirement program while making it fairer, more sustainable, and more pro-work.

Authored by Ben Ritz, PPI’s Vice President of Policy Development, and Nate Morris, Fiscal Policy Fellow at PPI’s Center for Funding America’s Future, the plan would restructure Social Security’s benefit formula, modernize eligibility rules, and raise revenue with a more progressive, growth-friendly revenue system. The proposal’s key features include:

  • New “Work Credit” Benefit Formula: Calculate benefits based on years worked, not lifetime earnings, ensuring a low-income worker and their higher-earning boss receive the same benefit for the same number of working years.

  • Targeted Retirement Age Adjustments: Gradually increase the early and maximum benefit ages to reflect longer lifespans, with safeguards for lower-income and long-career workers.

  • Better Cost-of-Living Adjustments: Change COLAs so they no longer overstate inflation, paired with a “longevity bump” for the oldest retirees most at risk of outliving savings.

  • Fairer Spousal and Survivor Benefits: Strengthen protections for widows and widowers while capping excessive subsidies to high-income couples.

  • Generationally Fair Financing: Use a mix of progressive income tax reforms and consumption taxes to spread costs more evenly across generations, rather than using regressive payroll tax increases to make working Americans foot the whole bill for fixing a problem created by previous generations.

“Many Social Security proposals cling to the current system but break the historically important link between contributions and benefits,” said Ritz. “Our plan is unique in that it actually strengthens Social Security’s premise as a benefit people earn through work, all while improving fiscal sustainability and reducing poverty.”

According to independent modeling, the plan would close Social Security’s shortfall through a roughly even mix of benefit reforms and tax changes. Top earners would see modest benefit reductions roughly on par with those already projected to occur under current law, but many low-income and long-career workers would receive higher benefits, leading to substantial poverty reductions for older Americans.

“Any serious plan to save Social Security will involve tough tradeoffs,” said Morris. “What makes ours different is that it balances the books without balancing them on the backs of working Americans. This is the kind of radically pragmatic reform Washington needs.”

Read and download the report here.

Launched in 2018, the Progressive Policy Institute’s Center for Funding America’s Future works to promote a fiscally responsible public investment agenda that fosters robust and inclusive economic growth. To that end, the Center develops fiscally responsible policy proposals to strengthen public investments in the foundation of our economy, modernize health and retirement programs to reflect an aging society, transform our tax code to reward work over wealth, and put the national debt on a downward trajectory.

Founded in 1989, PPI is a catalyst for policy innovation and political reform based in Washington, D.C. Its mission is to create radically pragmatic ideas for moving America beyond ideological and partisan deadlock. Find an expert and learn more about PPI by visiting progressivepolicy.org. Follow us @PPI.

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Media Contact: Ian O’Keefe – iokeefe@ppionline.org

Reform That Rewards Work: A New Vision for Strengthening Social Security’s Intergenerational Compact

Posted on by Alyssa Brown

For 90 years, Social Security has served as the foundation upon which people plan for retirement in the United States. But changing demographics and decades of policy mistakes have put this vital program on unstable financial footing. Just seven years from now — before the end of the next president’s term — the program will face a crisis if no action is taken. Policymakers are running out of time to prevent disaster and give Americans the retirement security they deserve.

At its conception, Social Security was designed to be an “earned benefit” — workers pay a dedicated payroll tax on wages up to a certain level, and once these workers reach retirement age, they receive benefits to replace some fraction of the wages upon which they were taxed. The benefit formula is progressive in the sense that workers with lower incomes receive a higher replacement rate for the wages on which they paid payroll taxes, but people with higher lifetime earnings ultimately receive higher benefits. To reinforce the link between contributions and benefits, an internal “trust fund” was established to ensure that spending on benefits would track payroll taxes over time.

But this structure has broken down due to a combination of demographic and policy changes, and Social Security now spends significantly more than it raises in revenue each year. The program’s trust fund system allows Social Security to temporarily run deficits commensurate with the savings generated by past surpluses. But in 2032, Social Security’s Old Age and Survivor Insurance (OASI) trust fund is projected to be depleted, and benefits will be automatically cut by 24% to match the program’s incoming revenues. Even if lawmakers were to combine the OASI fund with Social Security’s Disability Insurance fund, they would only delay insolvency by less than two years.

The prospect of such a steep and sudden benefit cut makes it difficult for current workers to plan for retirement and risks throwing vulnerable seniors into poverty. But simply continuing to fund scheduled benefits without any changes, whether by raising payroll taxes or by borrowing money to finance Social Security’s deficits, would impose an unfair burden on working Americans to solve a problem they did not create.

Unfortunately, today’s policymakers are not only failing to solve this problem — they are actively making it worse. Recent legislation has increased Social Security’s shortfall through unfunded benefit expansions and tax cuts, both moving up the date of insolvency and increasing the size of automatic cuts that will happen when that occurs. The most popular proposals in Congress for “addressing” Social Security’s insolvency rely on gimmicks that would strain the link between contributions and benefits while exposing the federal budget to massive fiscal risk.

If policymakers are unable or unwilling to make the current Social Security system sustainable in a way that’s consistent with its founding principles, then now is the time to reimagine it from the ground up. PPI believes that lawmakers should take this opportunity to reassess Social Security’s structure and build a new model that is fairer, more pro-work, and more sustainable for the future.

Through a groundbreaking new formula developed by PPI, we propose that Social Security award benefits based on the number of years someone worked, rather than their lifetime earnings. This innovative structure cements Social Security’s status as an “earned benefit” but is far more progressive and affordable than the current formula. A low-income worker and their higher-earning boss would get the same benefit if they put in the same amount of work, and anyone who works for at least 20 years would receive a benefit that keeps them out of poverty. Parents would also receive up to five years of credit for caregiving to reflect both their hard work and their contributions to future Social Security solvency.

Our comprehensive package of benefit reforms also makes a number of other changes to improve the fairness and sustainability of Social Security spending. We propose increasing Social Security’s retirement ages to keep pace with rising life expectancies, while preserving a special early retirement age for lower-earning workers, who have not experienced the same gains in longevity. We would change cost-of-living adjustments to more accurately reflect inflation but boost benefits for the oldest beneficiaries who are most at risk of outliving their savings. We would reform spousal and survivor benefits to better protect widow(er)s from falling into poverty. And we would make the recently passed “Social Security Fairness Act” live up to its name with fair treatment of people who work both in and out of the public sector.

Under PPI’s plan, beneficiaries in the top fifth of the lifetime earnings distribution would absorb cuts relative to the current formula that are, on average, comparable to the ones already slated to occur under current law. At the same time, the majority of beneficiaries would see no reduction in their monthly benefit, and many low-income or long-career workers would even receive greater benefits than they could receive under the current formula. Altogether, PPI’s proposed reforms would close half of the program’s shortfall over the next 30 years through benefit changes while reducing old-age poverty.

PPI would close the remainder of Social Security’s shortfall through new revenue. Under the current system, in which benefits are based on a worker’s contributions, the only structurally coherent way to raise revenue is by increasing the payroll tax. But the payroll tax is regressive and depresses the wages of working Americans. By transitioning to a system that awards benefits based on years of work rather than tax contributions, there is an opportunity to transition to a more progressive and economically efficient funding structure.

PPI’s framework proposes comprehensive changes to federal payroll and income taxes paired with broad-based consumption taxes that spread the cost of fixing the nation’s fiscal challenges fairly among all Americans. We would also reform the use of trust-fund accounting to prevent structural deficits from threatening to impose another big benefits cliff in the future.

Taken together, the proposals in this blueprint offer a robust framework for radically pragmatic Social Security reform that is both generationally and politically balanced. PPI realizes that any plan that reduces scheduled benefits or increases taxes on anyone but the ultra-rich will nevertheless be politically challenging to enact. The mathematical reality, however, is that any plan to rescue Social Security will require some combination of these difficult choices. And the longer policymakers wait to admit this, the more painful the solutions will become. Now is the time to address Social Security’s shortfall in a thoughtful way that is fair to working Americans and retirees alike, giving both groups retirement security they can depend on.

Read the full report.

 

Five More Problems With the ‘One Big Beautiful Bill’

Posted on by Alyssa Brown

As Republicans worked their way through the budget reconciliation process this year, PPI analyzed the most harmful features of the “One Big Beautiful Bill Act” (OBBBA) they eventually passed: increasing budget deficits by upwards of $4 trillion over the coming decade, regressively redistributing resources from the poorest Americans to the wealthiest, and undermining macroeconomic stability. But while these significant flaws have been widely reported, OBBBA is also littered with special interest giveaways and other problems that have received relatively less coverage. Here are five additional ways in which Trump’s signature legislative achievement is even worse than you may have realized:

1. Encourages Inaction on Reducing SNAP Error Rates

Before the bill’s passage, the federal government would pay for nearly all SNAP benefits. But under OBBBA, states will now have to pay an escalating share of SNAP costs, depending on how high their error rate is. This plan was a major sticking point for Senator Lisa Murkowski, whose vote they needed to pass the bill. Her home state of Alaska has the highest error rate in the nation, at 25%. To secure her support, Republican leaders tried to just exempt her state entirely from the cost-sharing requirements. However, after the parliamentarian ruled that this did not comply with the rules of reconciliation, Republicans decided upon a different strategy. In their new plan, any state that in 2025 or 2026 has an error rate above 13.3% would be exempt for up to two years from the requirement after its 2028 implementation.

In the short term, this provision does nothing to incentivize states to improve their SNAP error rates and, in fact, creates a perverse incentive to increase them. There are already nine states (plus the District of Columbia) above the 13.5% threshold, with another 11 only a few percentage points away. Under the new requirement, states already above the threshold have little reason to do anything to lower their error rates in the near term, while those on the margin might be incentivized to push themselves over the threshold to delay the requirement.

Even when the requirement is finally in place for every state, the law’s other changes to SNAP will hamper efforts to effectively reduce payment error rates. For example, OBBBA changes the federal government’s share of administrative costs to 25% — down from 50% under prior law — meaning that states now have to shoulder increased administrative costs associated with tracking payments, at the same time that they are being told to reduce them.

2. Expands Federal Aid for Wealthy Farmers 

While the law makes large cuts to the nutrition safety net for low-income Americans, it expands the agricultural subsidies for wealthy farmers. Federal farm subsidies were already extremely regressive before the passage of this bill, with many programs’ benefits flowing mostly to the largest and wealthiest farms, which have little risk of financial failure. For example, roughly 77% of the total subsidies in the Federal Crop Insurance Program (the largest federal program) go to the top 20% of farms by crop sales.

Republicans made these subsidies even more regressive. OBBBA further increases premium support for Crop Insurance by 3-5%, offering farmers both increasingly generous premium subsidies and coverage. The law also substantially expands Price Loss Coverage, a program that makes payments to farmers when the market price of a covered crop goes below a government “reference price,” increasing reference prices for various crops between 10-20% and increasing the likelihood that farmers receive a payout. Finally, the law increases the cap on maximum payouts farmers can collect from various agricultural programs from its previous $125,000 to $155,000. At the same time, Republicans defeated a bipartisan proposal that would have meant-tested benefits and ensured that more support went to struggling farmers. In sum, the bill’s many agricultural program expansions added nearly $66 billion to the bill’s cost without making any attempt at fundamental reform.

3. Turns Back the Clock on American Energy

To offset a small portion of its new spending, OBBBA repeals the Inflation Reduction Act’s (IRA) green energy credits. But in an effort to retain support from battleground Republicans worried about ongoing projects in their state or district, the law nominally retains some of the credits for an additional few years. However, under the law’s new rules on “prohibited foreign entities,” these credits could become functionally impossible to claim, even if they remain on the books. Prohibited foreign entity rules are intended to prevent firms in nations such as China, Iran or North Korea from participating in critical supply chains or benefitting from government subsidies. While these rules have existed since the passage of the IRA, OBBBA made them far more onerous.

A company seeking to claim the credits will now be required to verify a far more expansive set of contracted firms, suppliers, and debt holders than ever before to ensure that they are not owned or operated even in part by a prohibited foreign entity. For companies that operate with long and complex supply systems, the costs of doing so could prove prohibitive at best. In addition, the law’s many vague definitions leave substantial leeway for the administration to write the rules in ways that are even more restrictive — something they explicitly promised to do at passage and have already begun to implement.

While hobbling clean energy incentives, OBBBA supercharges subsidies and tax breaks for fossil fuel producers. The bill opens up more federal land for oil and gas drilling, while decreasing the royalties that fossil fuel companies must pay to do so. Oil and gas companies received a new break, allowing them to exempt drilling costs from their income, which makes them practically exempt from the Corporate Alternative Minimum Tax. Coal producers also received a new tax break to make metallurgical coal, which is used in the production of steel, despite the fact that it is not used in U.S. steelmaking and is typically exported overseas.

These policies will make energy both less clean and more expensive for American households. According to one analysis of the law, its energy provisions alone will increase costs for the typical American household by up to $192 while cutting the deployment of clean energy in half over the next 10 years.

4. Funds Private Schools Using Taxpayer Dollars

 The bill makes permanent and creates new tax benefits that will almost exclusively benefit private schools and the families that attend them. One example is the expansion of 529 college savings accounts, which disproportionately benefit the affluent households that have the most disposable income to save and are in the higher tax brackets that gain the most from its tax-free growth. OBBBA permanently extends a provision enacted in 2017 that allows parents to use 529s for elementary and secondary education tuition and expenses. But by doing nothing to address the notoriously regressive nature of 529s, this change merely helps wealthy parents pay for their child’s private school tuition tax-free.

In addition, OBBBA creates a new benefit to further funnel taxpayer resources to private schooling. Donations to “scholarship-granting institutions” – intermediary organizations that fund vouchers for students to attend private schools – will now receive a dollar-for-dollar tax credit on donations up to $1,700, meaning that a donation to these groups is essentially fully reimbursed by the federal government. This goes far beyond the income deduction granted to other charitable donations, giving private schools a massive tax advantage over other groups — such as churches, cancer research centers, or food banks — by making the donation essentially cost nothing. In addition, the credit has few guardrails to prevent abuse or even target those who would most benefit. For example, student eligibility is tied to 300% of an area’s median income, which for a family of four in many metro areas is nearly $500,000. Rather than help a low-income family pay for private schooling, the benefit could merely give a tax benefit for wealthy children who would have paid for private school anyway.

5. Strains State Budgets

In addition to blowing up the federal budget, OBBBA also places an enormous strain on state governments. The bill’s deep federal cuts to core safety net programs like Medicaid and SNAP, while nominally saving money for the federal government, mostly just push those costs onto states. According to the National Governors Association, the law’s cuts to these two programs alone would leave states with roughly $111 billion in increased costs to absorb. Most states have balanced budget requirements and operate on narrow margins, meaning that they are not equipped to handle a shock of this size without sharp benefit cuts or tax increases. As a result, Medicaid coverage could shrink, food assistance could be cut, and program administration will suffer.

The cuts will also impact state budgets in indirect ways. For example, the federal school lunch program allows communities to qualify if over a quarter of their students are enrolled in federal aid programs like SNAP or Medicaid. But if OBBBA cuts push enough families off those programs, these schools will lose eligibility, jeopardizing food access for children and requiring states to fill in the gap to ensure those children still have access to meals. Moreover, the bill’s substantial cuts to green energy credits will imperil infrastructure projects and other economic activity that would have brought tax revenue to states.

Read the full piece here.

Passage of ‘One Big Beautiful Bill’ Renders Republican Deficit Hawks Extinct

Posted on by Alyssa Brown

Republicans have sent their “One Big Beautiful Bill” to President Trump’s desk and it’s hard to overstate the consequences. Not only will the bill be one of the most regressive transfers of wealth from society’s poorest to its richest in recent memory, but it will also add trillions of dollars to our national debt and hurt our economy. By passing this obscene budget-busting bill with near-unanimous support from their members in Congress, Republicans have proven that their party’s deficit hawks have gone extinct.

According to analysis from the Yale Budget Lab, the bill’s deep cuts to safety-net programs such as SNAP and Medicaid will reduce annual incomes for the bottom 20% of Americans by roughly $700 per person. But the savings from these cuts won’t be used to pay down the national debt or improve the programs for the people who need them most — rather, they will help offset tax cuts that will increase average after-tax incomes for individuals in the top 1% by roughly $30,000. The bill also guts pro-growth investments in the clean energy transition while propping up coal production and other conservative special interests with new giveaways, such as expansive new aid for wealthy farmers and large tax deductions for whaling boats.

Despite the bill’s large cuts, it would add roughly $4.1 trillion to the national debt over the next ten years.  Moreover, if ostensibly “temporary” policies in the bill are eventually made permanent without offset — as Republicans have made clear they had no trouble doing when writing this bill— the cost would swell to $5.5 trillion, making it more expensive than every COVID stimulus bill combined. This is not only the most expensive bill ever passed using the filibuster-proof reconciliation process, it is also the first one to permanently increase budget deficits outside the 10-year window. This unprecedented outcome was only possible because Senate Republicans effectively invoked the “nuclear option” to blow up budget enforcement mechanisms, which will open the floodgates for future Congresses to add trillions more to the national debt with barebones majorities.

The explosion of federal debt will have lasting consequences for Americans. In the short term, deficit spending by the federal government will increase by up to $632 billion in a single year, putting upward pressure on inflation rates that have remained stubbornly above the Federal Reserve’s 2% target. Increased government borrowing will also put upward pressure on already elevated interest rates, making everything from mortgages to car loans more expensive for ordinary families. Over the long term, higher rates will make it more expensive for businesses to finance new investments, slowing innovation and job creation. The federal government already spends roughly a trillion dollars each year on interest payments – more than it spends on national defense or Medicare. Now those costs will grow even faster, putting them on track to rival Social Security as the single-largest line item in the federal budget within 20 years. Instead of being used to fund investments in America’s future, taxpayer dollars will be almost exclusively used to pay for previous obligations.

Perhaps what is most remarkable is that this massive assault on our country’s fiscal integrity was only made possible by the people pretending to be its loudest defenders. For years, self-identified “deficit hawks” in the House GOP conference repeatedly called the deficit an “existential threat.” And even though they relied on completely fake growth assumptions to argue that $2.5 trillion of tax cuts would pay for themselves, these representatives insisted they would not support legislation that included any additional tax cuts without offset. They went so far as to get a commitment from House Speaker Mike Johnson that he would step down if he passed a bill that crossed this red line. Yet when the Senate sent them a bill that blatantly violated their agreement, these “fiscal hawks” quickly folded under pressure and rubber-stamped it.

Compare that to what happened just four years ago under the Biden administration. President Biden’s full “Build Back Better” agenda, while no model of fiscal responsibility, would have added less than $3 trillion to budget deficits over the first 10 years if it had been permanently enacted. Even though they used budget gimmicks to do it, Democratic deficit hawks in the House ensured the reconciliation bill advancing this agenda was scored as roughly deficit-neutral under traditional accounting. And when Democratic deficit hawks in the Senate forced party leaders to strip out those gimmicks, the bill eventually became something that actually reduced deficits. While deficit hawks may be endangered within the Congressional Democratic Party, today it is clear they are functionally extinct on the Republican side.

Deeper Dive: 

Fiscal Fact: 

As President Trump’s chaotic and destructive economic policies have shaken investor confidence in the first half of 2025, the U.S. dollar has lost over 10% of its value relative to foreign currencies — the worst such decline in more than 50 years. A weaker dollar results in more expensive imports, lower spending power when traveling internationally, and higher borrowing costs for both the American people and their government.

Other Fiscal News:

More from PPI and the Center for Funding America’s Future:

Senate Republicans Go Nuclear to Blow Up the National Debt

Posted on by Alyssa Brown

Senate Republicans on Monday took the dangerous step of “going nuclear” to pass their One Big Beautiful Bill in violation of the rules governing the filibuster-proof reconciliation process — and the fallout will add trillions of dollars to the national debt.

The reconciliation process, which was designed to fast-track policies needed to help Congress hit its budget targets, does not allow lawmakers to increase deficits outside the 10-year scoring window. These rules have always been enforced by measuring how enacting provisions in the legislation would affect the federal budget relative to a “current law baseline,” which is a scenario defined in statute and generally assumes laws are left unchanged. Senate rules require 60 votes to waive this restriction. 

Republicans couldn’t find a politically palatable way to pay for the trillions of dollars in tax cuts they wanted to make permanent, so they instead decided to make those tax cuts appear free by scoring against a “current policy” baseline, which assumes every policy in effect today is extended in perpetuity — even if the law as written would have them expire. But it gets worse: to enact new tax cuts without paying for them, Senate Republicans scheduled those provisions to expire within the 10-year window and scored them as temporary. The result is a Frankenstein scorekeeping system in which no consistent accounting is used, and legislation is assumed to cost whatever the majority wishes it did. 

While the Senate GOP’s “official” score of the bill using this Frankenstein accounting shows they would reduce deficits, traditional scoring against the current law baseline would show it adding more than $4 trillion to the deficit over 10 years (including higher interest payments) — and the cost would swell to $5.5 trillion if all the “temporary” provisions were made permanent. Notably, if the bill were measured in a way that treated the scheduled expirations of both new and existing policies consistently, it would violate the rules of reconciliation by permanently increasing deficits relative to either a current policy or a current law baseline. 

The Senate’s parliamentarian, who is responsible for interpreting the chamber’s rules, almost certainly would rule against the GOP’s attempt to use their Frankenstein score for enforcement purposes. Any effort to circumvent the parliamentarian’s official interpretation of the rules – whether by firing her, overruling her, or formally changing the 60-vote supermajority requirement with just 51 votes — would be invoking a “nuclear option” that fundamentally changes the character of the Senate. 

Senate Republicans insist they found an alternative to going nuclear by asserting the Senate Budget Committee chairman has unilateral authority to determine scores — something they argue Senate Democrats did in their 2022 budget resolution. But the two situations are not remotely the same: Senate Democrats used their authority to consistently assume discretionary spending for both the IRS and Head Start continued at baseline levels, when the original CBO score was inconsistent. Moreover, Democrats made sure the move was blessed by the parliamentarian ahead of time, whereas Republicans actively prevented the parliamentarian from making any ruling. 

The fact that Republicans prevented the parliamentarian from weighing in before voting to break their own rules with a simple majority vote, rather than overruling her directly, is a distinction without a difference. Republicans have gone nuclear with their chicanery and destroyed the Senate’s budget enforcement mechanisms.

The fallout will radiate throughout fiscal policy for years to come. Not only will the national debt be up to $5.5 trillion larger 10 years from now than it would be without the “One Big Beautiful Bill,” but there will be little to stop future Congresses from doing the same thing that Republicans did this week: adding trillions more to the debt while claiming they are doing the opposite.

Weinstein Jr. for Forbes: It’s The Early 1990s Bond Market Again

Posted on by Alyssa Brown

Three decades ago, a president squarely focused on middle-out growth realized, much to his frustration, that the best thing to do for the nation’s working class would hurt him politically — at least in the short term. The first Democrat to be elected president after Reaganomics had blown a hole in the deficit, Bill Clinton understood that high interest rates for borrowers — small businesses, home buyers, and ordinary consumers alike — were the primary barrier to broad-based prosperity. To bring those rates down in the service of more robust growth, he would have to do something voters of almost every stripe hate: pare back the federal government’s deficit by cutting spending and raising taxes.

He did exactly that, and the economic growth that followed meant Clinton left office boasting the only federal surpluses in recent history. The lessons of his success bear heavily on the political debate today in Washington because, for the first time in 30 years, the yawning gap between federal revenues and federal outlays is poised to emerge again as the prime barrier to domestic economic growth. And yet the Trump administration’s decision to put its head in the sand on this issue with its misnamed Big Beautiful Bill threatens to cut the nation’s working-class families off at the knees.

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