issue: Fiscal Policies

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.

Keep reading in Forbes.

Loss of AAA Rating for U.S. Credit Underscores Grave Consequences of Trump’s Budget-Busting Bill

Posted on by Alyssa Brown

WASHINGTON — Today, Ben Ritz, Vice President of Policy Development at the Progressive Policy Institute (PPI) and Director of PPI’s Center for Funding America’s Future, issued the following statement on Moody’s decision to downgrade the U.S. credit rating from AAA:

“Even as all the other major ratings agencies downgraded U.S. credit over the past 15 years, Moody’s held firm in maintaining our government’s AAA credit rating. That today even Moody’s has lost its once-unshakable confidence in the sustainability of U.S. fiscal policy is more than a canary in the coal mine: America cannot afford a ‘big beautiful bill’ with policies that would add more than $5 trillion to our national credit card over the next decade if permanently enacted. No lawmaker who supports this budget-busting boondoggle or anything like it moving forward can call themselves a ‘deficit hawk’ ever again.”

Read more PPI analysis of the “Big Beautiful Bill” and its grave fiscal consequences:

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.

The Progressive Policy Institute (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. Learn more about PPI by visiting progressivepolicy.org. Find an expert at PPI and follow us on Twitter.

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

GOP Doubles Down on Deceptive Budget-Busting Tax Plan

Posted on by Max Sherrill

From our Budget Breakdown series highlighting problems in fiscal policy to inform the 2025 tax and budget debate.

PPI warned last week that Republicans’ “Big Beautiful Bill” was shaping up to repeat and compound many of the problems that doomed Joe Biden’s “Build Back Better” plan in 2021, such as bloating the legislation with a partisan wishlist and relying on budget gimmicks to mask its outrageous costs. But as House Republicans unveiled and began marking up legislative text this week, the details proved to be even worse than anticipated.  

Republican lawmakers eagerly packed their big budget bill with niche giveaways and unrelated policies. To name just a few examples: there’s a $5,000 tax credit for conservative education activists to subsidize private (often religious) school enrollment, a tax break for gym memberships that mostly benefits the wealthy, and the seemingly random addition of “MAGA” savings accounts. And that’s just the Ways and Means Committee — other committees have tacked on their own miscellaneous riders, from a partisan rewrite of the farm bill in the Agriculture Committee to a moratorium on subnational AI regulation in the Energy and Commerce Committee. 

They also relied on even more budget gimmicks than expected to hide the legislation’s true cost. It was widely anticipated that Trump’s many campaign proposals, such as exempting auto loan interest payments, overtime income, and tips from income taxes, would be made temporary to lower the bill’s sticker price. But the bill included several additional tax cuts, such as an enhanced Child Tax Credit (for everyone but low-income families) and a larger standard deduction, which are also set to expire after only a few years. 

In reality, Republicans don’t intend to allow any of these provisions to ever expire. They used the same tactic to reduce the scored cost of the Tax Cuts and Jobs Act (TCJA) in 2017, only to now argue that preventing the scheduled expiration of that bill’s tax cuts should cost nothing at all because they are not creating “new” tax cuts. As a result, the debt impact of Republicans’ BBB would be substantially higher than they claim. While the “official” cost of the bill’s tax cuts is roughly $3.8 trillion over 10 years, they would actually cost around $5.3 trillion — plus as much as $900 billion in interest costs — if enacted permanently. 

These problems are only likely to grow worse as Republicans make changes needed to win over uncommitted votes. Blue-state Republicans in the House are demanding a far greater increase to the $10,000 cap on State and Local Tax (SALT) deductions than the $30,000 level included in the bill, which they called an “insulting” offer. A critical mass of members in both the House and Senate have opposed the bill’s rollback of clean-energy tax credits from the Inflation Reduction Act, which they say will kill emerging technologies and cost their constituents jobs. Many oppose the bill’s deep Medicaid cuts that would leave 7.6 million more Americans uninsured — with one senator referring to them as “morally wrong and politically suicidal.” Meanwhile, Conservative hardliners in both the House and Senate are still demanding deeper spending cuts that might be more fiscally responsible but could make the bill even more difficult for swing-district Republicans to support. 

Ironically, Republicans are repeating the same mistakes that helped sink President Biden’s BBB plan in 2021. That bill also relied on arbitrary expiration dates to cram in a disjointed wishlist of policy priorities, even if they risked exacerbating budget deficits and inflation. As a result, the version that passed the House in 2021 lacked a clear strategy and made it easier for critical lawmakers to walk away when inflation continued to worsen. Yet Republicans have taken this playbook to an even greater extreme by proposing a bill that would add roughly three times as much to the annual budget deficit in its worst year as Biden’s BBB would have — despite the fact that inflation remains a pressing concern for voters.

If Republicans continue down this road, their BBB could very well fall apart entirely as Biden’s did. However, if they do successfully manage to jam their partisan megabill through Congress, the fallout would be substantially worse: stuffing the tax code with a myriad of giveaways, cutting critical social services for working families, and risking another round of inflation by blowing up the budget deficit – leaving Americans to pay the price for years to come. 

Deeper Dive

Fiscal Fact

Uncapping the SALT deduction would provide nearly three-quarters of the benefits to households making over $430,000, with an average annual tax cut of roughly $140,000 for the top 0.1% of households.

Further Reading

Other Fiscal News

More from PPI & The Center for Funding America’s Future

Trump’s BBB is Shaping Up to Be an Even Bigger Mess Than Biden’s

Posted on by Max Sherrill

From our Budget Breakdown series highlighting problems in fiscal policy to inform the 2025 tax and budget debate.

Donald Trump was elected in 2024 on a promise to “End Inflation and Make America Affordable Again.” He criticized “Joe Biden’s reckless spending spree, which is more reckless than anybody’s ever done or had in the history of our country.” And he complained that the incumbent Democrat was guilty of “weak, ineffective, and virtually nonexistent leadership.” In survey after survey, voters made clear they largely agreed with Trump’s assessment.

Perhaps no episode of Biden’s presidency better displayed the traits that fueled these criticisms than his failed effort to pass a sprawling “Build Back Better” domestic spending bill through the filibuster-proof reconciliation process in 2021. But as Congressional Republicans begin crafting a “big beautiful bill” to enact the bulk of Trump’s economic agenda through that process, there are early signs that they’re making all the same mistakes — or perhaps even more.

Although very different in their origins and ideological goals, these two BBBs have far more in common than just their initials. Both Biden’s BBB and Trump’s BBB seem crafted more to fulfill a lengthy wishlist for the president’s ideological allies than address a pressing national need. Both parties struggled to find a way to pay for these wishlists in large part because of shortsighted tax pledges their presidential nominee made during the previous campaign. Rather than right-sizing their ambitions, Republicans today are seeking to ram through their BBB using legislative tactics eerily reminiscent of those that backfired on Democrats in 2021. And both parties pursued their BBB with a cavalier disregard for their contributions to inflation, provoking voters’ ire on their top economic concern.

But there are many ways in which the 2025 Republican BBB is likely to be even more damaging — both economically and politically — by piling on debt and exacerbating inflation at a time when the country can least afford it. If Republicans continue going down this path, they risk betraying their electoral mandate to cut the cost of living and giving Democrats a perfect opportunity to regain something that’s long eluded them: public confidence on handling the economy.

Read the full comparative analysis.

Deeper Dive

Fiscal Fact

​House Republicans have claimed that their proposed tax cuts “will generate $2.5 trillion in additional revenue through economic growth,” but several independent analyses have found that they would actually shrink the economy over the next decade.

Further Reading

Other Fiscal News

More from PPI & The Center for Funding America’s Future

PPI Report Warns Trump’s ‘Big Beautiful Bill’ is Doubling Down on Biden’s ‘Build Back Better’ Mistakes

Posted on by Max Sherrill

WASHINGTON — As President Donald Trump and Congressional Republicans begin drafting a sweeping “Big Beautiful Bill” to implement their second-term economic agenda, a new report from the Progressive Policy Institute (PPI) warns that the GOP’s reconciliation effort risks repeating — and exacerbating — the economic and political mistakes of President Biden’s failed “Build Back Better” plan.

The report, “How Trump’s BBB is Shaping Up to Be an Even Bigger Mess Than Biden’s,” authored by Ben Ritz, PPI’s Vice President of Policy Development, argues that despite the difference in their origins and ideological goals, the BBBs of Joe Biden and Donald Trump have far more in common than just their initials. The two presidents’ signature spending plans share deep structural flaws stemming from poor leadership, unreasonable campaign promises, misleading budget gimmicks, and a refusal to reckon with inflationary risks.

“Joe Biden’s approach to party-line reconciliation bills was arguably the biggest failure of his presidency,” said Ritz. “Trump and Congressional Republicans are now on track to make all the same mistakes — but on a much larger scale, with even greater risks to the economy and their own political standing.”

In the report, Ritz outlines a series of parallels — and troubling new developments — that suggest Trump’s BBB could be even more economically reckless and politically damaging than the one pursued by his Democratic predecessor:

  • Both Overpromised And Refused to Set Priorities: Biden refused to set realistic priorities or grapple with tradeoffs as he sought to pass a grab bag of policies from the wishlists of left-leaning interest groups. But Trump has demonstrated even weaker leadership by seeking to incorporate a cacophony of even more costly and conflicting demands within his BBB.
  • Both Tied Their Hands With Shortsighted Tax Pledges: Whereas Biden’s pledge never to raise taxes on any household earning under $400K made it impossible to fully pay for his spending priorities, Trump’s campaign promises to cut taxes on tips, overtime pay, Social Security benefits, and more could deepen deficits by nearly $9 trillion over 10 years.
  • Both Relied on Procedural Gimmicks Masking Real Tradeoffs: Democrats used procedural tricks to make their BBB appear deficit-neutral and punt difficult political decisions until it was too late. Republicans are now utilizing similar gimmicks but aren’t even attempting to achieve deficit-neutrality. Even worse, they’re attempting to employ new gimmicks that would permanently erode the integrity of the budget process and open the door to tens of trillions of dollars in new deficit spending down the line.
  • Both Exhibited A Cavalier Attitude Towards Inflation: When confronted with rising inflation, the Biden administration paid lip service to cutting costs but continued to pursue inflationary policies. Trump has doubled down on this attitude during his second term, relying on the exact same excuses and scapegoats to justify his budget-busting policies. 
  • Costs Are Greater Today Than in 2021: Unlike in Biden’s first year, today’s high interest rates and record debt servicing costs mean fiscal recklessness will inflict even greater harm on American families. Independent estimates show that Trump’s BBB could reduce real wealth by more than $36,000 per household and put the U.S. economy in unprecedented peril.

“Donald Trump and Congressional Republicans were elected on a promise to ‘End Inflation and Make America Affordable Again,’” Ritz said. “If they insist on betraying their democratic mandate by doubling down on inflationary economic policy, they should expect the same political fate as their predecessors.”

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

How Trump’s BBB is Shaping Up to Be an Even Bigger Mess Than Biden’s

Posted on by Alyssa Brown

Donald Trump was elected in 2024 on a promise to “End Inflation and Make America Affordable Again.” He criticized “Joe Biden’s reckless spending spree, which is more reckless than anybody’s ever done or had in the history of our country.” And he complained that the incumbent Democrat was guilty of “weak, ineffective, and virtually nonexistent leadership.” In survey after survey, voters made clear they largely agreed with Trump’s assessment. 

Perhaps no episode of Biden’s presidency better displayed the traits that fueled these criticisms than his failed effort to pass a sprawling “Build Back Better” domestic spending bill through the filibuster-proof reconciliation process in 2021. But as Congressional Republicans begin crafting a “big beautiful bill” to enact the bulk of Trump’s economic agenda through that process, there are early signs that they’re making all the same mistakes — or perhaps even more.

Although very different in their origins and ideological goals, these two BBBs have far more in common than just their initials. Both Biden’s BBB and Trump’s BBB seem crafted more to fulfill a lengthy wishlist for the president’s ideological allies than address a pressing national need. Both parties struggled to find a way to pay for these wishlists in large part because of shortsighted tax pledges their presidential nominee made during the previous campaign. Rather than right-sizing their ambitions, Republicans today are seeking to ram through their BBB using legislative tactics eerily reminiscent of those that backfired on Democrats in 2021. And both parties pursued their BBB with a cavalier disregard for their contributions to inflation, provoking voters’ ire on their top economic concern.

But there are many ways in which the 2025 Republican BBB is likely to be even more damaging — both economically and politically — by piling on debt and exacerbating inflation at a time when the country can least afford it. If Republicans continue going down this path, they risk betraying their electoral mandate to cut the cost of living and giving Democrats a perfect opportunity to regain something that’s long eluded them: public confidence on handling the economy.

BUDGET-BUSTING BILLS BACKFIRE WHEN THEY IGNITE INFLATION

After voters rewarded their parties with narrow but decisive victories in 2020 and 2024, respectively, both Biden and Trump believed they had a mandate to pass sweeping policies in partisan megabills through reconciliation. At the time of its passage, 63% of voters supported Biden’s first reconciliation bill — the $1.9 trillion American Rescue Plan, which was intended to support the economy through the final stage of the COVID-19 pandemic. But the inflationary effect of this bill drowned out the popularity of the individual policies contained within it and the subsequent legislation Biden sought to pass.

In an incisive post-mortem of the failures of Biden’s economic policy, Jason Furman — the former Chairman of President Obama’s Council of Economic Advisors — explains how excessive government spending during the Biden Administration helped push inflation to heights not seen in decades. Moreover, this inflation effectively reversed the policy accomplishments Democrats thought Biden had achieved, such as by canceling out the spending increase from the bipartisan infrastructure law passed in 2021 or causing real wages to fall below their pre-pandemic level.

Inflation reversed not only the economic benefits of Biden’s policies but also their political benefits. Polling of working-class voters conducted later in the Biden administration by PPI found that 69% of respondents said the rising cost of living was the greatest economic challenge facing the United States, with 55% of those voters believing the primary cause was government overspending. No matter how popular Biden’s programs may have been in the abstract, voters didn’t support them at the expense of keeping the cost of living down. 

Democrats suffered both because the unpopularity of inflation outweighed the popularity of their policies, and because their programs were perceived as worsening it. That experience should be a warning for Republicans as they pursue their own party-line reconciliation bill. In isolation, any one of Trump’s proposed tax cuts may poll well. But if they worsen inflation and further increase the cost of living, Republicans are unlikely to reap any political benefits.

TWO FAILURES OF LEADERSHIP

Over the first 100 days of his second term, Donald Trump has repeated many of the missteps that Biden took toward developing budget-busting bills that worsened inflation and his party’s political prospects — starting with an inability to effectively lead. 

From the very beginning, Joe Biden’s economic agenda was undermined by the fact that neither he nor Congressional Democrats were willing to define top priorities and make trade-offs. When crafting the American Rescue Plan, they opted to pursue a $1.9 trillion price tag that several experts (including myself) warned was too big and likely to invite inflation. Subsequent reporting has revealed that Biden agreed to this figure not because he believed it was the was the right level of spending to meet the country’s macroeconomic needs, but because it was the amount Senate Majority Leader Chuck Schumer needed to fund a running list of requests from his members — and neither of them was willing to tell anyone “No.”

When it came time to craft a second reconciliation bill to implement their longer-term “Build Back Better” priorities, Democrats again struggled to prioritize. Previously successful party-line reconciliation bills focused on addressing a specific national goal, such as Barack Obama’s Affordable Care Act (health-care reform) or Donald Trump’s Tax Cuts and Jobs Act (tax reform). In contrast, Biden’s BBB was a grab bag of policies from the wishlists of left-leaning interest groups and their Congressional champions. Voters had a hard time making sense of this mishmash of health care, energy, child care, infrastructure, education, elder care, tax policy, and more. 

Although polls found solid majorities in support of the constituent policies in Biden’s BBB, only about 40% of voters supported the package as a whole at the time it collapsed. Many Democrats still believe this disconnect — and the party’s generally low approval rating on economic issues throughout the Biden era — simply amount to a “messaging problem.” But the real explanation is that there is far more support for individual spending proposals in isolation than for doing all of them together, especially when voters were already blaming a lack of fiscal discipline for inflation. In the abstract, who doesn’t want to expand access to life-saving health care or reduce the financial burdens of raising children on hard-working parents? But budgeting is about trade-offs and voters did not believe Democratic leaders were capable of making them.

Donald Trump has thus far shown himself even more incapable of setting clear priorities. The 119th Congress began amid internal Republican debates over how to advance Trump’s energy and security spending priorities while also extending and expanding upon the expiring provisions of the Tax Cuts and Jobs Act passed in his first term. Senate Republicans preferred to pass the spending priorities in one reconciliation bill followed by a second reconciliation bill with the tax priorities, while the House preferred to do it all at once. Trump waffled for months, leaving both chambers to go down divergent procedural routes before settling on his demand for “one big beautiful bill.”

Even now, the president continues to give Congressional Republicans conflicting guidance about the composition of his BBB and how he intends to pay for it. He has told House Republicans he supports cutting more than $1 trillion from mandatory spending while telling Senate Republicans he does not support cutting the programs that would be necessary to achieve those savings. The poorly targeted cuts identified by Trump’s “Department of Government Efficiency” are on track to save just a few billion dollars, while the deeper cuts to discretionary spending proposed in the administration’s “skinny budget” last week were immediately criticized as unworkable by their own Congressional allies. The few tax loopholes Trump has expressed willingness to close — such as for carried interest and sports stadiums — also wouldn’t raise a significant amount of revenue.

By far, the biggest “offsets” Trump has proposed are his sweeping tariffs, which the president is imposing through executive actions but his advisors are clearly linking to the BBB reconciliation bill. Trump aide Peter Navarro claimed the tariffs enacted on “Liberation Day” would raise $6 trillion over 10 years to help pay for tax cuts. But that faulty calculation does not account for falling revenues as the economy slows down or the tens of billions of taxpayer dollars Trump is planning to spend compensating farmers for destroying their export markets. Still, even critics of the policy agree Trump’s tariffs could raise roughly $2 trillion over 10 years if left in place. 

But the reality is that nobody knows if that’s the plan — least of all Trump. Some Trump advisors, such as Navarro, believe tariffs should be the permanent foundation of our tax system. Most others have suggested the purpose of tariffs is to give him leverage to negotiate better trade deals and foreign policy concessions. If the latter is true, then these tariffs are temporary and won’t even come close to paying for a fraction of the reconciliation bill Republicans are pursuing. This chaos is further evidence that Trump is at least as bad, and likely even worse, at setting priorities as his predecessor was.

TWO PRESIDENTS BOUND BY SHORTSIGHTED TAX PLEDGES

Both Biden and Trump struggled to cover the costs of their BBB in large part because of shortsighted tax pledges they made during the heat of a presidential campaign.

During the 2020 presidential election, Biden pledged not to raise taxes on any household with an annual income under $400,000. That pledge was undoubtedly smart short-term politics: taxes on the ultra-rich are the only ones that poll well. But as a previous report of mine documented, it also made raising revenue extremely difficult by limiting potential tax increases to less than 2% of American taxpayers. 

Even taxing all income not protected by the pledge at revenue-maximizing rates would not be enough to sustainably finance spending at the levels Biden proposed. Yet the tax increases Biden actually proposed were smaller than that, and a Democratic Congress still couldn’t pass them. If Democrats don’t believe they can convince voters that proposed programs are worth personally paying something for, it further suggests those programs aren’t as popular as Democrats wish they were.

Trump now faces a similar challenge of his own making. It would have been difficult enough to find the $4.2 trillion of savings needed over 10 years to offset the cost of making the tax cuts he passed in 2017 permanent. But during the 2024 presidential campaign, Trump made a cacophony of promises to eliminate taxes on tip income, overtime pay, Social Security benefits, auto interest loans, electric generators, and more.

Altogether, the Peter G. Peterson Foundation estimates that these policies could bring the 10-year cost of just the tax provisions in Trump’s BBB to roughly $9 trillion. To put into context how expensive that is: Republicans could completely eliminate Medicaid — the third-largest federal spending program — and still just barely break even.

TWO CONGRESSES USING PROCESS TO PUNT HARD DECISIONS

Knowing that they couldn’t possibly pay for everything their party’s president promised to do in their BBB, Biden’s Democrats and Trump’s Republicans both fell back on legislative shortcuts to mask or avoid difficult tradeoffs.

If enacted permanently, the full suite of BBB spending proposals Congressional Democrats sought to enact would have increased spending by nearly $5 trillion over the 10-year window used for official scorekeeping. But Sen. Joe Manchin — the most resolute deficit hawk in the Senate Democratic caucus — refused to support more than $1.5 trillion of new spending and insisted it all be fully offset. Sen. Schumer convinced Manchin to support a budget resolution with reconciliation instructions that would permit up to $3.5 trillion of new spending so that Congressional committees could begin drafting legislative language. But the two men privately agreed that Manchin’s red line remained unchanged, meaning Democratic leaders merely punted their disagreements rather than resolving them.

Because nobody in either the White House or Congressional leadership was willing to tell activist groups that their priorities had to get cut, they instead tried to circumvent Manchin’s demands using budget gimmicks. The House-passed BBB included tax increases that were permanent and thus effective for the full 10-year window, but spending programs had delayed starts or arbitrary expiration dates. In the official 10-year score, this gimmick made the bill appear roughly deficit-neutral. But in practice, spending programs would be adding to deficits every year they were in place if the law were passed and become increasingly expensive if they were later extended as many Democrats hoped.

Manchin steadfastly refused to engage with these shenanigans and prevented his party from passing a BBB that was deficit-increasing under any measurement. But the “fiscal conscience” of today’s Congressional Republicans is far weaker. While every iteration of BBB legislation Congress considered in 2021 was roughly paid for under traditional scoring methods, no Congressional Republicans are even trying to meet this standard today. 

In February, House Republicans — including the most anti-deficit hardliners — voted to pass a budget resolution that would enable a reconciliation bill to increase deficits by up to $2.8 trillion. Senate Republicans, who balked at the trillions in spending cuts the House required to partially finance GOP tax priorities, passed an even more fiscally irresponsible budget resolution that allowed up to $5.8 trillion in bigger deficits. 

Now Trump’s Republicans are trying to bridge the gap using tactics similar to those that backfired on Biden’s Democrats. First, House leaders — like Manchin did in 2021 — agreed to support the Senate’s budget resolution to keep the process moving forward, even though they would never agree to a BBB consistent with its instructions. Then, Republicans decided they would only seek to enact the new tax cuts Trump proposed during the 2024 election for four years — the same gimmick Democrats tried in 2021 to make their spending programs artificially appear cheaper. 

But Senate Republicans are simultaneously trying to employ a dangerous new gimmick that undermines not just the credibility of the previous one but also the foundation of the Congressional budget process: claiming that extending any policy currently scheduled to expire should be scored as costless. As I and a bipartisan group of budget experts recently warned in a letter to Congress, this approach would enable future Congress to enact a massive policy for one year, then proceed to make it permanent in the second year while pretending it’s completely free. If Republicans rely upon this unprecedented maneuver to pass their BBB, they will be responsible not only for trillions of dollars the legislation itself adds to the debt, but also the tens of trillions they’ve invited future Congresses to pile on.

A PROBLEM OF ATTITUDE MORE THAN MAGNITUDE

Defenders of Biden’s economic management will argue that most of the inflation that materialized during his presidency was due to COVID-related supply chain disruptions and other factors outside Democrats’ control. Indeed, several analyses have concluded that Democrats’ fiscal policies added up to 3 percentage points to inflation in 2021 — that’s a significant contribution, but ultimately, not even a majority of the inflation experienced that year.

The biggest problem for Democrats wasn’t that they got the policy wrong. Rather, it was that they repeatedly demonstrated disinterest in even trying to get it right — a mistake the Trump administration is now replicating to a tee.

Anyone who argued that no economic data justified the need for a $1.9 trillion package in early 2021 was met not with a substantive rebuttal but with a dismissive statement along the lines of “the cost of doing too little is much higher than the cost of doing something big.” It was very reasonable to believe that an overshoot was preferable to an undershoot of equal magnitude, considering that insufficient stimulus likely slowed the recovery following the 2008 financial crisis. But surely a package that was 2% too small would have been preferable to one that was 200% too large.

One might reasonably argue that it was sensible not to adjust policies to prevent significant inflation when decades had passed since that was last an issue in the United States. But when their assumptions proved wrong and inflation did materialize, most Democrats refused to accept that their policies could be responsible and needed to change. The Biden administration first argued that inflation would merely be “transitory.” Then, when that proved untenable, they sought to pass the buck by blaming “corporate greed” for inflation (as if corporations suddenly got greedier in 2021). 

Meanwhile, Democratic leaders did everything in their power to compound their mistakes. The version of BBB they passed through the House would have increased the federal budget deficit by roughly $200 billion in the first year alone. Biden later pursued costly executive actions such as trying to have taxpayers foot the bill for canceling as much student debt as possible, without any regard to the need or cost of such policies, and without doing anything to address the problems that created this debt in the first place. Progressives such as Sen. Elizabeth Warren even went so far as to pressure Federal Reserve Chairman Jerome Powell — who was responsible for curtailing inflation by raising interest rates — to keep interest rates low. 

Donald Trump was elected in large part because of a backlash against this cavalier attitude. Yet as economists and business leaders have been sounding the alarm for months that their tax and trade policies will raise prices on American consumers, the Trump administration has responded almost exactly like Biden and his progressive allies did: Treasury Secretary Scott Bessent said inflation will be transitory. Federal Trade Commission Chairman Andrew Ferguson threatened to investigate companies for raising prices. President Trump himself said the economic pain his policies cause are “worth the price that must be paid.” And now, he is pressuring Chairman Powell to cut interest rates. It is no wonder that Republicans’ approval ratings on the economy — which consistently outpaced those of their Democratic rivals throughout Trump’s first term and the 2024 election — now trail them.

WHY THIS TIME IS WORSE

When Biden’s Democrats increased budget deficits, they did so after a decade filled with warnings about the consequences of rising debt that never seemed to manifest even as the debt steadily grew higher and higher. But over the past four years, it’s become clear that those consequences are finally starting to materialize at great expense to the American people. Trump’s Republicans are thus inexcusably seeking to blow up budget deficits at a time when everyone understands that doing so is increasingly costly.

The combination of increased debt to finance borrowing under Biden and higher interest rates on that debt has pushed the federal government’s annual spending on interest to nearly $1 trillion. As a result, the federal government now spends more money paying interest on the national debt than it does on national defense or Medicaid. Measured as a percent of gross domestic product, annual interest costs are higher than at any other time in American history. And if Republicans enact Trump’s BBB, those costs are likely to more than double over the next 30 years.

As was the case under Biden, consumers will also bear the burden of this runaway borrowing. A recent analysis from Yale Budget Lab estimates that a permanent increase in deficits on the scale of what it would take just to make the expiring tax cuts from 2017 permanent would reduce real wealth by up to $36,000 per household over the next 30 years. This is effectively a tax on young Americans that cancels out most of the benefit they would receive from the GOP’s BBB itself.

Importantly, all these estimates are predicated on current economic assumptions that could swiftly change. Bond markets — which determine the interest rate at which the federal government can borrow money — have been increasingly volatile as investors express growing concern about the Trump administration’s economic agenda and its implications for the long-term health of the U.S. economy. If Congress simply adds the cost of extending the expiring tax cuts to the national credit card and interest rates are just one percentage point higher than currently estimated, the Congressional Budget Office projects that debt would rise so high that its model can no longer function. Put another way: passing Trump’s BBB could be the tipping point for not just higher inflation but an unprecedented economic disaster.

Voters made clear in their rejection of Democrats in 2024 that they prioritize controlling the cost of living above all else. If Republicans betray their electoral mandate by continuing to pursue a BBB that’s as bad or worse than the one pursued by their predecessors, they will hand Democrats a perfect chance to seize the political opportunity they’ve squandered. But to achieve a win more durable than a typical midterm backlash, Democrats will have to chart a new course that convinces voters they can be trusted not to repeat the fiscally irresponsible and inflationary policy mistakes that shaped the BBBs of both Biden and Trump.

GOP Defense Increase Gets Less for More

Posted on by dcadmin

From our Budget Breakdown series highlighting problems in fiscal policy to inform the 2025 tax and budget debate.

Congressional Republicans returned to Washington this week to begin drafting sections of the “big beautiful bill” that contains the bulk of their legislative agenda. One of the first sections to be considered was their plan to increase defense spending by $150 billion over the next ten years. At a time of growing threats from China and Russia, the need for military readiness is clear. Yet this surge in defense funding comes amid a simultaneous push from the Trump administration to dismantle our global commitments, raising the fundamental question: what is the purpose of building up military power if the United States no longer intends to lead with it?

Top Republicans are heralding the proposed defense increase as a “generational upgrade” in our military readiness. While some provisions — such as the billions allocated for the so-called “Golden Dome” — appear to be driven more by Trump’s own personal fascination than strategic necessity, most of the spending increases are serious priorities to improve military readiness and capability. Amongst other worthwhile provisions, their plan earmarks billions for shipbuilding, ramps up munitions production, and scales up innovative commercial technologies for military use. One would reasonably expect that this investment into America’s national security would be used to reinforce our global leadership and international commitments.

But since returning to office, President Trump has done just the opposite, pursuing a chaotic foreign policy of disengagement and signaling that the United States will no longer meet its obligations to its allies and partners around the world. Trump has renewed attacks on NATO, explored reducing U.S. troop levels in both Europe and Asia, and steadily undermined security commitments to allies in Ukraine and Taiwan. His destabilizing trade wars have alienated key economic partners, while his erratic threats to annex Canada, Greenland, and the Panama Canal have only deepened tensions with long-standing allies. Finally, he has gutted vital tools of American soft power, decimating foreign aid and development programs such as USAID, sharply cutting US diplomatic presence in critical regions, and slashing funds for basic scientific research and development. With this chaotic foreign policy, it’s no surprise that global confidence in the United States has plummeted in the past few months.

Military capability is not an end in itself, but rather a tool to execute a broader, coherent strategy. The United States built its post-World War II military and defense posture not to act unilaterally, but to support a system of alliances, deterrence, and collective security that amplifies American power. In the absence of the trust, stability, and strategic advantages that this system provides, hundreds of billions more in defense spending will be far less effective at ensuring national security and advancing American interests. Furthermore, by alienating our allies, Trump is undercutting the military power we can call upon in a crisis — perhaps by more than the spending increases would augment it.

As PPI has previously argued, any greater investment in the U.S. military should go hand-in-hand with revitalizing our alliances, restoring global economic leadership, and strengthening our diplomatic and international development institutions. For all the Trump administration’s talk of cutting wasteful spending, there is no better example of government waste than spending more money on activities from which we intend to benefit less.

Deeper Dive

Fiscal Fact

​During the first quarter of 2025, the economy shrank at a 0.3% annual rate — the largest decline in three years, driven by increased imports and the fear of Trump’s tariffs.

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