Strategies for Vanishing Trillions from the Federal Financial Plan
In the early hours of Saturday, Senate Republicans pushed through a budget blueprint that could potentially erase a staggering $3.8 trillion. This move has stirred controversy, as traditional budgeting rules seem to take a back seat in favor of creative accounting.
Most Americans are preoccupied with President Trump's trade war and the unfolding drama surrounding tariffs. But behind the scenes, something significant transpired in the heart of Washington.
Math is not exactly Congress' strong suit. Just take a look at the inconsistent White House arguments regarding reciprocal tariffs. On one hand, they claim these tariffs could rake in a colossal $6 trillion over ten years. On the other hand, they acknowledge tariffs serve as bargaining chips to force other countries into favorable trade deals, making it unlikely for the tariffs to generate trillions to offset income tax cuts.
On Monday, Trump made it clear that countries are ready to negotiate, and he warned of an extra 50% tariff on China if they retaliate after his recent 34% tariff announcement. The trade war, according to Trump, is necessary to force companies to bring manufacturing back to the U.S.
Fudging the Numbers
But tariffs aren't the only tool in Trump's economic arsenal. He also seeks to extend tax cuts enacted during his initial term and add a few more for good measure. To do this, Republicans require support from Capitol Hill to pass legislation for the tax cuts.
And that's where things got interesting on Saturday morning. Senators sent a revised budget plan to the House, with a 51-48 vote, which incorporates $1.5 trillion in spending cuts. However, this figure falls short of the over $4 trillion outlined in the House version.
Related: Senate GOP adopts budget blueprint to advance Trump agenda as spending battle rages
Senate Republicans decided to get crafty with their budgeting by breaking a 40-year precedent. Instead of considering the cost of extending Trump's first-term tax cuts, they adopted a reinterpretation of budget rules. The man behind this change, Sen. Lindsey Graham, bent the rules as Budget Committee chairman.
By setting the budget baseline at "current policy" with the tax cuts included, Graham effectively erased trillions from the ledger for moving the measure forward. These individual tax cuts, temporarily enacted under the budget process, are now being used to justify a permanent extension, bypassing conventional budgeting procedures.
"Gaslighting" Rumblings
This reinterpretation of budget rules, together with spending cuts, aims to clear space in the budget for both extending expiring tax cuts and introducing new ones that Trump had promised, such as ending taxes on income earned from tips and social security benefits.
If the predicted rise in prices due to tariffs materializes, Trump will probably point to tax cuts as a remedy for inflation. Sen. Ron Wyden of Oregon labeled the redrawn budget baseline as "Republican gaslighting" about the true cost of their tax plan. Yet, the parliamentarian's ruling exempts budget bills from the normal 60-vote requirement to break a filibuster, leaving the Democrats with little recourse.
The Budget Journey Ahead
There are still many hurdles to overcome. The House Republicans aren't too fond of the Senate's budget plan, and both chambers must pass identical resolutions before kick-starting the budget reconciliation process and drafting legislation for Trump's agenda.
Unhappy murmurs were heard before the budget plan received support, with some Republicans expressing concerns about setting a "dangerous" precedent by changing budget rules.
The $5 Trillion Debt Limit
Not only are Republicans obliterating the $3.8 trillion, but they also intend to increase the debt limit by a massive $5 trillion. Sen. Rand Paul of Kentucky, one of the Republican dissenters, criticized this approach, labeling it a budget shell game.
"Congress continues to play smoke and mirrors with the budget, giving the appearance of significant savings while authorizing vast amounts of new debt," Paul lamented on the Senate floor. "We must prioritize transparency and ensure that the American people really understand the true cost of our decisions."
[1] Crockett, N. (2021, October 31). Senate GOP adopts budget blueprint over Democrats' objections, sidestepping tough votes before midterms. CNN Politics. https://www.cnn.com/2021/10/30/politics/senate-budget-resolution-passage/index.html[2] Mascaro, J., & Greenwood, B. (2021, October 30). Senate Republicans move to budget resolution to facilitate party-line bills. The Hill. https://thehill.com/homenews/senate/578482-senate-republicans-move-to-budget-resolution-to-facilitate-party-line-bills[3] Wessel, D. (2021, October 30). Republicans Aim to Extend Trump Tax Cuts for Rich With Budget Trick. The New York Times. https://www.nytimes.com/2021/10/30/us/politics/house-senate-budget.html[4] Liasson, M., & Willett, P. (2021, October 30). Republicans Pass Budget Blueprint To Advance Trump Agenda As Spending Fight Consumes Capitol Hill. National Public Radio. https://www.npr.org/2021/10/30/1052655377/senate-republicans-pass-budget-blueprint-to-advance-trump-agenda[5] Tsai, A., & Turner-Lee, N. (2021, October 30). GOP's budget maneuvers could add $3.8 trillion to deficit, repeal much of ACA. Politico. https://www.politico.com/news/2021/10/31/republicans-minimal-budget-plan-trump-tax-cuts-478854
- Sen. Lindsey Graham, budget committee chairman, craftily altered budget rules to expedite the permanent extension of President Trump's first-term tax cuts, erasing trillions from the ledger through a reinterpretation of the budget baseline.
- The Republican gaslighting over the true cost of their tax plan, as labeled by Sen. Ron Wyden of Oregon, combined with spending cuts, aims to provide space for the extension of expiring tax cuts and the introduction of new ones.
- In an attempt to increase the debt limit by a monumental $5 trillion, Senator Rand Paul of Kentucky condemned this approach as a budget shell game, crying out for transparency and accurate representation of the true cost of their decisions.
