Manufacturing and construction step back in April. But ATL Fed says that makes economy better?

Wanted to talk about a few recently released reports that looked at the dollar values of construction and manufacturing in America. Given that April was the first full month after wide-ranging tariffs were announced and a lot of upheaval in the financial markets followed, seems to be worthwhile to look at how businesses and consumers may have responded. Start with construction, where the new report from the Census Bureau indicates new construction in the US continued to decline in April, especially on the residential side. The dollar value of residential construction dropped by 3.9% between January and April, and much of that drop is in “private residential improvements”, which is work done on previously-completed homes. But there also was a notable decline that happened in home-building construction in the last half of 2024

Also interesting is that the public sector kept the construction sector from falling even further, especially in road-building.

In April, the estimated seasonally adjusted annual rate of public construction spending was $513.5 billion, 0.4 percent (±1.3 percent)* above the revised March estimate of $511.3 billion. Educational construction was at a seasonally adjusted annual rate of $110.9 billion, 0.1 percent (±1.5 percent)* below the revised March estimate of $111.0 billion. Highway construction was at a seasonally adjusted annual rate of $146.3 billion, 0.5 percent (±4.1 percent)* above the revised March estimate of $145.5 billion.

Public health care (+$0.5 billion/+3.3%) and the combined total of govt office and commercial construction also helped the sector last month (+$0.5 billion/+1.9%). But it still isn’t a good picture for construction, which has been a good growth sector for much of the 2020s.

A decline also happened in April for new orders for manufacturers, falling below not only the elevated levels of March, but also what we had in February.

If you take out the volatile transportation category (especially aircraft), manufacturing orders declined by a seasonally-adjusted $2.6 billion in March and $2.4 billion in April, and shipments also declined in those two months.

That report from the Commerce Department on April orders came one day after the Institute for Supply Management said manufacturing kept declining in May.

"The Manufacturing PMI® registered 48.5 percent in May, 0.2 percentage point lower compared to the 48.7 percent recorded in April. The overall economy continued in expansion for the 61st month after one month of contraction in April 2020. (A Manufacturing PMI® above 42.3 percent, over a period of time, generally indicates an expansion of the overall economy.) The New Orders Index contracted for the fourth month in a row following a three-month period of expansion; the figure of 47.6 percent is 0.4 percentage point higher than the 47.2 percent recorded in April. The May reading of the Production Index (45.4 percent) is 1.4 percentage points higher than April's figure of 44 percent. The index continued in contraction in March for the third straight month after two months of expansion preceded by eight months of contraction. The Prices Index remained in expansion (or 'increasing') territory, registering 69.4 percent, down 0.4 percentage point compared to the reading of 69.8 percent in April. The Backlog of Orders Index registered 47.1 percent, up 3.4 percentage points compared to the 43.7 percent recorded in April. The Employment Index registered 46.8 percent, up 0.3 percentage point from April's figure of 46.5 percent.

"The Supplier Deliveries Index indicated a continued slowing of deliveries, registering 56.1 percent, 0.9 percentage point higher than the 55.2 percent recorded in April. (Supplier Deliveries is the only ISM® Report On Business® index that is inversed; a reading of above 50 percent indicates slower deliveries, which is typical as the economy improves and customer demand increases.) The Inventories Index registered 46.7 percent, down 4.1 percentage points compared to April's reading of 50.8 percent.

"The New Export Orders Index reading of 40.1 percent is 3 percentage points lower than the reading of 43.1 percent registered in April. The Imports Index plunged into extreme contraction in May, registering 39.9 percent, 7.2 percentage points lower than April's reading of 47.1 percent."

Spence continues, "In May, U.S. manufacturing activity slipped further into contraction after expanding only marginally in February. Contraction in most of the indexes that measure demand and output have slowed, while inputs have started to weaken:

And yet I look at the Atlanta Fed’s GDP Now estimates, and take a look at what they think will happen to economic output as a result of this information.

Somehow a decline in residential construction and new orders in manufacturing means more growth? I looked into their "contributions" number trying to figure out why, and I don’t see how you get residential home building becoming a positive or why they say consumer spending projections got better in the last 2 days.

Likewise, the stock market keeps climbing for no real reason. The DOW was up another 214 points today because….of optimism that tariffs won’t damage the economy more than they thought? People still pumping the AI Bubble?

Out in the manufacturing and construction sectors in America, I’m not seeing much in the data that would indicate anything beyond a drop in activity in April. And other than the end of the import surge that we saw in the first 3 months of the year, what has changed in the last month to make us think the economy is going to go back to strong GDP growth?

I just don’t get it. Are people just that tricked by the short-covering and dumb runup that we’ve had in the stock market?

What happened in 2024? IT WAS THE BROS

Wanted to give my reactions to the excellent work by Catalist, who looked at the actual voter files in the country, and draws a conclusion as to What Happened in [the] 2024 [elections]?

First of all, the voter files indicate that the overall US electorate was more urban and suburban and less rural in 2024 than in 2020, and even though battleground states like Wisconsin have more of its voters in rural and suburban areas than the rest of the country, they also trended toward having more non-rural voters last November.

In addition, there tends to be more Voters of Color in urban and suburban communities, as shown in this graphic of the electorate in battleground states.

That demographic change should have given Dems a sizable advantage, all things being equal. But a big shift in the 2024 election featured declines in Dem votes among Voters of Color and young voters. Especially among men of all ethnicities.

For Dems, the women did their part, as Harris only lost around 1% of the vote share Biden got in 2020 and Obama did in 2012. But Trump’s gains with men got him over the top, as it did when he faced Hillary Clinton in 2016.

Yep, IT WAS THE BROS.

There is also a difference between what happened in the 7 battleground states that all went to Trump after mostly supporting Biden in 2020, and the election that happened in the other 43 states. The changes in percentage and turnout in battleground states were smaller overall than they were in the rest of the country, and despite all the talk you hear about fewer overall voters, in close states like Wisconsin, turnout went up among many demographics.

Trump’s gains from 2020 were smaller in battleground states. While Trump did not secure an overall majority of the popular vote when accounting for all ballots cast, his performance improved in two-way support, which looks at only ballots cast for Democrats and Republicans. In 2020, he received 49% of the two-way vote and increased that share to 52% in 2024. However, his gains in the battleground states were about half the size, going from 49% to just over 50%. The major trends against Democrats in the election were mitigated in the battleground states – turnout was higher, support losses were lessened – which may be related to higher levels of campaign activity and more frequent election participation in these states.

But it was where turnout happened within states that helped Trump – bigger turnout in redder than bluer areas, and that was true regardless of how close the election was.

Voter turnout was high in the battleground states, but not consistently so, which ultimately benefitted Republicans. Figure 2 shows turnout change from 2020 to 2024 by census tract. The graph shows turnout change compared to 2020 Biden support. In non-battleground states, shown in black, turnout was about the same as 2020 in Republican areas, while it dropped by as much as 15% in Democratic areas. This was fairly obvious shortly after the election, looking at state-level and county-level turnout. What was not as obvious was the trend in battleground states, shown in red; here, the turnout advantage in Republican areas was nearly as strong, but these areas also voted at relatively higher rates compared to non-battleground states. Specifically, within the battleground states turnout in Republican areas increased by as much as 5%, while turnout in Democratic areas decreased by as much as 5%.

Another part of the Catalist report went into whether a voter casts votes every 2 years in November, or if they don’t. It was telling in several ways.

In each of the last 4 presidential elections, Dems’ candidate lost a majority of voters who had voted in the previous presidential election but didn’t vote in the current one. In the other 3 elections, they were able to make up for it by getting a sizable majority of the voters who didn’t vote in the previous elections.

But in 2024, the new voters trended toward Trump.

The folks at Catalist note that the demographics of those voters matches up with the voters that Trump made gains with.

In the previous sections we detailed Harris’s support losses among voters of color (particularly Latinos), young voters, men, urban voters, and finally, irregular voters, with losses compounding the more groups share these overlapping characteristics. Across demographics, new voters and dropoff voters look very similar to one another – they are more likely to be voters of color, substantially more likely to be Latino, less likely to have gone to college, and more likely to live in urban areas. Age is an exception – new voters are younger than dropoff voters, but both groups are younger than repeat voters.

On the other side of the equation are the larger number of Americans that do vote in back-to-back presidential elections. The Dems had a net loss of voters that went their way in the first election in both 2012 and 2016 (either to the GOP or to a third party), but Joe Biden picked up some voters that didn’t vote for Hillary Clinton. However, in 2024 Kamala Harris was the only Dem candidate not to get 50% of voters that went to the polls in the previous presidential election.

What’s worth noting is that repeat voters tend to be whiter, older, more likely to be college-educated, and less urban than new voters, which underscores the gains that Trump got among younger voters and non-white voters in cities in the last election.

But these results also underscore how soft Trump’s support was and is, because the group that got Trump just enough votes to win were irregular and young voters who are in general less likely to be dedicated to continuing to support any candidate. Especially when that candidate doesn’t do the things that they thought/were told they were voting for (like lower prices or better job prospects or not having goons run around on their streets and snatching people who look like them).

In addition, as Split-Ticket noted for Wisconsin in the wake of April's Supreme Court election, the voters most likely to come to the polls in the 2026 midterms and other future elections are going to be more likely to support Dems. So when I see JD Vance make comments about how “the voters gave us a mandate to do these things”, I say BULLSHIT. In fact, if we had a true national election in 2024 where all votes counted the same, it seems likely to me that Dems would have gotten more votes in the non-battleground states, because the election would have mattered.

Instead, many people in those states either did not vote because it didn’t matter enough, or were willing to cast a protest/contrarian vote for Trump. So my hot take about 2024's results is if we had a national popular vote election, it is possible that we would have seen enough of those voters in non-battleground states take their duty more seriously, choose to vote and/or vote for Dems, and Harris might have won the popular vote instead of losing by less than 1.5%.

Which makes it all the more infuriating that things are being wrecked as they are by Trump/GOP, because I don't think this is what a majority of Americans thought they'd be getting.

When you lie to yourself, live in an information Bubble of BS, and don't take the act of voting seriously, you end up with this. Now, if we have fair elections over the next 3 years, and the economy and quality of life drags (as it likely will), some of this can be corrected, as enough soft Trump voters and low-info dipshits will likely learn from 2024's outcomes, and all things being equal, Dems should win. But that doesn't mean those who voted for Trump 2.0 should be forgiven, as it can't be forgotten how we got here, and who caused it.

April shows a month in transition, when we have yet to meet tariffed reality

As the last business day of the month hit on Friday, we got the always-important income and spending report for April. That was a month that started with the Trump Administration’s announcement of tariffs and the loss of more than 11% in the S&P 500 in a week, and then most of those losses were recovered by the end of April.

The same report has inflation information for consumers, which would tell us if those tariff announcements were already raising prices, which would encourage the Fed from backing off from lowering interest rates from its still-elevated levels.

So what did we get?

The Fed's preferred Core PCE Price Index rose 0.1% in April, matching March's revised gain and consensus estimates, signaling that early-month tariffs had little impact on underlying inflation.

Excluding food and energy, core PCE climbed 2.5% year-over-year, also in line with forecasts and down from a 2.7% pace in March, while the headline PCE measure, which includes all items, increased 0.1% month-over-month and 2.1% annually. The data echo April's CPI report in showing muted tariff effects, as consumers shifted spending patterns rather than letting price spikes feed through to core inflation.

Personal income jumped 0.8% more than double the 0.3% consensus while personal consumption expenditures slowed to 0.2% growth, down from March's 0.7%....

A big reason for the boost in incomes was due to an increase of nearly $108 billion in Social Security benefits, which is odd because the annual inflation-indexing boost of benefits happens in January, not April. So how did this big jump happen?

Because of a bill signed by Joe Biden before he left office earlier this year that restored benefits to a sizable number of American workers.

In January, two provisions—the Windfall Elimination Provision (WEP) and the Government Pension Offset (GPO)—that reduced Social Security benefits for millions of workers were repealed after bipartisan efforts in Congress.

Signing the act into law, former President Joe Biden said it would boost Social Security benefits by an average of $360 a month for more than 2.8 million recipients.

The WEP reduced Social Security benefits for individuals receiving pensions from public-sector jobs—such as those held by state and federal employees—that did not require Social Security payroll tax contributions. This reduction applied even if they contributed to Social Security through other employment and qualified for benefits.

The GPO reduced spousal or survivor benefits for retired federal, state and local government workers who did not pay into Social Security funds through their payroll taxes.

It continues an unusual trend where US income growth has been driven more by one-off bits of non-job income every month of 2025 instead of wages, salaries and other work-related compensation. Compensation of employees accounts for more 3/5 of overall US income, but was less than 2/5 of income growth for the first 4 months of this year.

There aren’t going to be continuing sources of non-job income like these for the rest of 2025 (not that I know of, anyway), so that’s not a recipe for sustained income growth in an economy that has more than 2/3 of its GDP based on consumer spending.

Combine that income info with the tanking of the stock market in April, then add the Trumpian-induced chaos from tariffs that were announced and put into place, but not yet being shown on the prices that consumers paid. This may help explain why there wasn’t much of an increase in consumer spending for April (only up by 0.2%, and 0.1% after inflation), and instead we had a big jump in the saving rate.

I also note that there was a slight cutback in durable goods spending after a big increase in March, which seemed to be intended to get ahead of the tariffs that were coming, and mirrors an increase in year-end durable goods spending that happened ahead of Trump’s inauguration.

So is that front-running of tariffs by consumers going to result in another retrench in durable goods spending for May, just as we see a large group of imports for Q1 2025 hit the market? Or is April’s decline just a breather after a big runup, and we will see the higher levels of durable goods spending continue for the rest of Q2 2025? Seems to be an important question going forward.

In general, it seems that the April data shows a lull between the rapid changes and economic concerns that came with the start of Trump Admin 2.0, and with what we see after tariffs affect prices, jobs and production levels. And now that the TACO trend (Trump Always Chickens Out) is becoming acknowledged by Wall Streeters, media and other Americans, what changes to consumer and business behavior will that cause?

I also thought that the strange recovery in stocks for May would be a boost to consumer sentiment. I think the headlines about the lower stock market in April signaled to everyday Americans that things were going bad, so why wouldn’t the recovery in stocks and warmer weather make people think things were OK?

But there wasn’t much of a rebound in sentiment at all.

Consumer sentiment was unchanged from April, ending four consecutive months of plunging declines. Sentiment had ebbed at the preliminary reading for May but turned a corner in the latter half of the month following the temporary pause on some tariffs on China goods. Expected business conditions improved after mid-month, likely a consequence of the trade policy announcement. However, these positive changes were offset by declines in current personal finances stemming from stagnating incomes throughout May. Overall, consumers see the outlook for the economy as no worse than last month, but they remained quite worried about the future.

In fact, consumers’ rating of the current economy was worse in May than in April, with expectations lower than their opinions of the current economic situation.

And despite some breaks and/or delays in tariffs, the Michigan survey shows that Americans are still counting on sizable inflation for the near-future.

Year-ahead inflation expectations were little changed at 6.6%, inching up from 6.5% last month. This is the smallest increase since the election and marks the end of a four-month streak of extremely large jumps in short-run expectations. Notably, long-run inflation expectations fell back from 4.4% in April to 4.2% in May. This is the first decline seen since December 2024 and ends an unprecedented four-month sequence of increases. Given that consumers generally expect tariffs to pass through to consumer prices, it is no surprise that trade policy has influenced consumers’ views of the economy. In contrast, despite the many headlines about the tax and spending bill that is moving through Congress, the bill does not appear to be salient to consumers at this time.

Oh yeah, Big Beautiful Tax Scam 2.0! I’m sure the thought of less support for health insurance and higher interest rates from rising deficits will do wonders for consumers’ views on the economy! (well, for the 2/3 of the country that doesn’t live in a Bubble of BS, anyway).

From what I can see with the data, the underlying economy didn’t change much at all in April, despite all the chaos that was happening in DC and on Wall Street in that month. And given that there hasn’t been a large increase in layoffs or other major damage being obvious in the last month, I wouldn’t think a lot would be different in May’s data either. But it all seems to be a false calm that is masking what’s to come.

It doesn’t seem like what’s coming is going to be good, whether we have more TACOs or not, since the distortions have already happened in the first 4 months of 2025, and the re-adjustment people and businesses make to those idiotic moves will be the story that determines how the economy ends up for much of the rest of this year.

How Wisconsin might be left with a Big Beautiful Tax Shift

After the House passed GOP Tax Scam 2.0 and its related budget cuts, state officials have been looking at what the bill would mean for Wisconsin. And among the changes are some big adjustments and new burdens in the food assistance program.

If implemented, the changes could upend food assistance for more than 12% of Wisconsin’s current recipients, Wisconsin Medicaid Director Bill Hanna said. Most affected would be people between 55 and 64 who previously weren’t required to work to receive the benefits, also known as the Supplemental Nutrition Assistance Program or food stamps.

Families with children who age 7 and older would also be newly subject to work requirements under the proposal narrowly passed by the U.S. House early Thursday. Households with children ages 18 and under are currently exempt.

The bill would also end exemptions for about 2,300 Wisconsinites who lack job options in rural counties, such as Adams, Marquette and Menominee, a largely tribal county, along with others in northern Wisconsin.

It also means large amounts of paperwork and new job duties for state employees, without the Feds paying for the extra work they would require. Which pushes those costs onto state taxpayers.

The changes could cost state taxpayers as much as $314 million starting in 2027, Hanna said. Much of that is due to a new provision fining states for even small errors of as little as a few dollars in calculating the amount of benefits individual recipients get.

The state would also have to pick up more of the costs of administering the program and documenting that recipients are working or volunteering. The proposed changes would also eliminate $12 million in annual education programing aimed at helping recipients eat healthy and stay active.

But I thought we were Making America Healthy Again? Oh wait, that’s by the standards brought to you by supplement companies and other new age BS that paid hucksters like RFK Jr and Internet influencers are promoting.

The state of Wisconsin is also looking at more changes and extra costs for its Medicaid programs, as much of the "savings" from the Big Beuatiful Pile of Garbage not only comes from kicking people off of ther health care coverage, but also because it would keep the state from using as many federal tax dollars to pay for services.

The changes would go into effect by the end of 2026, a timeline that was sped up after some House conservatives pushed for the requirements to go into effect sooner. The bill originally called for work requirements to start in 2029.

If passed, the measures would present recipients with more barriers to remaining covered and could result in millions of Americans losing coverage. Under the original bill, the House GOP's Medicaid provisions are expected to reduce spending by $625 billion but cause 7.6 million people to be uninsured by 2034, according to preliminary estimates from the nonpartisan Congressional Budget Office. Those numbers, though, could change after Republicans moved up the work requirement timetable…..

The bill also would limit how states raise money for their Medicaid programs through what are called "provider taxes," or taxes on hospitals and nursing homes.

Like other states, Wisconsin uses its provider tax revenue to draw down extra matching dollars from the federal government. It pays the money back to hospitals and nursing homes to supplement the reimbursements they receive for care provided to Medicaid patients.

Under the GOP legislation, the state would be prohibited from implementing any new provider taxes on hospitals and nursing homes or increasing existing tax rates on those providers, said Jennifer Tolbert, director of state health policy and data at [Kaiser Family Foundation].

One of the biggest hits to Americans would come from a significant jump in out-of-pocket costs for people who get their health insurance on the Obamacare exchanges, as the Big Beautiful Tax Scam reverses what helped a lot of Americans get insured in recent years.

The extended subsidies were passed via the American Rescue Plan Act during the pandemic, and covered plans in 2021 and 2022. The Inflation Reduction Act extended the benefit until the end of 2025….

Since the extended tax credits have been in place, the enrollment in the ACA marketplace grew from 12 million in 2021 to a record 24.2 million in 2025, according to a February report by the Commonwealth Fund.

Based on 2025’s enrollment figures, there's been a 63.5% increase in enrollment for Obamacare exchange policies in Wisconsin over the last 4 years, as Medicaid enrollments dropped post-COVID.

The premium credits and Obamacare exchanges are especially important here since Republicans have refused to expand Medicaid, so people making anything above the poverty line are limited to getting insurance either through their job (good luck with that on lower-wage gigs), or through Obamacare, or not getting insured at all.

If those tax breaks go away, it’s going to cost a lot of people in Wisconsin quite a bit more to keep their insurance.

If we go back to earlier thresholds, those who earn more than four times the federal poverty level — $62,000 for an individual or $128,600 for a family of four with 2026 coverage — would lose eligibility for subsidies and would have to pay the full cost for their health plans, according to KFF.

Researchers at KFF anticipate that between the potential lapse of the credits coupled with the proposals, enrollment could shrink by one-third, leaving about 8 million uninsured in the U.S.

One change in the House GOP tax bill would increase by 4.5% the share of people’s income that they pay for premiums after tax credits in 2026, according to Gideon Lukens, senior fellow at the CBPP. It would also increase the maximum out-of-pocket limit by 4.5% in 2026, he said.

So large numbers of Wisconsinites will be paying more for health insurance, and state taxpayers will be on the hook for hundreds of millions of dollars in unfunded, poor-bashing mandates. That's before we account for the lack of economic activity that'll result from the lack of stability or lack of funds available for other things, and the likely increase in interest rates that come from the exploding deficits in the next few years.

So what are us non-rich in Wisconsin getting out of this Tax Scam, again?

WisGOPs want to make costly voucher scam even larger?

While the Wisconsin state budget is on hold, let's go over a recent Ruth Conniff article in the Wisconsin Examiner which tells us that WisGOPs are more than willing to increase state funding on at least one item – school vouchers to private schools.

The plan, contained in two bills that failed in the last legislative session, would stop funding school vouchers through the same mix of state and local funding that supports regular public schools, and instead pay for school vouchers just out of the state’s general fund.

“It’s certainly something that I personally support. … I’m sure it will be part of the discussion,” Rep. Mark Born (R-Beaver Dam), co-chair of the powerful Joint Finance Committee, told Lisa Pugh on Wisconsin Eye when she asked about “decoupling” Wisconsin voucher school funding from the rest of the school finance system.

“Decoupling” would pave the way for a big expansion in taxpayer subsidies for private school tuition. While jettisoning the caps on available funds and enrollment in the current school formula, voucher payments would become an entitlement. The state would be obligated to pay for every eligible student to attend private school. It’s worth noting that most participants in Wisconsin’s voucher programs never attended public school, so what we are talking about is setting up a massive private school system with separate funding alongside the public K-12 school system. That’s more than Wisconsin can afford.

Anne Chapman, research director for the Wisconsin Association of School Business Officials (WASBO), has followed the issue closely. “It could come up last-minute, on very short notice,” she warns.

What’s funny is that I’ve long wanted a version of “decoupling”, but that’s because I think it’s ridiculous that most vouchers in Wisconsin are paid for by taking away state funds from the local public K-12 district, even if the child never attended a day of public school in that district.

The other effect of this is that the local public school district often has to raise property taxes to make up the difference in the lost state aid. And I think that if we are going to use state tax dollars to pay for 2 separate K-12 school systems (bad enough, but also the reality in 2025 Wisconsin with the GOPs still in control of the Legislature), then let’s pay the full costs of this scheme. Let's not not jack up property taxes in communities because some families choose not to send their kid to the local school and instead wants to have them attend a (usually religious) private school.

And let’s get some parity in per-student state aids between vouchers and public K-12 districts, as vouchers get significantly higher payments from the state than the community schools do. Chapman points out in Conniff's article that state taxpayers shell out twice as much for a student to get a voucher than we pay on a per-student basis for higher-need special education.

Yet, Chapman reports, we are now spending about $629 million for Wisconsin’s four voucher programs, which serve 58,623 students. That’s $54 million more than the $574.8 million we are spending on all 126,830 students with disabilities in Wisconsin, as school districts struggle with the cost of special education.

Chapman says we should watch for the GOPs in the Legislature to try to give even more of a funding advantage to these voucher schools and try to make us turn to a system similar to Florida’s, where the state government gives a handout to all parents of up to $8,000, resulting in a total cost of nearly $4 billion in the last school year. I don’t know about you, but I never want us to follow the lead of Florida in 2025. That's true for anything, but especially in government policy.

In the current budget, Governor Evers wanted to limit the amount of kids using vouchers in any district to 10% of the district’s enrollment, and limit the total of the (already larger than public school) payment for voucher schools to serve kids with special needs. But those were among the many provisions Republicans on the Joint Finance Committee removed from the budget earlier this month - the one bit of action they've taken on the budget so far.

So those limitations on the state costs of vouchers won’t happen, and on top of that, the Legislative Fiscal Bureau projects that the 3 main voucher programs will see their combined costs grow by another $140 million 2 years from now.

Any voucher expansion that Republicans may try to get through can fortunately be vetoed by Governor Evers, and I doubt we will see a repeat of the 2023 deal that greatly increased the number and amount of the vouchers in exchange for more spending and an increase in revenue limits for public schools over the next 2 years (which Evers later turned into increases in revenue limits for the next 402 years through a veto that was recently upheld by the state Supreme Court).

Which means that vouchers could be a main point of conflict as budget debates heat up in the coming weeks, and if the GOP tries to push to funnel even more of the hundreds of millions of taxpayer dollars they’ve been able to send to these mostly religious schools, it could increase what seems to be a higher-than-normal chance of a budget not being passed in time for the start of the next fiscal year on July 1.

Getting SALTy again as Tax Scam 2.0 is debated

One of the reasons that Trump/GOP's Big Beautiful Tax Scam 2.0 is up in the air is because of a provision where I stray from most progressives. It deals with what's known as the SALT Cap, and it's something I've long called to be fixed, even if the outcome favors higher-income Americans.

To backtrack, let's talk about how we got here. The standard deduction was nearly doubled in the original 2017 Tax Scam, which likely cut taxes for lower-income Americans who may not have itemized to begin with. There was also an argument that it would make tax filing easier, because someone could just take the standard deduction without having to keep so many records and figure out strategies and documentation for certain tax deductions.

vs this

But as a way of limiting the cost of the Tax Scam, there were limitations put on other deductions, and the limitation that ended up being the most common was the write-off for State and Local Taxes (SALT). This was set at $10,000 for single filers and for married couples filing jointly, and hasn’t changed in the 8 years since.

Meanwhile, the standard deduction has been allowed to grow with inflation, and as you can see, it totaled $29,200 last year for married, joint filers. This means more Americans have gotten hit by the SALT Cap, since their incomes and taxes got higher, but the amount they could write off in SALT didn’t change, making it less likely to have $29,200 in itemized deductions in 2024, which pushed them to take the standard one.

The guy who signed the 2017 Tax Scam into law said he would get rid of the SALT Cap if American voters would let him avoid prison return him to the White House.

Trump, the Republican presidential candidate, made waves September 17 by appearing to indicate he wants to overturn the $10,000 SALT cap established by the Tax Cuts and Jobs Act in a post on Truth Social about his upcoming campaign rally on Long Island, New York. Trump signed the TCJA into law in 2017.

“I will turn it around, get SALT back, lower your Taxes, and so much more,” Trump wrote.

The Trump campaign didn’t clarify Trump's stance on the cap in a request for comment from Tax Notes, instead bashing Democratic presidential candidate Kamala Harris’s “out of control inflationary policies” and saying Trump plans to quickly advance tax relief for working people and seniors should he take office.

Not surprisingly, Trump/GOP was in “say anything” mode last Fall to slip back into office. But now that they are in power, and the costs of Tax Scam 2.0 are slamming into reality, Trump is trying to backtrack on those words.

On Monday, the President told House Republicans that there now needs to be some kind of SALT Cap in Tax Scam 2.0, and that those from states that got hit with the Cap should stop asking for so much.

In a private meeting with House Republicans, Trump singled out the lawmakers from New York, New Jersey and California who have rejected the $30,000 deduction limit — three times the current cap — contained in the legislation moving through the House. Trump told lawmakers he wants to leave the SALT deduction limit “where it is” in the current version of the legislation, Representative Bruce Westerman of Arkansas said after the meeting…..

House Speaker Mike Johnson met with SALT holdouts late Monday, but left without an agreement.

In the meeting, the speaker offered to raise the cap on the SALT deduction from the $30,000 limit set in the legislation to $40,000 but only for four years and for people making less than $751,000, said a person familiar with the matter. After four years, the limit would snap back to $30,000 with a $400,000 income limit.

SALT caucus members said Tuesday they do not want a temporary increase and have said they want a doubled cap for joint filers.

Well the LEAST that should happen is to have the cap be doubled for joint filers. You know, like how pretty much all other deductions are, including the standard deduction, which is the item that two-income married couples often end up taking because it gives them a bigger write-off than they can get from itemized deductions because of the SALT Cap.

Then Trump did some kind of public whining about how changing the SALT Cap would be more likely to help people in states that generally vote for Democrats (I’ll spare you the stupidity of the quote). In addition to the sick idea that people in states that vote one way should be punished for doing so, it conveniently ignores that many of those blue states pay more in taxes than they take out (unlike the poorer red states that many of those tax dollars are funneled to).

For the record, I’m fine with redistributing taxes that come from richer places to poorer places, as I don’t believe that certain people should have a second-class existence just because there isn’t as much income and wealth to be had in those places. But the fact that richer blue states then pay higher state and local taxes to make up the difference IS THE REASON WE HAVE A SALT DEDUCTION IN THE FIRST PLACE.

On the flip side, it’s also laughable to hear Coastal GOPs claim that $30,000 or $40,000 is still too low of a SALT Cap. Think about how big your incomes + property taxes have to be in order to owe more than $40,000 in those types of taxes. For example, my wife and I have a combined income that puts us around the top 20%-25% level of US household incomes, and our most recent SALT write-off would have been somewhere around $19,000 if we didn’t have the $10,000 limit. Being able to write off $19,000 in SALT may have allowed us to write off our mortgage interest and charitable contributions instead of taking the standard deduction of $29,200, or at least made us consider actions that would get us beyond that level.

And that’s why expanding the SALT Cap and getting rid of the marriage penalty would be an especially useful reform that would help upper-middle class, 2-income couples. If you limit the SALT Cap to something like $30,000 joint and $15,000 single, you keep it targeted and don't give as much to the super-rich and wealthy. So this means we don't go back to the pre-Tax Scam days where hundreds of thousands of dollars could be written off because there wasn’t any SALT Cap at all. And while I'd like to see the GOP Tax Scam banished, I understand that also means no SALT Cap and a huge giveaway to certain rich people would return. So $15K/$30K would be a good compromise measure that helps both ways if some kind of Tax Scam 2.0 has to happen.

I'm not sure what might be in the pile of crap that might emerge onto the full House floor, but the fact that the Rules Comittee is supposed to start its meeting at 1am overnight tells me that there isn't going to be anything they want normal people to see. Let's watch to see if the Coastal GOPs get what they want on SALT for Tax Scam 2.0, or if they get nothing and accept it anyway. At which point, I'd expect a whole lot of them to lose in 2026 just like several of their GOP counterparts did in those states in 2018, after selling out constituents on the SALT Cap.

Friday news dump - GOPs can't agree on Tax Scam 2.0, and US downgraded

Couple of big bits of fiscal and monetary news that broke Friday afternoon. Starting with the attempt to install GOP Tax Scam v 2.0, which isn't working out as the realities of the Big Beuatiful Bill set in.

The GOP-led House Budget Committee voted to reject a sweeping package for President Donald Trump's agenda on Friday, dealing an embarrassing setback to Speaker Mike Johnson, R-La., and Republican leaders.

The vote in the Budget Committee was 16-21, with a band of conservative hard-liners who are pushing for steeper spending cuts joining all Democrats in voting against the multitrillion-dollar legislation, leaving its fate uncertain...

“I have to now admonish my colleagues on this side of the aisle. This bill falls profoundly short. It does not do what we say it does with respect to deficits,” {Republican Rep. Chip] Roy said. “That’s the truth. Deficits will go up in the first half of the 10-year budget window and we all know it’s true. And we shouldn’t do that. We shouldn’t say that we’re doing something we’re not doing.”

“This bill has back-loaded savings and has front-loaded spending,” Roy added. “I am a no on this bill unless serious reforms are made today, tomorrow, Sunday. Something needs to change or you’re not gonna get my support.”

As a reminder, in order to get around a Senate filibuster and only require 50 GOP votes for Tax Scam 2.0 to go through, it needs to be under the outline of the budget resolution that was passed a month ago. That resolution gives total numbers over 10 years that total deficits and tax cuts can't exceed over that time, and if the bill goes beyond those costs, then it has to go through a Senate filibuster and the 60 vote threshold to get to the floor. And as weak and pathetic as I think Chuck Schumer is, even he won't allow 7 Senate Dems to let any Tax Scam go through.

The Committee for a Responsible Federal Budget has a good rundown of these budgetary boundaries.

But the resolution doesn't give a set amount that has to be cut in each year, and that's where Rep. Roy's complaint comes in. The CFRB also did an explainer on this topic earlier this week.

The legislation’s spending and tax cuts are quite front-loaded, while offsets are back-loaded. We estimate about 55 percent of the gross deficit increases – $2.8 trillion – would take place in the first half of the budget window. Meanwhile only 40 percent of the offsets – $970 billion – would accumulate over that period. As a result, 70 percent of the non-interest borrowing would occur in the first five years.

The tax cut and spending increase provisions are front-loaded, in large part, due to the use of “arbitrary expirations” designed to limit reported costs. A number of provisions – including the enhanced Child Tax Credit and standard deduction, no tax on tips and overtime, 100 percent bonus depreciation for equipment, and new ‘MAGA accounts’ – are scheduled to expire in 2028 or 2029. The bill also relies on one-time appropriations for defense and immigration, which must be obligated by 2029. And finally, the bill includes a large number of retroactive provisions that provide a one-time windfall for activities already undertaken.

Meanwhile, many of the offsets don’t begin or ramp up until late in the budget window. Medicaid work requirements, for example, save $300 billion through 2034 but do not take effect until 2028. In addition, while some of the Inflation Reduction Act (IRA) energy credits are repealed at the end of 2025, the most expensive ones only begin phasing out in a few years with some restrictions taking effect sooner. And the Supplemental Nutrition Assistance Program (SNAP) state matching fund requirements do not start until 2028.

It's cynical gimmickry (because it blows up the deficits short-term, and kicks the real deficit-reducing cuts and tax increases to a later date), and related to that, a problem certain Republicans like Rep. Roy have is that not enough people are being hurt by the bill right away. Among the GOPs in that crowd is Wisconsin's Senior Senator.

As House Speaker Mike Johnson, R-La., feverishly works to finalize the details of a massive package that includes major portions of President Trump's agenda, many Senate Republicans are dismissing the legislation before it is even finished in the House.

"Unfortunately, it's a sad joke," Wisconsin GOP Sen. Ron Johnson said Wednesday.....

Some conservatives in the House are pushing for $2 trillion in cuts — but that's not far enough for Johnson, who wants spending levels to revert back to what they were pre-pandemic. Sen. Johnson told reporters that he believes it was a mistake for leaders to try to pass so much of Trump's agenda in one single bill, instead of three separate pieces of legislation that could be considered individually. As a result, he said he'd oppose the House bill "as it's currently constructed."

Me and my donors took ours, fuck the rest of you.

I'll remind you that price levels have risen over 20% in the five years since COVID broke out and there are more people in this country as well. But apparently those realities mean little to RoJo and the other GOP "fiscal hawks", now does it?

And then late on Friday afternoon, after the budget bill had been shot down and the stock markets had closed, we got more bad news that connects to these rising deficit numbers.

Moody’s Ratings downgraded the United States’ debt on Friday, stripping the country of its last perfect credit rating. The move could rattle financial markets and push up interest rates, potentially creating an additional financial burden for Americans already struggling with tariffs and inflation.

Of the three major credit rating agencies, Moody’s was the lone holdout, maintaining its outstanding rating of AAA for US debt. Moody’s held a perfect credit rating for the United States since 1917.

It now ranks US creditworthiness one notch below that, at Aa1, joining Fitch Ratings and S&P, which lowered their credit ratings for US debt in 2023 and 2011, respectively.

The decision to downgrade debt was influenced by “the increase over more than a decade in government debt and interest payment ratios to levels that are significantly higher than similarly rated sovereigns,” Moody’s said in a statement. Moving forward, Moody’s said it expects borrowing needs to continue to grow and for it to weigh on the US economy as a whole.

Oh? Well maybe it's not such a great time to continue the Tax Scam that blew up the deficit in the first place, eh? Especially when you consider that 60% of Tax Scam 2.0 will be going to Americans making over $200,000, and more than 1/6 of the benefits will go to millionaires.

We also know that cutting medical and food assistance for lower-income Americans is something that hurts the overall economy. And if our already-higher budget deficits and borrowing costs are a big concern, why would you want to both slow down the economy and make those deficits skyrocket in the next few years?

Well, we know why. It's the same reason Ron Johnson's "fiscal concerns" got assuaged in the last GOP Tax Scam.

GOP megadonors Diane Hendricks and Dick and Liz Uihlein were able to claim a combined $215 million in deductions in 2018 because of provisions ⁦@SenRonJohnson⁩ put into the tax cut Trump signed, according to ⁦@propublica⁩. https://t.co/mniK4o6R0I

— Patrick Marley (@patrickdmarley) August 11, 2021

And guess who put up tens of millions to get RoJo to ooze back into the Senate by 1% the next time he was up for election?

The $22 million that Wisconsin Truth PAC has spent so far places it as the sixth highest-spending super PAC in the midterms cycle and the highest-spending single race-focused super PAC, according to OpenSecrets. The group was formed earlier this year by Republican consultants to back Johnson in the battleground race.

Building materials company CEO Diane Hendricks has contributed at least $6.5 million so far this year to the Wisconsin Truth PAC. Shipping and packaging supplies company CEO Richard Uihlein and his wife Elizabeth have given the PAC at least $3.5 million. Those figures are as of the most recent disclosures covering through the end of July, so it is possible they have donated more or that additional wealthy donors have contributed to the PAC since then.

The Big Beautiful Theft bill is far from dead at this point, and requires strong vigilance for the next few months as GOPs try to come up with something that fits within their tight margins and massive deficits. But at least as of now, it's clear that there isn't enough agreement on how to pull off the next Scam within the GOP's caucus, let alone how hated this thing will be from a public who got a taste of strong government supports during the early 2020s, and liked it.