Tax Scam 2.0 by the numbers

There's a lot of individual items I could go over with GOP Tax Scam 2.0 coming out of DC, and I can discuss those in other individual posts. But I wanted to take a step back, and much like I did with the state budget that became law on the morning July 3, I wanted to go over the Federal totals that are in the bill that Trump signed on July 4 (I'm going off of the CBO totals from the Senate bill, which I think is the final version, barring some last-minute giveaway that isn't recorded in these numbers).

First of all, let's note how the budget deficit blows up immediately in the first 2 years of Tax Scam 2.0. The Congressional Budget Office says the bill itself increases the deficit by more than $479 billion in the next fiscal year, and by more than $588 billion in Fiscal Year 2027. And even if you take out the tax cuts from Scam 1.0 that were continued in this bill, the deficit is still slated to go up by another $270 billion next year due to what was added in and changed in Scam 2.0.

And even more remarkable to me is that the US government is slated to INCREASE its spending under the bill for Fiscal Year 2026 and 2027, because of the big boost in money that's slated for ICE and the military. And because the larger cuts in Medicaid don't generally kick in until the later years.

But what's with that huge decrease in expenses that's in Fiscal Year 2025, which means it'll happen over the next 3 months? It's because this Trump/GOP bill is going to make it harder for students to pay for college in 2025, and makes it harder to pay back their loans if they've gotten out of college.

The bill places a new cap on the amount students can borrow in federal student loans for graduate school and how much parents can borrow to help pay students’ tuition.

There would be fewer opportunities for deferments or forbearance and new limits on lending for part-time students.

The bill also has much more limited set of repayment options, ending loan forgiveness programs that have been in place for years, as well as a Biden-era program that tailored payment requirements to the person's income. It would be replaced with a new fixed-rate program, which would disadvantage lower-income families.

Now, the huge cuts in 2025 are more of an accounting measure that shows the government won't have to write off as much student debt as we had under Biden-era policies (this swing in govt accounting also happened in 2022 and 2023 when Biden's student loan deferrals were first announced, and then reversed by the courts). But even though it improves the budget numbers for 2025, you can bet it'll be a burden for the real economy as college students and graduates try to adjust to having to pay more for their loans and likely will spend less on other items as a result.

What also will be a burden is the fact that this bill adds on to what was already slated to be sizable budget deficits over the next 10 years. When you add the bill's red ink to what the Congressional Budget Office had as its baseline assumptions back in January, our deficit reaches $2.2 trillion next year, and nears $2.5 trillion by 2028.

Now maybe that huge deficit number doesn't cause major real-world economic issues, and maybe we continue to entice investors and foreign governments to take up our debts and keep our interest rates lower. With the dollar at its lowest levels in more than 3 years, American assets are now cheaper for foreign governments to buy, while American investors have benefitted from foreign stocks becoming higher in value.

But this deficit boosting and cheaper dollars both are inflationary items, and if we don't get a recession in the wake of Tax Scam 2.0, I don't see how prices don't jump from both increased demand and higher incentives for speculation. And after an election cycle when we were told that inflation was so horrible for people to deal with, I can't think voters would take kindly to prices going up at a faster rate from a higher amount. In addition, that inflation should stop any cycle of interest rate cuts from the Federal Reserve before it even gets going, and President Trump is openly saying that rate cuts are a requirement for any of his Fed nominees.

Conversely, since there aren't a lot of new tax cuts for people with jobs, we could well end up in the recession we seemed to be heading toward before the bill passed. And if investors aren't willing to pay for all this new debt, we could well see interest rates go up, which would keep the economy on a slowing/recessionary track. Combine that with supports for health insurance and food assistance being diminished by Trump/GOP, and you have a setup for either a long recession or serious stagflation.

But hey, as long as the Trump/GOP donors and their puppet politicians get a cut, they don't care! Too bad that many of us will be forced to take on the costs for those slugs, and the crumbs of tax breaks we will get in return (if we get any at all) won't be worth it.