The “Big Beautiful Bill”: A reverse Robin Hood?
The House passed the omnibus reconciliation bill. And it cannot be understated how monumental the bill is in terms of its size and its fiscal, economic and distributional implications.
Democrats will naturally try to go on the offensive and characterize the bill as an effort to take money from the poor, the needy, and middle income and working-class Americans just so that the „plutocrats“ can pay less in taxes. They’ll conjure up images of 90% of Americans paying for the tax cuts of the 1%.
This political attack may or may not work - but critics of the bill should understand what they’re really criticizing. If you assume Americans vote with their wallets, the actual effects of the bill will matter in the midterm elections and in 2028 not just the political spin of either party.
First things first. This bill doesn’t amount to a wealth transfer from the majority of Americans to a wealthy minority.
It is a bill that will produce net income losses (after transfers) for the lower middle-class and many low income individuals and households. It‘ll not affect people who’re actually classified as income poor, at least not in any drastic way. Specifically, because the effective Medicaid cuts will affect people above the federal poverty line, primarily individuals with an income between and above 130%-200% of the poverty line.
Assuming about 7 million Americans will lose Medicaid coverage over the next ten years, the loss of coverage would still just affect a small fraction of the overall US population which stands at 340 million.
The bill, however, will also create net winners. As it happens, the majority of Americans will be financially better off over the next ten years thanks to the bill, especially high income earners and the upper-middle class. The effects on the middle-class will be less pronounced but they‘ll also benefit from the extended tax cuts as well as from some additional tax cuts (the higher standard deduction & CTC) while they won’t be affected by the SNAP and Medicaid cuts.
That’s critical. Unless the bill pushes up long-term interest rates by adding about $3.3 trillion to the national debt over the next 10 years, middle class Americans, and the overwhelming majority of American voters won’t be negatively affected by the bill. In fact, many will be better off compared to their personal pre-2017 tax burden but also compared to the pre-2025 tax burden. Still, the price will be a more unequal wealth and income distribution and a larger debt burden for all Americans, especially for future generations.
If you frame it in that way, the bill might still seem like an unfair affront to egalitarian values, and it’s most certainly fiscally imprudent, but good luck convincing people who‘ll actually benefit from the bill that they don’t deserve their tax cuts because some people (not them) will lose some benefits due to the spending cuts to partly offset the costs of their tax cuts.
Democrats will naturally try to go on the offensive and characterize the bill as an effort to take money from the poor, the needy, and middle income and working-class Americans just so that the „plutocrats“ can pay less in taxes. They’ll conjure up images of 90% of Americans paying for the tax cuts of the 1%.
This political attack may or may not work - but critics of the bill should understand what they’re really criticizing. If you assume Americans vote with their wallets, the actual effects of the bill will matter in the midterm elections and in 2028 not just the political spin of either party.
First things first. This bill doesn’t amount to a wealth transfer from the majority of Americans to a wealthy minority.
It is a bill that will produce net income losses (after transfers) for the lower middle-class and many low income individuals and households. It‘ll not affect people who’re actually classified as income poor, at least not in any drastic way. Specifically, because the effective Medicaid cuts will affect people above the federal poverty line, primarily individuals with an income between and above 130%-200% of the poverty line.
Assuming about 7 million Americans will lose Medicaid coverage over the next ten years, the loss of coverage would still just affect a small fraction of the overall US population which stands at 340 million.
The bill, however, will also create net winners. As it happens, the majority of Americans will be financially better off over the next ten years thanks to the bill, especially high income earners and the upper-middle class. The effects on the middle-class will be less pronounced but they‘ll also benefit from the extended tax cuts as well as from some additional tax cuts (the higher standard deduction & CTC) while they won’t be affected by the SNAP and Medicaid cuts.
That’s critical. Unless the bill pushes up long-term interest rates by adding about $3.3 trillion to the national debt over the next 10 years, middle class Americans, and the overwhelming majority of American voters won’t be negatively affected by the bill. In fact, many will be better off compared to their personal pre-2017 tax burden but also compared to the pre-2025 tax burden. Still, the price will be a more unequal wealth and income distribution and a larger debt burden for all Americans, especially for future generations.
If you frame it in that way, the bill might still seem like an unfair affront to egalitarian values, and it’s most certainly fiscally imprudent, but good luck convincing people who‘ll actually benefit from the bill that they don’t deserve their tax cuts because some people (not them) will lose some benefits due to the spending cuts to partly offset the costs of their tax cuts.
