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Why I support the Omnibus Reconciliation Bill (One Big Beautiful Bill)

How did this bill come to be? The answer is simple: The United States' exorbitant privilege—the global demand for U.S. debt—and the general dynamism of its economy allow for deficit-financed tax cuts that no other country could sustain without risking an imminent debt crisis.

Is it wise to indefinitely rely on the global demand for U.S. debt to continue accumulating more of it? Probably not. However, the U.S. is unlikely to face a serious sovereign debt crisis similar to the 1997 Asian financial crisis or the 2010 Eurozone debt crisis.

Despite having relatively low tax rates compared to most developed nations, the U.S. remains one of the wealthiest countries in the world, with a GDP per capita far exceeding that of any other large, developed economy.

Moreover, U.S. entitlement programs function like a treasure chest. If Congress adjusts the eligibility age in line with rising life expectancy, it would help structurally adjust the debt trajectory, stabilizing fiscal imbalances.

As a last resort, the U.S. could reform entitlement programs, raise taxes, and cut discretionary spending, ensuring that a chaotic sovereign debt crisis is avoided. A poorer country with a less dynamic economy, a higher GDP/debt ratio and a much higher tax burden simply doesn’t have the same margin of error or fiscal wiggle room.

This bill will demonstrate that the U.S. can still implement substantial spending cuts, which may, counterintuitively, reassure bond markets. Over the past quarter-century, Congress has only passed revenue-reduction bills—either through tax cuts or increased spending. Even the Budget Control Act of 2011 was an attempt to contain future growth in discretionary spending via caps and sequestration, but it didn’t result in real, immediate cuts.

The Omnibus Reconciliation Bill (OBBB) is expected to enact the largest spending reductions relative to U.S. GDP, cutting $2.5 trillion over a 10-year period. However, due to the cumulative effect of various tax cuts, the bill will add $2.5 trillion to the primary deficit over the same period.

That said, if signs of concern emerge in the U.S. bond market in the coming years, some of these tax cuts could be partially repealed. Previous presidents—Reagan, Bush 41, Clinton and Obama—all raised taxes to generate revenue while maintaining generally lower tax rates amidst fiscal imbalances in the 1980s, 1990s, and 2010s. Reagan’s initial tax cuts were so expensive that his administration later proposed raising taxes to offset some of the initial cuts. By compromising on these offsets, Republicans also gained leverage over a Democratic-controlled Congress, combining tax increases with spending cuts.

Similarly, the OBBB will create positive path dependencies for future Congressional negotiations on deficit reductions by simultaneously lowering both government spending and tax levels. As a result, future agreements will likely involve less aggressive tax increases and deeper spending cuts than they would have otherwise.
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Your last sentence is very intriguing. Thank you for posting
CedricH · 22-25, M
@ElwoodBlues If it were to be blocked there‘d be basically no spending cuts, after all, those would have do go through the ordinary budget or appropriations process which means Democrats could veto any major spending cuts.

At the same time, the TCJA would mostly expire which would substantially increase federal revenues with a considerable effect on the US economy, likely precipitating a short and mild recession.

Still, it’s absolutely defensible to oppose the bill on distributional or fiscal grounds.
@CedricH I don't know all the details of the budget reconciliation process. If this BBB fails maybe it's the only reconciliation this year. But if they abort it before final vote, maybe they could try in the autumn for a more modest bill with fewer spending cuts and a smaller tax increase.
CedricH · 22-25, M
@ElwoodBlues It‘ll pass. I‘m fairly confident that it‘ll pass. They have the votes. But if it doesn’t, they could just try again after the Summer recess. Congressional rules basically say that you can pass one reconciliation bill a year.
It‘s because the reconciliation process is tied to the annual budget resolution and there’s only one budget resolution each year.

The second half of this year is probably reserved for the actual budget/appropriations for FY2026. That’s quite an effort in and of itself.
Bumbles · 51-55, M
Nah, you just don’t care about poor people.
CedricH · 22-25, M
@Bumbles Well, if you say so. Welfare transfers, then.
Bumbles · 51-55, M
@CedricH Resenting poor people who use government resources is nothing new to be sure. At least you didn’t say “welfare queen.”
CedricH · 22-25, M
@Bumbles Resent is such an ugly term and completely polemic.
MasterLee · 56-60, M
The original bill looked good but since then unelected bureaucrats stripped out too much and added too much pork.
CedricH · 22-25, M
@MasterLee You‘re probably referring to the Senate parliamentarian. She‘s added nothing, she‘s just removed certain provisions that were either struck entirely or revised because they were inconsistent with the reconciliation process that Republicans use to avoid the filibuster so they can pass the bill with 50 votes.

So she essentially removed extraneous provisions that had no major budgetary effect.

That process is pretty important because otherwise a Democratic administration could just declare that raising the minimum wage to $15 could be fit into a reconciliation bill. They tried that back in 2021/22. The Senate parliamentarian rebuffed them.

So if Democrats had wanted to raise the minimum wage, they would’ve had to get 60 votes in the Senate which is structurally impossible for them for the foreseeable future. The Senate definitely tilts toward a persistent Republican majority simply because there are more red states than blue states.

 
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