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📆This Week’s Topic
This week we’ll be talking about the monumental tax cuts and debt limit increases that Republicans are poised to act on, seemingly while neglecting to heed to expert warnings. Republicans in Congress are trying to pass domestic legislature that would see around $4 trillion dollars in tax cuts. And to add on to that, they’re also trying to pass a $5 trillion dollar increase to the debt limit.
💳 Cause & Effect
What are tax cuts and the debt limit? Tax cuts are reductions on the taxes that individuals and businesses are forced to pay every year. But because the cuts are such a large sum of money, Wall Street is worried about the repercussions. And it’s not just experts on wall street that are nervous about the bill. The former Department of Government Efficiency Co-Head and tech mogul Elon Musk has criticized the bill, saying that new legislation needs to be created that “doesn't massively grow the deficit.”
Now, the debt limit. The debt limit is essentially the limit the government can withdraw to pay off its dues, or debt. Raising the debt limit would basically mean letting the the US Government pay off its debt until 2028, as it’s expected to run out of money by the end of the summer. Most economists and analysts would be relieved, as the “brinkmanship” has pushed the economy into a place of instability over the past few years.
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📊 Statistics
The debt limit bill would increase the debt limit by $5 trillion. The $5 trillion proposed is a 21% increase from the republican bill last month, which was situated at around $4.1 trillion. It seems that the primary aim for this bill is to lower the Debt-to-GDP ratio over time, which is speculated to be 130% percent by 2034. (It’s sitting at 124% currently). To pair with that, tax cuts are set just below that, at $4 trillion. Because of that high number, several expert groups are speculating that President Trump’s tax bill will add another $2 trillion to the national debt. The experts also found that the bill would deliver little economic growth, and generate little revenue.
⛱ Consumer Effect
In relation to the tax cuts, It seems as if Republicans are scared of backlash and are unwilling to cut social welfare programs such as social security and Medicare. Although, they are trying to cut social security and Medicaid. However in the past, Republicans and Trump have targeted antipoverty, tips, and overtime. However for now, it seems as if Republicans are content with rebuking the estimates of the Debt created by the bill. And again with the Debt Limit increases, it seems as if both parties are scared to cut safety net programs. Michael Peterson, chief executive of the Peter G. Peterson foundation says that both house and Senate reconciliation bills are policy-wise different, but will add trillions to the national debt. He says that “With $36 trillion of debt already, we should be focused on slowing the growth of our debt and deficits, and the reconciliation process was originally intended to be used for that.”
⏳ Final Summary
The US economy is already in a fragile state, with the high tariffs, changing workforce, inflation, and interest rates. It’ll be interesting to see in the future the affect these bills have on consumers and businesses, and to see if these bills either further weaken the economy as speculated or strengthen them like Republicans say they will. Finally, it makes you wonder what the affect on consumers will be in years to come, and what government programs will look like in the future.
🙏Thank You & Important Information
As always, thank you for reading Friday Finance. We hope you’ve enjoyed this edition, and continue to enjoy further publications. If you have an idea, a comment, or anything else you want to say on the sidebar (or at the bottom for website) there is a comment button/section to share your opinion. Have a great weekend, and see you next time!
Grayson Stein & Jacob Gans
Friday Finance