President Donald Trump’s fascination with tariffs has roiled financial markets across the globe, while simultaneously wreaking havoc on what were supposed to be the nest eggs of millions of Americans who are either on the verge of retiring or already retired.
Meanwhile, state and local governments, together with thousands of nonprofit organizations and educational institutions from K-12 schools to universities, are wondering if federal funding they rely on — and has been previously approved — will actually be disbursed.
Then you have Elon Musk and the so-called Department of Government Efficiency slashing public expenditures in a manner that has little to do with making the federal government more efficient.
Why do I say that? Well, the process isn’t predicated on any objective evaluation of the efficacy of the programs being axed; is so haphazard that fired workers have had to be rehired because they were crucial to things like nuclear safety; has failed any standard of accountability given the laundry list of inaccurate claims DOGE continually makes; and has in some cases run afoul of the law.
As if that wasn’t bad enough, Congress hopped on the fiscally irresponsible bandwagon in April, when it passed a budget resolution that, among other things, fritters away some $4.1 trillion in federal revenue between now and 2034, by extending Trump’s 2017 tax cuts.
That’s horrible fiscal policy for a host of reasons. First and foremost, those tax cuts didn’t deliver the promised economic boost. Back in 2017, Trump administration officials claimed their tax cuts would boost household income by some $4,000 on average and stimulate so much economic activity they’d pay for themselves. But they didn’t.
So who benefits? Well, the data is clear. A Treasury Department analysis reveals that about half the dollar value of the Trump tax cuts go to the richest 5%, who have annual earnings starting at $320,000. But the folks who really make out like bandits are the 134,000 or so tax filers with annual earnings that start at $3.5 million and who comprise the richest 0.1% in America. They’ll get more total dollars in tax relief than the 187 million households in the bottom 60% of income.
Of course, the failure of Trump’s supply-side tax cuts to stimulate economic growth was entirely predictable. In fact, the London School of Economics did a comprehensive study in 2020 that found tax cuts focused on the wealthy and businesses have never generated the promised job or economic growth that’s supposed to trickle down to benefit everyone, in any of the 18 Organization for Economic Co-operation and Development nations (including the U.S.) that implemented them over the last 50 years.
This mirrors findings of the nonpartisan Congressional Research Service, which analyzed how America’s economy was impacted by all changes made to the highest individual federal income tax and capital gains rates, from the end of World War II through 2010. After reviewing 65 years of data, the service found that cutting or raising these tax rates is not “correlated with economic growth, savings, investment or productivity growth. Top tax rates appear to have little or no relation to the size of the economic pie.”
Worse, to pay, at least in part, for this $4.1 trillion tax cut that won’t boost the economy but will transfer gobs of money to the wealthiest, Congress plans to slash some $1.5 trillion in spending on programs that benefit folks who aren’t independently wealthy.
Particularly galling is the directive made to cut $880 billion in spending over the next decade, because a large portion of those cuts will have to come from Medicaid.
Medicaid, which provides access to health care for poor and low- and middle-income folks, as well as seniors with disabilities, is the largest health insurance program in the country, covering 72 million Americans. That’s about one-fifth of the population. Medicaid insures almost half of America’s children, covers over 40% of all births nationwide and nearly 50% of all births in rural communities.
In Illinois, Medicaid covers 3.5 million people — or 27.5% — of the state’s population. Better yet, the feds subsidize around 69% of Medicaid’s costs, which frees up state-level revenue to cover other core services like education.
And unlike Trump’s tax cuts, every dollar spent on Medicaid stimulates the economy by generating $2 of private sector economic activity. Total Medicaid expenditures in 2023 were about $890 billion, which translates to $1.78 trillion in economic activity. That benefits everyone.
Of course, cutting Medicaid by $880 billion over the next 10 years would reduce economic activity over that sequence by roughly $176 billion annually, which benefits no one.
Oh, and millions of Americans will lose access to health insurance. All to what end — so really rich people can pay less in taxes and become even richer? That makes no sense, fiscally or morally.
Ralph Martire is executive director of the Center for Tax and Budget Accountability, a nonpartisan fiscal policy think tank, and the Arthur Rubloff Professor of Public Policy at Roosevelt University.
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