Happy Tuesday! It was a pretty good day for Taylor Swift, who was added to Forbes’ annual list of global billionaires, with an estimated net worth of $1.1 billion. She’s the first musician to make the list based solely on songwriting and performing, Forbes says. Other newcomers on the list include TV producer Dick Wolf of “Law & Order” fame and Magic Johnson, the NBA superstar turned business mogul.
In all, Forbes says that there are now 2,781 billionaires around the world, 141 more than last year, with a record combined wealth of $14.2 trillion, $2 trillion more than last year. “The super-rich are also richer than ever,” Forbes says.
That might count as fiscal news, but here’s what else made our radar screen.
Quote of the Day: A Big Win for the Anti-Tax Movement
“The anti-taxers have, at least for now, won the debate. Federal budget deficits are massive and growing. US tax rates are low. Promised Social Security benefits are at risk. The public overwhelmingly supports tax increases on the wealthy and corporations. Yet, Congress keeps cutting taxes and even many congressional Democrats are unwilling to raise them.”
— Howard Gleckman of the Urban-Brookings Tax Policy Center, writing about the anti-tax movement in the U.S., which is the subject of an event at the center and online tomorrow.
Referring to a new book on the subject by law professor Michael Graetz, who served in the Treasury Department during the George H.W. Bush administration, Gleckman writes that the anti-tax movement, which Graetz traces back to California in the 1970s, is a powerful force in U.S. politics driven as much by cultural concerns as economic ones.
Advocates of tax cuts hoped to slash the government, in part to reduce the influence of public schools that were offering racial integration and an IRS that was threatening tax exemptions for segregated schools. Prominent backers — including Newt Gingrich, Grover Norquist and Rush Limbaugh — created and sustained a political movement whose “starve the beast” mentality failed to shrink government but succeeded in generating enormous fiscal deficits.
That political movement is still very much in play, scoring its most recent victory in the Tax Cuts and Jobs Act signed into law by former President Donald Trump 2017. It will likely be tested once again in the coming months as lawmakers turn their attention to the expiration of many of the TCJA’s individual tax cuts at the end of 2025.
Debt Danger Ahead Even Greater Than CBO Sees: Analysis
The team at Bloomberg Economics is warning that federal debt is set to grow even higher as a share of the economy than the most recent projections from the Congressional Budget Office, which see the debt climbing to 116% of GDP by 2034.
“From tax revenue to defense spending and interest rates, the CBO forecasts released earlier this year are underpinned by rosy assumptions,” Bloomberg economists Bhargavi Sakthivel, Maeva Cousin and David Wilcox write. “Plug in the market’s current view on interest rates, and the debt-to-GDP ratio rises to 123% in 2034. Then assume — as most in Washington do — that ex-President Donald Trump’s tax cuts mainly stay in place, and the burden gets even higher.”
The Bloomberg analysts ran a million simulations to assess the path the debt may take depending on the many variables in play. They say that in 88% of the simulations, the debt-to-GDP ratio was “on an unsustainable path,” which they defined as increasing over the next decade.
They also note that debt that reached 123% of GDP in a decade would result in servicing costs or almost 5.4% of GDP, which would be “more than 1.5 times as much as what the federal government spent on national defense in 2023, and comparable to the entire Social Security budget.”
The analysts note that it “would take a lot to shake investor confidence in US Treasury debt as the ultimate safe asset” and that the debt is more sustainable if judged by looking at inflation-adjusted interest expense, a measure preferred by Treasury Secretary Janet Yellen. In only 30% of Bloomberg simulations did that metric exceed Yellen’s preferred threshold of 2% of GDP.
Still, the Bloomberg team concludes that getting the debt to a truly sustainable path will take congressional action — and the prospects for that in the absence of a crisis appear remote given current partisan divisions.
Op-Ed of the Day: Is It Time to Revive the Public Option?
The Editorial Board at Bloomberg News reminds us Tuesday that the U.S. healthcare system remains an anomaly, combining the highest costs among its peers with the worst results as measured by life expectancy.
“America’s approach to health care is an outlier among the world’s rich countries, and not in a good way,” the Bloomberg editors write. “Extraordinarily complex and hideously expensive, it still manages to leave some 26 million people without coverage.”
Although the Affordable Care Act offered some improvements, coverage and cost remain serious problems. The Bloomberg editors argue that a public option for health insurance run by the government — a feature dropped from the ACA amid political pressure from special interests — could offer an alternative with the potential to slow and perhaps reverse the rise in costs, even as it provides coverage to more people. “Like Medicare, it would save money by negotiating prices and cutting costs,” the editors write.
Some states are experimenting with public options that could provide models for a national program. Lawmakers in Congress are also working on versions of a national plan, including a proposal from Sens. Michael Bennet and Tim Kaine, which would expand Medicare in underserved parts of the country.
Whatever the details, it’s clear that the country needs new options, the editors say, even if implementing anything new will be a difficult politically. “[T]he existing system is undeniably failing,” they write. “In poll after poll, Americans say rising health-care costs are a top concern. States should keep on trying new approaches to see what works. And Washington should put the Medicare-based public option — perhaps the most promising way to solve the system’s biggest problems — back on the agenda.”
Fiscal News Roundup
- Senate Faces Tough Choice on Speaker Johnson’s Ukraine Vision – The Hill
- McConnell: Federal Government Will Pay ‘Lion’s Share’ of Baltimore Bridge Repairs – The Hill
- Ways and Means Republican Willing to Consider Federal Funds for Baltimore, but Not Yet Committed – Politico
- McConnell: I’ll Stay in the Senate and Fight the GOP ‘Isolationist Movement’ – Politico
- NATO’s Stoltenberg Floats $100B, Five-Year Fund for Ukraine – Politico
- Swing States Net Half of $114 Billion in Inflation Reduction Act Factory Investment – Bloomberg
- US Job Openings Edged Higher in February as Layoffs Returned to Pre-Pandemic Levels – CNN
- Fed Officials Say Three Rate Cuts a Reasonable Baseline for 2024 – Bloomberg
- Fed’s Mester Wants More Data Before Cutting Three Times in 2024 – Bloomberg
- Bond Market Sees Fewer Rate Cuts Than Fed, Deepening Losses – Bloomberg
- Medicare Advantage Plans to See 2025 Base Pay Fall – Axios
- ACA Plans Are Being Switched Without Enrollees’ OK – KFF Health News
- Retirement Crisis Looms as Americans Struggle to Save – CNN
- His Brownstone Is Worth $5.4 Million. Why Is His Tax Bill So Low? – New York Times
- The History of U.S. Military Aid to Israel, and the Weapons Involved – Washington Post
Views and Analysis
- Will MAGA Republicans Block Baltimore’s Rebuilding? – Paul Krugman, New York Times
- How The Anti-Tax Movement Changed Politics and Government – Howard Gleckman, Tax Policy Center
- Health Care Is Still Too Costly for Americans – Bloomberg Editorial Board
- Will Medicare Raise Your Monthly Premiums to Cover Wegovy? – Berkeley Lovelace Jr., NBC News
- Medicare Keeps Getting Tougher for Health Insurers – David Walner, Wall Street Journal
- Why I Believe in Industrial Policy — Done Right – Sen. Marco Rubio (R-FL), Washington Post
- Mike Johnson’s Proposed Ukraine Deal Is as Cynical as It Is Stupid – Kate Aronoff, New Republic
- The Home Mortgage Interest Deduction Reinforces Racial Disparities – Janet Holtzblatt, Robert McClelland and Gabriella Garriga, Tax Policy Center
- A Higher-for-Longer Good Friday From the Fed – John Authers, Bloomberg
- I Have a Disability and I Found a Job I Love. Social Security Is Making Me Pay Dearly – Jennifer Brooks, The Hill
- Poor Nations Are Writing a New Handbook for Getting Rich – Patricia Cohen, New York Times
- I’m an Economist. Don’t Worry. Be Happy – Justin Wolfers, New York Times