| | | | | | A newsy analysis of the workings of D.C. (and beyond), providing the inside track on both the overhyped and overlooked events of the week. | | | | | | | All Things will be taking a summer holiday; it will return the week of July 21. | | Big, Beautiful Distortions | | | | | Senate Republicans squeaked through Donald Trump's megabill on Tuesday, 51-50, and cue the onslaught of misleading claims from Democratic opponents and their Beltway copywriters. The bill is far from perfect, and is facing headwinds from fiscal conservatives in the House. But it bears no resemblance to the critics' description of a bill that puts the nation on "a new, more perilous fiscal path," or enacts "the largest cut to [the] U.S. safety net in decades," or pushes household energy bills "higher over the next decade," or loses the country 900,000 jobs, or mostly "benefits the rich." This is partisan spin masquerading as analysis. A guide to surviving the disingenuous coverage: - A tax "cost": The left and the media are suddenly worried about spending (as they are only when Republicans run things) and wailing that the bill will add $3.3 trillion to deficits over a decade, a figure plucked from a recent Congressional Budget Office "score" of the bill. But this figure rests on the bizarre claim that simply keeping our existing tax regime—in place since 2017—beyond this year will somehow "cost" trillions. In reality, the bill will save at least $500 billion over the next 10 years. This remains less than what House fiscal conservatives want, thus the potential trouble for that vote.
- A debt bomb: Critics are specifically pointing to the bill's tax provisions as the driver of new "debt" and risk of a "debt crisis." But aside from including a few temporary perks like a reduction of taxes on tips and overtime (which are offset by spending reductions), the bill is mainly extending the tax status quo. The real driver of debt has been—and remains—Joe Biden's blowout spending on entitlements and climate, which this bill at least begins to scale back. And speaking of a debt crisis, few things would more rapidly push the U.S. closer to one than the economic downturn that would accompany a $4.5 trillion tax hike at the end of this year—which is what happens without this bill. Trump's legislation should spur growth, in part by making a few key business provisions permanent, bolstering tax certainty.
- A benefit to the rich: Again, the bill largely extends existing tax policy. To the extent it makes modifications, many of these are boons to lower- and middle-income families. Those include a larger standard deduction, an expansion of the child tax credit, reductions in taxes on tips, overtime and Social Security benefits, and a new deduction for auto loans. Nearly all of these phase out for—or are unavailable to—itemizing and higher-income earners. One exception is the increase in the state and local tax deduction to $40,000, though this perk will flow primarily to higher-income residents in blue states. And while the business community does benefit from the bill, that isn't a handout to "the rich" but to the economic engine that employs average Americans.
- An attack on the social safety net: Repeat and repeat again: Republicans are not cutting spending on Medicaid or food stamps; the House and Senate bills merely slow those programs' (unsustainable) rate of growth. Republicans accomplish this by implementing modest work requirements for able-bodied adults, by pushing back on a scheme states use to inflate federal Medicaid spending, and by asking states to be more diligent in identifying fraud. Our recent breakdown of the CBO forecast of who would "lose" Medicaid by 2034 shows a population of able-bodied adults who aren't complying with the work requirement, illegal migrants, and people who qualify for other subsidized coverage.
- Hiking energy prices: Opponents are furious over the bill's new restrictions on Biden's slush subsidies for green energy, moaning that it will "gut" some of the "fast-growing sources on the grid," potentially hiking prices and killing renewable-sector jobs (or even our AI future). Yet those industries aren't growing because they are more advanced or more cost-effective; quite the opposite, they are challenging to add to the grid, expensive, and unreliable for many high-energy needs (like artificial intelligence). They are growing entirely because government is floating them with obscene subsidies, in the process undercutting and diverting capital away from cheaper, more functional and more durable fossil-fuel production. Demand for natural-gas turbines remains enormous, and with Trump deregulation, fossil-fuel plants will quickly fill any gaps and provide an equal or better opportunity for jobs.
An amusing aspect of all this griping is that, were Democrats in charge, they'd be passing a bill that shared the megabill's core feature: an extension of nearly all the current tax rates (save the top rate for higher earners). And they would be truly busting budgets, piling yet more dollars into distortionary green subsidies and government programs. Strip away all the drama, and the GOP megabill is legislation that provides tax certainty, makes an investment in the military and border, and institutes some modest reform to runaway entitlement spending. | | | | Cracking the Biden Inner Circle | | | The Alex Thompson-Jake Tapper book on the cover-up of Joe Biden's cognitive decline— "Original Sin"—continues to fly off shelves, though Americans as soon as next week will begin getting information direct from the Biden inner circle. That's when the House Oversight Committee, led by Kentucky's James Comer, starts holding its first interviews with the central players in the drama. First up, on Wednesday, will be Dr. Kevin O'Connor. Biden's former physician initially refused to provide voluntary testimony, requiring the committee to subpoena him. O'Connor routinely provided rave public assessments of Biden's health, including one just last year that pronounced Biden a "a healthy, active, robust 81-year-old male, who remains fit to successfully execute the duties of the Presidency." The committee will demand answers both about what, if anything, O'Connor did to assess Biden's mental health, but also about broader decisions that resulted in a failure to catch Biden's recently announced advanced prostate cancer. And next Friday the committee will sit with Ashley Williams, who worked in the deputy chief of staff's office, and who Thompson last year described as one of the Biden aides who "created a cocoon around him that initially seemed earnestly protective," but later appeared "potentially deceptive." The weeks after that will feature former Biden chief of staff Ron Klain, former counselor Steve Ricchetti, and former senior advisor Mike Donilon. The interviews follow last week's testimony from Neera Tanden, the former director of Biden's domestic policy council, who according to Comer explained that she had "no visibility" into who at the White House was actually approving her requests to use the autopen to sign legislation. The committee also subpoenaed Anthony Bernal, the top Jill Biden aide, who last week abruptly canceled his voluntary testimony, after the Trump White House waived Bernal's ability to invoke executive privilege in response to questions. Bernal will likely comply with the subpoena, though the cancellation bought him time to work with his lawyer on responses. Which underlines the big challenge of this GOP probe: If the small handful of aides who closed ranks around the Biden family doggedly stick to the line that the former president never showed any signs of slippage and was always in charge, who can refute them? | | | | The Coming North Carolina Senate Fight | | | North Carolina GOP Sen. Thom Tillis's retirement announcement has political prognosticators bullish that Democrats could take back the Senate in midterms. It certainly adds to the uncertainty, though the Tar Heel State holds good and bad omens for both parties. The upside for Democrats: Challenging a new Republican face is easier than challenging an incumbent. Democrats will also have a strong contender in two-term former Gov. Roy Cooper, who is almost certain to run. Cooper has name recognition, cash and solid approval ratings. And there is every possibility Republicans might repeat the error of recent cycles, and choose a candidate for brand value or fiery rhetoric, rather than for qualifications or political skill. Republicans recently blew North Carolina's gubernatorial race when their nominee, Mark Robinson, imploded in scandal and lost the seat to Josh Stein—providing one of the few Democratic bright spots in last year's election. But Republicans have a few things going for them, too. One is history. Republicans haven't lost a Senate race in North Carolina since 2008, and movement is toward the party. Trump's 3-point victory last year isn't much changed from his victory in 2016—though an improvement on his 2020 total. But Republican and independent registrations in the state have grown notably in recent years. In 2008, Democrats had some 860,000 more registrations than Republicans; Democrats were about 46% of the electorate, Republicans about 35% and "unaffiliated" voters about 19%. But according to Center Square, by the end of May this year, only about 22,000 registrations separated the two parties, while "unaffiliated" voters accounted the biggest share of the electorate, nearly 38%. This is a trend similar to other swing states that came through for Trump last year. In the end though, North Carolina dynamics likely won't matter nearly as much as the GOP's Washington performance over the next year. If the Trump White House and GOP megabill fail to bring down inflation and improve the economy, they are in for a rocky midterm no matter the Tar Heel ground game. | | | | | | | | | | | Billions of dollars in government health-care fraud schemes that the U.S. Justice Department says it broke up, resulting in criminal charges against 324 defendants, including doctors, nurses, pharmacists and "transnational criminal organizations." | | | | | | Senators who voted against discharging from the Foreign Relations Committee a war powers resolution from Virginia Democratic Sen. Tim Kaine that would have handcuffed Trump from taking further action again Iran. Kentucky Republican Rand Paul voted for the measure; Pennsylvania Democrat John Fetterman voted against. | | | | | | Billions of dollars of customs duties—including tariffs, taxes and fees— the Trump administration has collected since the beginning of the president's tenure, according to an analysis from Axios. This is 65% higher than the year-earlier period, according to the outlet, but does not factor in any reduction to growth due to the fees. | | | | | | | | Connecticut won't be topping the ranks of economically free states any time soon, but give Democratic Gov. Ned Lamont credit for blocking (at least for now) two proposals that would have hammered his state's economy. Lamont last week vetoed the Democratic Legislature's bill to make striking workers eligible for unemployment benefits, saying he's wary of legislation that "discourages jobs in this state." He also "reluctantly" vetoed a housing bill that the Yankee Institute explains would have bullied cities and towns into "one-size-fits-all housing mandates." The governor is holding out the prospect of signing a revised housing bill, but for now the vetoes are a breath of economic common sense amid so many blue states doubling down on higher taxes, more regulation and more union handouts. | | | | | | | | Pulitzer-prize winning journalist Karen Elliott House is out next week with her informed new book—"The Man Who Would be King"— about Saudi Arabia's enigmatic crown prince, Mohammed bin Salman (MBS), and how he's transforming his kingdom. It's a fascinating look at how MBS is reining in clerics, eliminating "restrictions on women, music, mixing of genders, and entertainment," turning his economy toward tourism and advanced industries, and attempting to make Saudi Arabia a regional and global power (topics Karen Elliott House also discusses with me in this week's podcast). Key takeaway: While the country faces many challenges, including human rights, "today's Saudi Arabia is literally unrecognizable from that of 2016." | | | | | | | All Things With Kim Strassel: Saudi Arabia's Transformation and its Role in the Middle East | | The U.S.-Israeli strikes on Iran put a new spotlight on Saudi Arabia, where Crown Prince Mohammed bin Salman is rapidly shifting his country both domestically and on the world stage. On this episode of All Things, journalist Karen Elliott House--drawing on her new book, "The Man Who Would Be King"--explains the crown prince's work to rein in clerics, to reduce restrictions on women, music and "fun," and to transform Saudi Arabia's economy by courting new industries and foreign investment. She also breaks down Saudi Arabia's bid to become a new regional and global player, how the kingdom is a "silent winner" in the wake of the Iranian conflict, and the challenges to an ongoing U.S.-Saudi relationship. | | | | | | |
