Biden Set the GOP to Fail

The clock is ticking

The total cost of extending Donald Trump’s 2017 tax cuts beyond 2025 will be $4.6 trillion over 10 years.

However, Trump has promised to lower the corporate tax rate further, from the current 21% to 15%. This means the GOP must find significantly more than $4.6 trillion to offset the costs. Infighting has already begun over what to cut, where to cut, and what should or shouldn’t be touched.

Trump suggests taxing imports through tariffs to fund the tax cuts. Some propose cutting Medicaid, while others, like Elon Musk, advocate for deregulating industries and reducing the federal workforce. Meanwhile, some argue for using debt, and others insist on maintaining deficit neutrality.

For now, the GOP remains divided and without a clear strategy. GOP can afford only two defections in the House and three in the Senate. They need to use the reconciliation process to clear the Senate, which means they cannot reduce federal revenue by more than $1.5 trillion in ten years. Which means they need to find money that they cannot find.

Thank you President Biden for adding $8 trillion to the US GDP in four years and also reducing the deficit while doing so.

Let us break things further down:

Trump needs $4.6 trillion to extend his 2017 tax cuts and an additional $2 trillion to bring corporate tax receipts back to their 2017 levels. The total wealth transfer required amounts to more than $6.6 trillion over ten years. That equates to about $660 billion per year.

Slashing the entire federal workforce—which is highly unlikely—would only net $200 billion annually. Even if Elon Musk and Vivek Ramaswamy somehow managed to cut the federal workforce in half, the savings would amount to just $100 billion annually.

So, where will the remaining $560 billion come from?

A significant faction within the GOP has its sights set on Medicaid and Social Security. This group is likely to resist any plan that increases the deficit, though they won’t openly admit that Medicaid is their target. Instead, they will frame their position as being about maintaining deficit neutrality.

Meanwhile, the United States is grappling with an enormous mountain of debt—$35 trillion. Interest payments on this debt are now approaching a staggering $1 trillion annually. Since 2017, federal debt has nearly doubled, largely due to Trump’s 2017 tax cuts, which reduced federal revenue, widened the deficit, and increased the debt.

Far-right GOP House representatives are already pressuring the administration to avoid further increases to the debt.

Says Rep. Chip Roy (R-Texas), policy chair of the House Freedom Caucus: “We need to advance the agenda that the president ran on — he has a mandate — but we should be mindful of making sure that there are corresponding cuts or corresponding tax changes to make sure that we are deficit neutral.”

Oopsie.

There’s no way Team Trump can achieve half a trillion dollars in annual wealth transfer without touching Medicaid, Social Security, or defense. All three are political minefields that will hand them a sizeable defeat in 2026 midterms. But they are most probably going to take that risk.

Let’s see.