By Edward Luce
Two cheers for Thom Tillis. The North Carolina Republican voted against Donald Trump鈥檚 鈥渂ig beautiful bill鈥, then said he was quitting politics. Like a bee, the outgoing senator stung once then died. But Tillis forfeits a third cheer because he would in any case have been likely to lose next year鈥檚 re-election. All things being equal, many Republicans could lose their seats because of Trump鈥檚 reverse Robin Hood budget. Having chosen to live by the Trumpian sword, some will die by it.
Trump鈥檚 budget will have two dramatic impacts 鈥 one political, the other economic. The first is the damage to Trump鈥檚 blue-collar Maga brand. 鈥淏BB鈥 鈥 Republicans鈥 slavish adoption of Trump鈥檚 nickname for the bill 鈥 will result in a large fiscal transfer from America鈥檚 poorest to its richest. Given how blatantly that upward redistribution breaks Trump鈥檚 campaign vows, his party will pay a price at the polling booth. Some polls show fewer than 30 per cent of voters approve of BBB. This is an unusually strong thumbs down for a president鈥檚 signature bill.
The nearest parallel is to George W Bush鈥檚 2005 attempt to privatise Social Security 鈥 a radical step on which he had barely campaigned. Bush鈥檚 gamble boomeranged. Though he was forced to drop the bill, his party鈥檚 鈥渢humping鈥 defeat in the next year鈥檚 midterm elections partly stemmed from it. The other comparable example is Trump in 2017 trying to abolish Obamacare, the healthcare reform that had halved America鈥檚 number of uninsured in previous years. Trump lost his Obamacare repeal by one vote courtesy of the late Republican senator John McCain. Republicans lost Capitol Hill the next year.
Unlike the other two bills, which failed, Trump鈥檚 BBB looks likely to pass, which suggests the midterm fallout will be worse. That is accounting for Democratic incompetence. Even an opposition in disarray can score off an incumbent party that has made many voters worse off. The bill does the Democrats鈥 messaging for them. It imposes steep cuts on Medicaid for America鈥檚 poorest to partly fund tax cuts for its wealthiest. Between 11mn and 16mn would lose health insurance. Millions more would lose food assistance. The bottom 10th of Americans would sacrifice $1,600 a year while the top 10th would gain $12,000. Here is a slogan for Democrats: 鈥淭rump robbed the poor to pay the rich鈥. It is not that hard.
But there is another twist 鈥 many of the rich also loathe Trump鈥檚 BBB. This includes Elon Musk, Trump鈥檚 estranged former First Bro, who says the bill will put America on the path to 鈥渄ebt slavery鈥. Depending on the estimate, Trump will be adding between $3tn and $4tn to the US national debt over the next decade. This will put America into the Italian category. Leaving aside Musk鈥檚 reasons for opposing the bill 鈥 he wants steeper healthcare cuts 鈥 he is right about the country鈥檚 irresponsible direction.
There is nothing specifically Maga about Trump鈥檚 bill. The US national debt has more than doubled since 2000 to more than 120 per cent of GDP. The next quarter of a century is likely to be far costlier than the last one, which was flattered by ultra-low interest rates. As debt servicing eats up a growing share of the US budget, there will be less for everything else. On this, Trump is upholding decades of Republican tradition. His budget robs tomorrow to help the rich today.
In economic terms, Trump鈥檚 budget is classic bait and switch. He promised blue-collar America lower prices and rising incomes and is delivering the opposite. But he has other ways of catering to the base. My colleague Martin Wolf calls this pluto-populism. Trump鈥檚 BBB includes a big budget rise for the infamous Immigration and Customs Enforcement agency and more Pentagon spending on the US-Mexico border. Expect military-backed ICE raids to extend from Los Angeles to other big cities, including New York and Chicago.
Trump is also limbering up for an assault on the US Federal Reserve. He has a proverbial bullet with Jay Powell鈥檚 name on it. The Fed chair鈥檚 term expires next May. But Trump鈥檚 impatience will surely not last that long. Powell is a 鈥渟tupid person鈥, a 鈥渘umbskull鈥 and an 鈥渋diot鈥, according to Trump. His sin is not to cut interest rates amid a trade war-fuelled bout of rising inflation. Expect Trump to win this battle. He wants a steep cut to the US prime rate.
Expect Americans, rich and poor, to be the eventual losers. A broken Fed that obliges Trump鈥檚 desire for easy money will make inflation great again. The politics of BBB is self-harming to Trump. The economics is terrible for everyone.
edward.luce@ft.com