One of the problems in dealing with public finances in a democracy, and particularly in the United States, is that, when it comes to large numbers, a significant percentage of the population suffers from innumeracy, i.e., a lack of full understanding of numbers and/or mathematical concepts, and the ability to reason with them.
For example, the Senate just passed a $9 billion recission bill that will “claw back” funds already appropriated for foreign aid and public broadcasting, a cut that will primarily cripple if not eliminate broadcast stations in rural areas. While a $9 billion cut sounds significant, it only amounts to less than one tenth of one percent of the total federal budget, according to the Republican Senate Majority Leader. But just a week ago, Trump signed his “big, beautiful bill,” which will raise national defense spending by $156.2 billion. The cuts in non-defense federal programs aren’t enough to offset the massive increases in defense and homeland security, and few if any politicians are keeping track of the negative multiplier effect of federal job cuts.
Likewise, as I wrote previously, the “tax cut” won’t grant most taxpayers any lower taxes than they’ve paid over the last several years. It will keep their tax rates from returning to pre-2018 levels.
Because “big, beautiful bill” also increases health care and other costs, families may receive modest tax cuts, but face higher costs in health, education, and other areas. According to the Congressional Budget Office, on average, families earning less than $56,000 a year will bring home $300 less than before the bill was enacted as result of the increased cost of federal or federal supported services, while families earning less than $43,000 will bring home $750 less. On the other hand, families with earnings in the top ten percent will benefit by an average of $12,000.
According to the most conservative of economists, the deficit from the bill will add over $2 trillion to the national debt, and that debt will need to be financed, increasing the pressure on interest rates. The apparent consensus among federal policy makers is that an inflation rate of two percent a year is “feasible,” but that “feasible” rate means that today’s dollar will only be worth fifty-one cents in twenty years – or that you’ll have to increase the value of your savings by almost fifty percent to have the same purchasing power in twenty years. And two percent is far lower than what’s likely to occur.
Yet the majority of Trump’s supporters don’t seem to have the slightest idea that the “big, beautiful bill” will reduce real incomes of possibly as much as a fifth of American families (based on CBO figures) both now and in the future.
