THE DEVIL IS IN THE DETAILS - HR1 REQUIRES SCRUTINY!

 Weekly Opinion Editorial

BEAUTY OR BEAST?

by Steve Fair

     President Trump’s ‘one big beautiful bill’ (HR1) passed the Republican controlled U.S. House last week by one vote (215-214), with five Republican House members voting no (2), present (1) or not voting at all (2).  It now heads to the Senate, where it faces some opposition.  The text of HR1 is available at: https://www.congress.gov/bill/119th-congress/house-bill/1/text for those interested in the details.

     HR1 makes permanent the 2017 Trump tax cuts.  It cuts taxes by an additional $1,300 for a family of four and removes the tax on tips and overtime pay.  HR1 allows an American family to fully deduct auto loan interest for American-made cars. It also increases the standard deduction by $2,000 for every American family.  It increases the Child Care tax deduction.

     But the 1,116-page bill does not remove tax on Social Security, as has been wrongly reported.  Social Security can’t be changed through a budget reconciliation process.  HR1 does contain a provision where people over age 65 could deduct an additional $4,000 from their taxes if they make less than $75,000 or $150,000 filing jointly.  Three observations about HR1:

      First, HR1 will get changed in the Senate.  Senator Ron Johnson, (R-WI) and other Republicans, have criticized the spending in the bill.  Johnson wants deeper cuts, calling for government agencies to go back to pre-COVID spending levels.  “This is the weekend we honor the service and sacrifice of the finest among us.  I don’t they served in sacrifice to leave our children completely mortgaged,” Johnson said on CNN Sunday.  Johnson, a fiscal hawk, exhorted his fellow senators to be ‘responsible’ and reminded them the first goal of a budget reconciliation process should be to reduce the deficit. 

     HR1 does cut Medicaid (not Medicare) funding by up to $1 trillion and requires more stringent provider screening requirements.  A significant amount of taxpayer dollars are spent providing medical care for illegal immigrants and HR1 seeks to stop that expenditure.

     The Congression Budget Office (CBO) estimates HR1 will increase the budget deficit by $3.8 trillion next year.  Speaker Mike Johnson, (R-LA) says those estimates are inflated and the CBO did not factor in the economic growth HR1 will create.  One thing is certain- HR1 likely faces modification before it gets through the Senate.

     Second, HR1’s success hinges on U.S. economic growth. The House Ways and Means committee estimates HR1 will increase America’s GDP an average of $850 billion annually over the next decade.  One reason for the projected growth is the extension of key Trump economic tax policies for small businesses the Biden administration had rescinded.  Reduction of regulations on energy productivity is expected to lower energy costs and increase consumption.  Whether the tenets of HR1 will result in the projected growth the Trump administration expects remains to be seen.

     Third, the devil is in the details.  Simple things can often become complicated and problematic.   Overlooked details can be the source of failure.  In a bill with over 1,100 pages, specifics are crucial for success.  Unintended consequences are the axiom/motto of Congress.  While HR1 has some excellent provisions, it’s the undetected fishhooks that snag taxpayers. 

     HR1 includes measures consistent with ‘supply-side economics,’ aka Reaganomics.  With tax cuts, incentives encouraging work and investment and focus on supply, HR1 is similar to the approach President Reagan took to combat record inflation in the early 1980s.  It worked, despite critics who said it helped the wealthy in the U.S. the most.  If HR1 doesn’t work, the beautiful bill will be the beast.