Breaking down the chaotic ‘reforms’ in Washington

The fiscal chaos emanating from the Beltway is truly remarkable. President Trump’s fascination with tariffs has roiled financial markets across the globe, while simultaneously wreaking havoc on what were supposed to be the nest-eggs saved by millions of Americans who are either on the verge of retiring or already retired. Meanwhile state and local governments, together with thousands of nonprofit organizations and educational institutions from K-12 schools to universities, are wondering if funding which they both rely on — and has been previously approved — will actually be disbursed.

Then you have Elon Musk and the so-called “Department of Government Efficiency” taking an approach to slashing public expenditures that clearly has little to do with making the federal government more efficient. Why do I say that? Well, the process: isn’t predicated on any objective evaluation of the efficacy of the programs being axed, is so haphazard that fired workers have had to be re-hired because they were crucial to things like nuclear safety, has failed any standard of accountability given the laundry list of inaccurate claims DOGE continually makes, and has in some cases run afoul of the law.

As if that weren’t bad enough, Congress has hopped on the fiscally irresponsible bandwagon. On April 10, the House adopted a Senate budget resolution that, among other things, fritters away some $4.1 trillion in federal revenue between now and 2034, by extending President Trump’s 2017 tax cuts. That’s horrible fiscal policy for a host of reasons. First and foremost, those tax cuts didn’t deliver the promised economic boost. Back in 2017, Trump Administration officials claimed their corporate tax cuts alone would boost household income by some $4,000 on average. But they didn’t. All the research to date has found the economic gains from that corporate rate cut did not “trickle down” to most families.

So who did benefit? Well the data here are also clear. A Treasury Department analysis reveals that roughly half of the dollar value of the Trump tax cuts go to the richest 5%, who have annual earnings starting at $320,000. But the folks who really make out like bandits are the 134,000 or so tax filers with annual earnings that start at $3.5 million, who comprise the richest 0.1% in America. They’ll get more total dollars in tax relief than the 187 million households in the bottom 60% of income.

Worse, the congressional plan to pay, at least in part, for tax cuts that don’t stimulate the economy and transfer gobs of dollars to the wealthiest, is to slash some $1.5 trillion in spending on programs that benefit folks who aren’t independently wealthy. Particularly galling is the effort to cut $880 billion from Medicaid over the next decade.

Medicaid, which provides access to healthcare for poor and low- to middle-income folks, as well as disabled seniors, is the largest health insurance program in the country, covering 72 million Americans. That’s roughly one-fifth of the population. Medicaid insures almost half of America’s children, covers over 40% of all births nationwide, and nearly 50% of all births in rural communities. In Illinois, Medicaid covers 3.5 million people — or 27.5% — of the state’s population. Better yet, the feds subsidize around 69% of Medicaid’s costs, which frees up state-level revenue to cover other core services like education.

On top of that, every dollar spent on Medicaid stimulates the economy by generating two dollars of private sector economic activity, which benefits everyone. Total Medicaid expenditures in 2023 were about $890 billion, which translates to $1.78 trillion in economic activity.

Of course, cutting Medicaid spending by $880 billion over the next 10 years would reduce economic activity over that sequence by roughly $176 billion annually, which benefits no one. Oh, and millions of Americans will lose access to health insurance. All to what end — so really rich people can pay less in taxes and become even richer? That makes no sense, fiscally or morally.

• Ralph Martire is Executive Director of the Center for Tax and Budget Accountability, a fiscal policy think tank, and the Arthur Rubloff Professor of Public Policy at Roosevelt University. rmartire@ctbaonline.org