Elon Musk has been wrong about a lot and his DOGE rampage with multiple cuts to government has been an atrocity. But he is right that the Trump tax cut bill is an "Abomination". Yeah, we can debate whether his opposition is really on the level - regarding the $2.7 trillion added deficits- or is merely a visceral reaction to his EV vehicles being removed from any tax benefits.
But the fact remains that the grandiose Trump's mega tax cut porker - if passed- could blow the bond markets open and have many more negative impacts on average citizens than benefits. Just yesterday, the nonpartisan Congressional Budget Office said that the broad Republican bill to cut taxes and slash some federal programs would add $2.4 trillion to the already soaring national debt over the next decade. You can be sure the bond markets will react very negatively indeed, if this monstrosity is passed.
According to a recent WSJ piece ('How A Growing Deficit Could Hurt Americans', May 31-June 1, p. A2) spells it out, noting:
"Trump's agenda of tax cuts would put more money in people's pockets, but it also stands to widen the U.S. deficit. This is fueling worries about a potential blow to households, businesses and the broader economy."
This isn't rocket science or quantum mechanics after all. I mean, much higher deficits - which will break the record of Trump's previous (2017) bill, means almost certainly vastly higher inflation. That in turn will curb households' ability to borrow, say to even cover home renovations or college expenses.
Over-exaggeration? Not really. Moody's stripping the U.S. of its triple A credit rating was already a warning shot over the bow of the Reepo congress. Warning them away from passing Trump's "great big beautiful" bill - which will send Treasury yields soaring toward 5%. That is a critical threshold marker which translates to too few buyers (like China and Japan etc.) buying our bonds to support our profligate ways. As the WSJ piece noted:
"A weak Treasury auction sent yields higher Wednesday (May 28) signaling investors' concern about the deluge of government borrowing."
Charlie Gasparino - FOX News Business reporter- was among the first to break the news of Japanese Treasury selloffs, and their dire consequences, e.g.
Charlie Gasparino: "It is the White House who capitulated" | Media Matters for America
Excerpt:
"You know, Bessent knows this better than anybody, when you have yields on the 10-year rising to 5%, stuff starts shutting down when you have the lending market screwed up. By the way, who's dumping the bonds? Somebody asked him if it was China, right? It wasn't, it was Japan. While he was negotiating with Japan, Japan, according to my sources, were running major money management firms that are involved in the bond market, without giving up names. Japan was dumping bonds because they believed this was not a great place to do business. That forced their hands."
Because it is essential for the U.S. future that Treasurys keep getting bought, that means if yields go too high (say to 5%) the Fed will have to raise interest rates to try to get more bond buyers to rescue our sorry butts. This would be tacked on to the already high rates, e.g. for a 30-year fixed mortgage. (See below how those rates have soared):
As the WSJ piece observes: "Prospective home buyers are already contending with higher rates and home prices. The average rate on the 30 -year fixed mortgage recently rose to 6.86% according to Freddie Mac. Now mortgage rates could climb even more meaning people would have to shell out more for monthly payments."
Let's also not forget the other side of the coin is uncertainty. No business can survive for long when policies governing the economy change every few days, and neither can consumers. Wherefore the uncertainty? Since Dotard’s inauguration Jan. 20th he's announced new or revised tariff policies more than 50 times, according to a tally by The Washington Post. Trump himself has issued more than a dozen tariff-related, Stephen Miller- authored executive orders alone. That's about one per week.
Hate him or not, Musk's public putdown of the latest Trump farce - a deficit holocaust that will impoverish future generations - ought to be applauded. If nothing else it ought to entice more Reep Senators to find their spines and vote against it.
See Also:
Musk blasts Trump’s tax bill as ‘disgusting,’ citing ‘unsustainable debt’
It seems like only a couple of days ago that I was writing about President Trump and his former BFF Elon Musk's apparent falling out. Actually, it was a couple of days ago, but even though I was pretty sure that the famous bromance was on the rocks, due to all the vicious, anonymous back-stabbing by administration figures, I had no idea it was going to blow up as spectacularly as it did on Thursday.
I won't go into the details because I'm sure you've heard all about it. The upshot is that Musk is apparently upset by Trump's unwillingness to do everything he wanted, which convinced Trump to finally listen to the people around him and ease his "special government employee" out of the federal government. Unfortunately for Trump, Musk didn't want to go quietly. He worked himself up into a frenzy about the "One Big Beautiful Bill," undoing his measly work at DOGE and began a crusade on X to kill it. It attracted a torrent of whining from Trump at a White House event with the German chancellor on Thursday, followed by an afternoon of Musk tweeting furiously in response. It continued until Trump finally threatened to cancel Musk's government contracts. Musk shot back with a threat to leave the astronauts stranded on the International Space Station and then blew up the MAGA universe by claiming that Trump won't release the Epstein files because he's in them.
Tax bill would add $550 billion in interest payments to national debt
The national debt already exceeds $36.2 trillion, and even without the expensive new legislation, debt could top 250 percent of the U.S.’s annual economic output by 2055 if annual agency spending and federal revenue remain at historical averages
— from Robert Reich's Substack
Friends,
I never thought I’d agree with Elon Musk, but even he thinks Trump’s Big Ugly Bill is a “disgusting abomination.”
Trump is busily working the Senate this week in an effort to get his Big Ugly Bill across the finish line. Given the Republicans’ close margin in the Senate, he can afford to lose only three Republican senators.
But Republican senators don’t like the idea of cutting Medicaid — many of their constituents depend on it — and they’re balking at the huge deficit-busting price tag (which, of course, includes a giant tax cut mostly for the wealthy).
Opinion | The bond market just sent a big warning for Trump - The Washington Post
Excerpt:
“Investors started dumping U.S. government bonds. They sold and sold and sold. This is not normal. Typically, U.S. government bonds are a safe haven. Whenever stocks tank or there’s turmoil around the world, investors rush to buy plain vanilla bonds from the U.S. Treasury. It’s the equivalent of chicken soup for unhealthy markets. But suddenly, those bonds turned bitter. Ultimately, Trump caved to the bond markets. He didn’t want to follow the fate of British Prime Minister Liz Truss, who resigned in humiliation in 2022 after a similar bond market fiasco in reaction to her policies.
This unsleeping, unfeeling, unsentimental voting bloc forced Trump to change course on his tariff tornado. Other forces sagged into exhaustion in the face of Trump’s obsession, but the votes of the bond markets kept piling up, second by second, hour by hour, day by day. Forget about memes, sick burns and capital letters on Truth Social. The market eschews parades and petitions and marathon speeches. It is an endless murmur of individual transactions, each one a vote, and a landslide swept Trump away.
Trump and his team tried to happy-talk their way past the stock market collapse, but the tireless voters weighed in. His attempt to brush off his defeat in the bond markets by saying that traders had gotten “yippy” fell flat. This is the world’s infrastructure of finance we’re talking about, and it’s built on the value of government promises. Yips have nothing to do with it.
And the pillar of this infrastructure is the credibility of the United States.”
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