Backing off on some tariffs caused the stock market and the president's poll numbers to bounce. But price hikes from tariffs are coming, and the irresponsible tax cut bill is spiking interest rates.
“Bill Clinton contrasted the Republican record — tax cuts for the rich, large budget deficits, and stagnant wage growth — with his own plan to reduce the deficit by taxing high earners and corporations”. He indeed ran on this, but as GHWB correctly pointed out, his math didn’t work. Bill Clinton had to raise taxes on the middle class.
The “someone else will pay the tax hikes” is a promise that Democrats won’t be able to keep if they are going to be serious about putting the budget on a path to sustainability. Even Jason Furman when he was on your podcast said it wasn’t going to work if the Democrats held the line on no tax increases on people making under 400k. You tell the lie to get elected, you do the thing you need to do in order to be serious about the issue, you get creamed in the next election cycle, and the progress you made on the issue in two years is probably erased.
The closest you can probably get to a tax the rich plus painful but not agonizing austerity is Jessica Riedl’s 30 year plan to stabilize the debt at 100% of GDP. And it’s a pretty reasonable plan that tries to respect the Democratic party’s lines in the sand as well as can be done. But it requires fiscal discipline for 30 years. And I have a hard time seeing politicians be fiscally disciplined for 30 minutes in an environment where the most visible political figures are Donald Trump and AOC.
I agree with your points and would add the 1992 politics were much different. Perot ran as a hardcore deficit scold hence Clinton could come off as nicer and gentler than Perot whilst Bush was stuck running on not raising any taxes. Clintons plan was more palatable than Perot and more credible than Bush's. In 2028 the Dem will presumably face a MAGA opponent running on no tax increases and no spending cuts beyond the usual largely symbolic stuff to rouse the base. Yes if the bond market forces higher rates that will put pressure on the MAGA nominee but will it be enough to force the issue. As you rightly point out "taxing the rich" is no longer going to be enough but running on cutting Medicare, Social Security or raising taxes even the ones that will be eliminated in the new bill (i.e. tips etc.) will be a really tough slog I suspect. And even getting the Dem party to contemplate running on any kind of austerity seems like a stretch given where the Sanders/Warren wing of the party resides on spending matters.
Good point, but all one can do is put the best foot forward and make as much meaningful progress as possible. But I agree, the incentives for getting our financial house in order are grim, for both parties.
This is a great piece, but can you explain the adverse financial impact that this will have on working class families that have one Black parent and one Asian parent specifically? I kid.
Do you have expectations around inflation and employment? On the one hand, I see Trump taking a bunch of steps that will tend to raise prices, but also steps that will tend to push the economy towards recession. And recessions/unemployment tend to put downward pressure on prices. Is Trump somehow using economic harm to keep inflation down?
Another boost for Clinton was the increased productivity of the economy due to the widespread adoption of the internet by companies in the 90’s. AI could drive an even for significant productivity boost. An abundance minded candidate could integrate this into their pitch.
way underrated point about domestic producers in wine and elsewhere getting space to raise prices given tariffs. another headwind for consumers. what you are describing in the dems 2028 economic plan and messaging is a new version of Rubinomics.
I think there's a SLIGHT bit of historical revisionism going on here. The Dems under Clinton did not run for president on a semi-austere fiscal platform in 1992. Paul Tsongas did ("I'm not Santa Claus"), but Clinton actually ran on a much more fiscally expansive platform. Granted, when he took over, Rubin effectively seized control of fiscal policy, which in turn became more oriented in the direction of austerity (leading James Carville to lament that in his next life he wanted to come back as the bond market because "you can intimidate everybody.”)
1. Data Point: Paypal used to have a deferred credit plan: purchases over $100 could be paid off in 6 months with no interest, but recently increased the threshold to over $149.
2. Businesses will have to raise prices, despite threats from WH. If they don't, we'll see empty shelves, or rationing. That takes us back to 1970s, with even/odd* days at the gas station, people 'topping off their tank' in fear of unavailability-which made lines at the gas station longer. In 2025, retailers might resort to coupons for tariff-sensitive goods such as toys, sugar containing products (cookies, candy), where the buyer presents the coupon and pays, then goes to the rationed goods counter to receive the product. Similar to buying fine jewelry at Costco.
Remember how people freaked out over a shortage of baby formula a couple of years ago? More recently, over the price of eggs?
There will be anger. Will it transfer to the ballot box in 2026?
*Even/Odd: dates when you could purchase gas depended on the last number of your license plate - even numbers on Monday, odds on Tuesday, etc.
Excellent piece
When will you do another Very Serious podcast? I loved the first couple episodes.
Yes, more Josh content please.
Yes, I was looking forward too them.
yes plese! Josh, it's what the people want!!!
“Bill Clinton contrasted the Republican record — tax cuts for the rich, large budget deficits, and stagnant wage growth — with his own plan to reduce the deficit by taxing high earners and corporations”. He indeed ran on this, but as GHWB correctly pointed out, his math didn’t work. Bill Clinton had to raise taxes on the middle class.
The “someone else will pay the tax hikes” is a promise that Democrats won’t be able to keep if they are going to be serious about putting the budget on a path to sustainability. Even Jason Furman when he was on your podcast said it wasn’t going to work if the Democrats held the line on no tax increases on people making under 400k. You tell the lie to get elected, you do the thing you need to do in order to be serious about the issue, you get creamed in the next election cycle, and the progress you made on the issue in two years is probably erased.
The closest you can probably get to a tax the rich plus painful but not agonizing austerity is Jessica Riedl’s 30 year plan to stabilize the debt at 100% of GDP. And it’s a pretty reasonable plan that tries to respect the Democratic party’s lines in the sand as well as can be done. But it requires fiscal discipline for 30 years. And I have a hard time seeing politicians be fiscally disciplined for 30 minutes in an environment where the most visible political figures are Donald Trump and AOC.
I agree with your points and would add the 1992 politics were much different. Perot ran as a hardcore deficit scold hence Clinton could come off as nicer and gentler than Perot whilst Bush was stuck running on not raising any taxes. Clintons plan was more palatable than Perot and more credible than Bush's. In 2028 the Dem will presumably face a MAGA opponent running on no tax increases and no spending cuts beyond the usual largely symbolic stuff to rouse the base. Yes if the bond market forces higher rates that will put pressure on the MAGA nominee but will it be enough to force the issue. As you rightly point out "taxing the rich" is no longer going to be enough but running on cutting Medicare, Social Security or raising taxes even the ones that will be eliminated in the new bill (i.e. tips etc.) will be a really tough slog I suspect. And even getting the Dem party to contemplate running on any kind of austerity seems like a stretch given where the Sanders/Warren wing of the party resides on spending matters.
Good point, but all one can do is put the best foot forward and make as much meaningful progress as possible. But I agree, the incentives for getting our financial house in order are grim, for both parties.
This is a great piece, but can you explain the adverse financial impact that this will have on working class families that have one Black parent and one Asian parent specifically? I kid.
Do you have expectations around inflation and employment? On the one hand, I see Trump taking a bunch of steps that will tend to raise prices, but also steps that will tend to push the economy towards recession. And recessions/unemployment tend to put downward pressure on prices. Is Trump somehow using economic harm to keep inflation down?
Another boost for Clinton was the increased productivity of the economy due to the widespread adoption of the internet by companies in the 90’s. AI could drive an even for significant productivity boost. An abundance minded candidate could integrate this into their pitch.
way underrated point about domestic producers in wine and elsewhere getting space to raise prices given tariffs. another headwind for consumers. what you are describing in the dems 2028 economic plan and messaging is a new version of Rubinomics.
I think there's a SLIGHT bit of historical revisionism going on here. The Dems under Clinton did not run for president on a semi-austere fiscal platform in 1992. Paul Tsongas did ("I'm not Santa Claus"), but Clinton actually ran on a much more fiscally expansive platform. Granted, when he took over, Rubin effectively seized control of fiscal policy, which in turn became more oriented in the direction of austerity (leading James Carville to lament that in his next life he wanted to come back as the bond market because "you can intimidate everybody.”)
Anyone worried trump will say he's not defaulting on the debt but actually it is defaulting on the debt and everything goes to shit?
1. Data Point: Paypal used to have a deferred credit plan: purchases over $100 could be paid off in 6 months with no interest, but recently increased the threshold to over $149.
2. Businesses will have to raise prices, despite threats from WH. If they don't, we'll see empty shelves, or rationing. That takes us back to 1970s, with even/odd* days at the gas station, people 'topping off their tank' in fear of unavailability-which made lines at the gas station longer. In 2025, retailers might resort to coupons for tariff-sensitive goods such as toys, sugar containing products (cookies, candy), where the buyer presents the coupon and pays, then goes to the rationed goods counter to receive the product. Similar to buying fine jewelry at Costco.
Remember how people freaked out over a shortage of baby formula a couple of years ago? More recently, over the price of eggs?
There will be anger. Will it transfer to the ballot box in 2026?
*Even/Odd: dates when you could purchase gas depended on the last number of your license plate - even numbers on Monday, odds on Tuesday, etc.
"No tax on tariffs."