Scott Bessent regurgitates a 45-year-old myth
On Friday, Fox News anchor Bill Hemmer had Treasury Secretary Scott Bessent in for a chat about the House Reconciliation Bill (aka The Big Beautiful Bill). This legislation, poised for review by the Senate, includes massive spending cuts on programs that help people and increased spending on programs that help defense contractors.
It also includes a significant tax cut. One so obscenely irresponsible that the Congressional Budget Office calculated it would add trillions to an already burgeoning federal debt. This fact caused palpitations and protestations among conservative deficit hawks — until it didn't.
Hemmer got the ball rolling by referring to the legislation's narrow approval and projected rocky future.
"On the Big Beautiful Bill [this sounds like something out of a fairy tale — how appropriate] that passed in the House. But it only passed by a single vote. And some suggest that now is the hard part. Here is Senator Ron Johnson on what's expected next.
A video of Ron Johnson pops up. He says
"As I have already said, in its current state it is completely unacceptable to me. What was not even brought up in the House debate are the numbers we ought to be considering."
A reporter interjects to point out that "the President" wants this "passed ASAP" and asks Johnson if he is worried that Trump will be "upset" with the Senate. Johnson replies:
"I couldn't care less if he's upset. I'm concerned about my children, my grandchildren, and the fact that we are stealing from them."
We'll have to see how long Johnson's spine holds up. Hemmer uses Ron's "I don't care" rhetoric to ask Bessent:
"If you listen to that, it's going to be a battle. How much change can the President accept on the Senate revision?"
Bessent hems and haws while discussing timing and how the Senate will "take this up immediately." He adds that he doesn't expect "that much change." And that he respects Johnson's position that "we do have to get our finances in order."
Scott then trots out a 45-year-old Republican economic position that has failed since Ronald Reagan first offered it.
"That's a combination of controlling spending but also growing the economy.
Any reader now expecting some supply side (aka Voodoo Economics) shenanigans will not be disappointed. Bessent sailed on:
"We did not get into this fiscal mess overnight. This has been a long process. We're not going to fix it overnight. I'm aligned with Senator Johnson on fixing it. I think we just have to be careful on the timing."
If any reader knows what Bessent means by "to be careful on the timing," I welcome illumination in the comments. Hemmer drills down on Scott's "growing the economy" remark as the red ink rises.
"You mentioned economic growth in your comment there. This bill adds trillions to our debt. How is that acceptable to this administration?"
In response, Bessent played a card no reputable economist gives credence to: the Laffer curve. In short, he argues that cutting taxes will stimulate GDP growth and reduce the debt-to-GDP ratio. Scott starts with waffling, a non-sequitur, and a fantasy.
"Again, you're referring to the CBO scoring, which is 10-year scoring, and it's DC-style scoring. So we think that we can both grow the economy and control the debt."
Note: Arthur Laffer used his curve to argue for tax cuts in 1974. However, he did not say that all tax cuts produce GDP growth. That has been proven to be absurd. He argued that there was a sweet spot where a specific tax rate would lead to a GDP growth that maximized tax revenue. He never said what that rate was.
Bessent continues with his fantasy. And adds Biden's Treasury secretary as a fig leaf to cover his shortcomings.
"What's important, Bill, is that the economy grows faster than the debt. So what I would tell your viewers to focus on is what I'm focused on is, what Secretary Yellen was focused on, is what is the total debt to GDP.
Because we can grow our way out of this. That if we change the growth trajectory of the country, of the economy, then we will stabilize our finances and grow our way out of it."
Bessent does not mention that Yellen argued for an increase in the corporate tax rate and a crackdown on tax evasion by wealthy Americans. She also supported Biden in raising taxes on Americans earning more than $400,000.
Does Bessent believe his own bullshit? I doubt it. But he likes his title and the perks. And he is willing to lick orange ass to keep them. What George HW Bush famously called "Voodoo economics" has lasted so long undead in the conservative Big Beautiful Book of Deception that it is better called "Zombie economics."
A short history of Voodoo (Zombie) economics
(Note: if the reader is pressed for time or knows their federal fiscal history, they can safely skip the rest of this diary)
In 1980, the affable but soulless Ronald Reagan endorsed a fiscal plan based on supply-side economics. The Cold War warrior told the American public that a government could slash its revenue, increase defense spending, and shrink the deficit.
George H.W. Bush — at the time Reagan's political rival, before becoming his VP. (JD Vance wasn't the first to go from critic to suck up) — quite rightly called this patent bullshit "Voodoo Economics." It became known as Reaganomics. But whatever its name, it sucked.
Deficits soared. The nation's debt increased. And conservatives lit the fuse that led to an explosion of the wealth gap. Reagan/Bush Sr. presided over the largest non-emergency debt increase by percent in American history. Note: The following chart shows a total percent change by President. The reader should consider whether the incumbent had one, two, or 3+ terms.)
By percent, FDR is number one. However, he inherited the Great Depression and had to fight WWII. And he gave American seniors Social Security. Wilson also had big numbers. But his was an unforced error. Eight years of unregulated Republican laissez-faire fiscal policy sowed the seeds of the catastrophe.
Next on the list, we had 12 years of "voodoo economics" too late blunted by Bush Sr.'s political deathbed tax increases.
His son, the affable and vacuous W., inherited Clinton's three years of budget surpluses. Instead of treasuring the gift, he cut taxes on the rich. If he thought repeating Reagan's insanity would lead to a different outcome, he was wrong.
In addition, his early 2000s reintroduction of the GOP's 1920's regulation-lite fiscal policies led to the 2007/2009 Great Recession. Which left his successor, Barack Obama, holding a flaming bag of fiscal shit.
After Obama righted the ship of state, Trump put holes in it. He and his congressional stooges passed a third massive tax cut for the rich. The deficit was already ballooning when COVID-19 hit. The pandemic was not his fault. However, Trump made the situation worse by delaying the federal response to the calamity and assuring the public that it would soon blow over.
Another Democrat had to clean up after a Republican had shit the nation's bed. Despite being saddled with the enormous cost of pandemic recovery, Joe Biden still came in under Trump's debt number.
Now Trump 2.0 is priming the deficit pump with his big bag of bullshit bill (I apologize for the repeated fecal references, but it seems appropriate). The only debate is whether his free candy giveaway to the rich is a fourth tax cut or a continuation of his third.
Let's look at the claim that tax cuts boost GDP growth. Here is a chart of annual GDP growth by President.
The Great Depression, WWII, and its aftermath (which saw the US quit spending on war materiel) were unique circumstances. So, let's start with Eisenhower. Despite the mythologizing of the 1950s, the 1960s saw the most consistent GDP growth.
But let's not be too hard on Ike. At least he didn't slash taxes. In terms of debt, he was one of the best Presidents, with a mere 7.6% increase in eight years. And, even at the time, he was considered a socialist or worse by the McCarthy/Goldwater wing of the party.
The JFK/LBJ years were boon times. In fairness, under those two Democratic Presidents, the maximum income tax rate fell from 90% to 71%. Republicans like to point this out. Fine. Let's have the maximum tax rate be 71% again.
Nixon/Ford did OK. And they did not slash taxes. Carter was not as financially bad as the Republicans painted him. Reagan/Bush saw some increase in GDP. But was it worth the explosion of debt? Consider this: After H.W. raised taxes and Clinton didn't slash them, economic growth improved. So the answer has to be "NO!" or better, "NOT EVEN CLOSE!".
There was little top-line GDP change from W to Obama to Trump. However, Obama didn't explode the debt like W and Bozo did. Finally, Biden's GDP growth beat Trump's.
And here we are today with the big beautiful bill. We won't know what happens until it happens. But history says it will be more of the same debt-increasing obscenity. And the omens are ominous.
