Catch 22
The big, beautiful conundrum that is the US economy.
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Imagine if Kamala were president and doing the things Trump is doing, he would surely have some good banter. *Trump voice* “The Big Beautiful Bill, it’s not big or beautiful, Kamala’s tiny ugly bill is not good, no one knows these bills better than me.” Sometimes I wonder why the democrats don’t just start roasting Trump like he does to them.
The Big Beautiful Bill (BBB) is all the talk right now. It has passed the House of Representatives and is currently being voted on and amended in the Senate. Once it passes the Senate, it must return to the House for reconciliation. There are a bunch of changes that must be made for it to get enough votes to pass, which is what the fuss is about this week.
The core of the bill is the extension of the 2017 Tax Cuts and Jobs Act, which includes massive tax cuts set to expire at the end of 2025. Other things include state and local taxes, food stamps, the debt ceiling, and no tax on tips/overtime. The second biggest issue on the bill, though, is the Medicaid cuts, or the federal funding of healthcare for low-income and disabled Americans. Republicans suggest that the BBB only cuts waste and fraud in Medicaid by enforcing work status and immigration status. Opponents suggest that millions of people will lose coverage.
What happens if the BBB passes or not? If it does not pass, it means a tax increase on consumers and businesses. This will reduce corporate earnings and reduce personal consumption, which will further reduce corporate earnings. This will exacerbate the economic slowdown and further steer the US into recession. The bill will likely pass in one shape or another, so this scenario is less likely unless negotiations take a nosedive.
So the BBB passing will be a good thing, right? This may be surprising, but the economy may still falter even if the bill passes. The bill is still subject to change, but the risk to the healthcare sector may be more problematic than most realize. I first learned of this potential in a Monetary Matters podcast with guest Eric Pachman.
The healthcare industry is a huge mess in the US. Anyone with a brain can see that drugs are expensive, health outcomes are poor, and healthcare companies are raking in money. There is a lot of waste and fraud, as the republicans suggest, but it’s not as if addressing it doesn’t come with consequences. I encourage you all to listen to the podcast, as he discusses what the healthcare empires look like and how they work. In short, they take as much vertical control over the industry as they can. Then, in my opinion, take advantage of the government money to grow and bloat the company in such a way that the market would not have let them.
The reason this is problematic is that the healthcare sector has been the stalwart of the employment sector. I’ve written about how full-time employment has been steadily decreasing, such that the “stable” unemployment rate is being propped up by part-time and government jobs. Of the employment that has been created, new healthcare jobs remain at the top while other sectors are anemic.
With the inefficient healthcare industry growing like it has, it needs more employees to keep chugging along. If the BBB includes cuts to Medicaid or even reduces who can qualify for it, the industry could at the very least stop growing. At worst, a reduction of new entrants into the system could decrease profits, and they may cut the workforce in response. In either case, the unemployment rate will increase, just depending on how much. There is no other sector of the employment market that is showing signs of growth to offset this hit.
The deficit is the main concern with the BBB, but anyone expecting any modern administration to meaningfully reduce the deficit is wishful thinking at best. Whether illegal immigrants are getting Medicaid is a big deal, but not from the standpoint of whether it is right or wrong, ironically. It may stop propping up the healthcare complex, which is the only stable form of employment left in the economy. The Big Beautiful Bill may not be big or beautiful after all, if the economy takes a hit either way. Until next week,
-Grayson
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