The budget fiasco of the past three days shows Trump does not have absolute control over the Republican party. 
Wake-Up Call for Trump
Trump ran into massive resistance from his own party to remove the debt ceiling as he asked. Trump called removal of the debt ceiling “VITAL to the America First Agenda.”
Defying Trump is a rude Wake-Up Call: Republicans are Willing to Defy Him.
Over the past 48 hours, 38 House Republicans rejected the stopgap spending bill that the president-elect publicly threw his weight behind after tanking Speaker Mike Johnson’s original proposal to keep the federal government running past Friday. Their defiance came even as Trump and his allies threatened to field primary challenges against GOP members who didn’t fall in line.
Then, on Friday night and early Saturday, the House and Senate passed a different version of the spending plan — one that didn’t include Trump’s demand to extend or end the debt limit.
Wake-Up Call Comments
- “Republicans campaigned on cutting spending and reducing the $35 trillion national debt. You can’t achieve that by suspending the debt limit,” Rep. Kat Cammack (R-Fla.) wrote on X on Thursday.
- Rep. Greg Lopez (R-Colo.), another Republican who opposed the bill Thursday, said in a statement that he could not back a continuing resolution “that does not consider our nation’s growing $36 trillion debt and removes the debt ceiling, creating an open check book for Congress to spend more money it already doesn’t have.”
- Rep. Rich McCormick (R-Ga.) said on X that “ending reckless spending and tackling the national debt immediately” is what will allow Trump to “shake up the status quo.”
- “We talk about MAGA, Freedom Caucus, etc., but there’s a sizable chunk of the conference that are OG Tea Partiers,” said Doug Heye, a GOP strategist and Hill alum. “Raising the debt ceiling tests the boundaries of what is otherwise an enormous influence over the party.”
- One person close to Trump, who was granted anonymity to speak frankly, worried the president-elect’s decision to use his political capital to unsuccessfully try to pass a new funding bill suspending the debt ceiling could echo back to his failed attempts to kill Obamacare early in his first term. “I’m hoping we’re not in that same spot right here,” the person said.
Some people dismiss anonymous comments. But there is nothing about the comment that remotely rings untrue.
Heck, I used that analogy already. I have commented previously that Trump wasted two years trying to undo Obamacare then lost the House after the midterms.
An Extremely Tenuous Majority
On November 30, I noted A Tiny Republican Majority in the House Will Make Legislation Difficult
How many balanced budget hypocrites do you expect to see when Trump proposes big budget deficit increases?
Here’s the deal. If there are many as two defections, Republicans will not be able to pass much of anything if Trump tries to deliver his campaign promises like no tax on tips, no tax on Social Security, and no tax on overtime.
The incumbent party usually loses seats in the midterm elections. But Republicans have zero seats to give, literally.
Trump threatened to primary Chip Roy. How stupid is other other than very. What’s he going to do, primary over 30 House reps?
What’s Dead on Arrival?
If as many as 10 (possibly even one or two), House members (or 4 Senators), are willing to stand up to Trump by insisting we pay for his promises, then at least three things are dead on arrival: No tax on tips, no tax on overtime, and no tax on Social Security.
Extending TCJA
The Peter G. Peterson Foundation estimates that Extending Trump’s TCJA Would Cost $4.6 Trillion.
The Tax Cuts and Jobs Act (TCJA) was the most significant tax law to be enacted in nearly two decades. The law lowered tax rates for individuals and businesses while overhauling many tax rules. Most of the individual tax provisions and a handful of business provisions are scheduled to expire in the next few years. As the expiration of those provisions nears, decisions about extension — in part or in whole — and the effect on the federal deficit must be considered.
The Congressional Budget Office (CBO) projects that extending the TCJA would increase deficits by $4.6 trillion over 10 years, $0.6 trillion of which would result from additional interest payments.
Extending expiring provisions of the TCJA would cost two and a half times more than the initial cost of the law.
Q: How did Republicans pass that in the first place?
A: By pretending years 8, 9, and 10 did not exist.
By that I mean TCJA expired in 7 years, not 10, so under House rules, they did not have to do 10-year accounting on the cost.
However, to get the extension to pass, Trump may have to restore State and Local Tax deductions, digging a bigger hole, which Trump promised to do.
I suspect Republicans will be willing to be hypocrites (with help from Democrats) to extends the 2017 tax cuts (which by the way did not pay or themselves as was originally budgeted).
The Penn Wharton Budget Model estimates that to eliminate the SALT cap entirely beginning in 2025, would cost an additional $1,169 billion on top of a TCJA extension over the 2025 to 2034 budget window.
TCJA + SALT
Let’s total those two items.
TCJA + SALT = $4.6 Trillion + $1.2 trillion = $5.8 Trillion
Just to pay for those two items alone, Republicans need to increase revenue or reduce spending elsewhere by $5.8 Trillion.
That would not balance the budget. A reduction of $5.8 trillion would just keep us where we are.
Hello Team DOGE
The Projected Fiscal Year 2025 Deficit is $1.9 trillion. That does not count the latest handouts from the Continuing Resolution nor unfunded Social Security payouts.
I suggest we put those back on the budget to stop the annual charade where the debt rises much more than than the alleged deficit.
To balance the budget if the TCJA extension passes, we need to come up with a minimum of $5.8 trillion plus $1.9 trillion. The total is $7.7 trillion.
Trump proposes to do that with tariffs. The value of total goods imports for 2023 were just over $3 trillion.
Assuming a 100 percent tariff on all imports, all of it collected (paid for by consumers because it’s a tax), with no retaliation, and no global economic collapse, Team Trump is still $4.7 trillion in the hole on what it has pledged to do.
[Edit: A reader accurately noted I did one year accounting on the above. 10-year accounting would be taxing $30 trillion in imports. But I also made the absurd assumption of 100% tariff collections. Factoring in retaliations, and a more reasonable tariff hike of 10 percent we are back to the math that I gave, if not worse. See addendum below for detailed analysis.]
This does not count Trump’s pledge of no tax on tips, no tax on overtime, and no tax on Social Security.
Do You Have Any Faith that Sheriff DOGE Will Reduce the Fiscal Deficit?
On December 18, I asked Do You Have Any Faith that Sheriff DOGE Will Reduce the Fiscal Deficit?
If you said yes, please read (or re-read) the above post, then think about what I said above.
Can You Balance the Budget?
If you wish to give it a go then here’s An Interactive Exercise: What Would You Do to Balance the Budget?
I balanced the budget, not that my solution would pass. But at least it was economically viable, not smoke and mirrors.
Implied Assumption
Finally, the implied assumption of Trump’s smoke and mirrors budget is no recession for at least another 10 years.
How realistic is that? Please see Two Recession Indicators, What Do They Say Now?
The sobering economic reality is Trump’s economic plan is either a known lie or blatant stupidity, no matter what savings Team Doge can concoct.
You can believe what you want, but it will not change economic reality. A rude awakening, in many ways, is guaranteed.
Addendum
A reader accurately noted I did one year accounting tariffs. 10-year accounting would be taxing $30 trillion in imports.
However, I purposely made the absurd assumption of 100% tariff collections to highlight the silliness of the idea.
Factoring in retaliations, and a more reasonable tariff hike of 10 percent we are back to the math that I gave.
For the sake of argument. Assume Trump applies a 60 percent tariff hike on China. Trade with China would approach zero. Tariff collections from China would also be zero.
Regarding USMCA, Trump threatens to break a deal affirmed by the Senate and signed by Trump.
What is the cost to the US, if Trump unilaterally starts breaking deals with allies? To threaten so is either a bluff or insanity. And unlike China which imports relatively little from the US, Mexico and Canada import much.
They can and would retaliate. So no matter how you slice tariffs, it is economic nonsense to think they will bring in significant revenue.
Edit: A reader accurately noted I did one year accounting on the above. 10-year accounting would be taxing $30 trillion in imports. But I also made the absurd assumption of 100% tariff collections. Factoring in retaliations, and a more reasonable tariff hike of 10 percent we are back to the math that I gave, if not worse.
Thanks to EEProf
See addendum for detailed analysis.
“They can and would retaliate. So no matter how you slice tariffs, it is economic nonsense to think they will bring in significant revenue.”
You kept saying that tariffs are “inflationary”, because you think that price rises are the same thing as inflation, which they are not.
Then you also say that tariffs will kill trade and thus not be collected, so if trade is throttled away by tariffs that suggests that (via retaliatory tariffs) US companies will export fewer goods and services, which in turn suggests lower hiring and increased layoffs, which in turn suggest lower disposable income amongst consumers, which in turn suggests price declines to compete from a hesitant consumer, which in turn doesn’t even fit your definition of inflation… it looks like deflation.
Price rises are not inflation; synthetic policy-generated price rises mask deflation.
This is all BS! Economies run on confidence not data. The laugh is that no matter what process or system the geniuses employ, if the hoi poloi get worried and decide to sit aside, all of the great plans on planet Hopium go astray. Gold bugs have been destroyed due to the same miscalculation as the communists, fascists, Sparticists etc. In human existence, people have thrived with or without officially sanctioned “money” over and over again whether on a macro or micro basis, government controlled or not. Read the effing history of economic systems before you opine on your favorite concept.
Time to devalue the dollar by a lot. It’s our only hope.
The debt limit is over 35 trillion and it will be rising. Some pundits are already talking of the debt being 50 trillion in the not that far distant future. Regardless any restrictions on the length of extension, the ceiling is going to march higher and higher. It’s a third rail.
Shifting deck chairs on the titanic.
It’s always good when someone is smacked with reality.
You can’t power a modern society with windmills.
Ukraine cannot defeat Russia.
A man cannot become a lady.
Trump cannot control republicans in Congress.
Hugh Hewitt wants to prioritize tax cuts over the border. Hugh Hewitt is always wrong.
Excellent article once again Mish! Your points are all spot on!!!
Elon speaks for the “forgotten man”.
Many think he speaks for the “forgotten billionaires” … those who work to propagate the system that made him his billions. That system is structurally deficient and must be destroyed. /s
Our RINO representatives are pissed too. They can’t stand the fact that Elon can terrify them with primary threats. They would say as much, but are too afraid to come out of hiding. Of course Johnson is likely done… someone needed to be sacrificed.
I can tell you the left is furious at Elon. It’s all you hear about in liberal circles. How dare Elon influence Congress, they rant. Some knuckleheads even go so far as to say Elon is making all the decisions. As if Trump were senile like Biden or brain dead like Kamala.
Or as if there weren’t already hundreds of billionaires all plying their influence, just more quietly than Elon, and mainly to further enrich themselves
Surely you’re not impugning Uncle Warren!
\s
I am no fan of D. J. Trump. I see someone sporting an inferiority complex, exacerbated by a mother who, reportedly, had all the warmth of an iguana. His “tough guy” act is a facade. Sadly, I have voted for him three times. That’s not a reflection of confidence, but I am well aware the destruction Barack Hussein and Sleazy Joe have wreaked upon this formerly great nation. I do, however, have significant faith in the abilities of Elon Musk, Vivek Ramaswamy, J.D. Vance (that man is SHARP), and maybe Tusli Gabbard (even though she purportedly supported the incredibly-toxic vax). WHEN is either party going to proffer a candidate we can enthusiastically support? Jimmy Carter wasn’t effective, but I admire the man’s integrity. JFK (and his brother Robert) had high ideals, but the deep state executed both. Ike – yea, I liked Ike – a fine leader. Name one other recent president who actually represented the citizens who elected them? Let me list a few I would enthusiastically support – Tom Woods, Mike Maloney, Chris Martenson, Dennis Miller (“Miller on the Money”) and, I have to admit, this guy would make a pretty doggone good leader – good ol’ Mish (up for it Shedlock?).
Your thoughts reflect many others who are not as erudite.
We can’t find a “good” president because of a root cause: the shift from federalism to a centralized power over past 125 years. It has enhanced “populism”; a phenomenon that tears countries apart.
Thus, End-the-Fed and their control of money supply (obviously politicized under JPow); massive downsizing IRS with flat-tax; honor the 10th amendment; define “common welfare” via supreme court. Return the House selection to the states and away from populism.
I can dream can’t I?
Oswald wasn’t working for the deep state.
Eisenhower
It might be more useful to think of Trump and Musk/DOGE as separate third parties. Neither really shares the goals of the old guard GOP/tea party, and they don’t even really share goals with each other.
We get to experience a sort of parliamentary setup with 4 parties for the next few years. Should be interesting.
Agree that there are multiple factions and no one singly in control. I like this better than single-party domination. This weeks events also thoroughly disprove the “dictator” BS from 2 months ago.
this is just plain stupid, nobody, not even Trump, not even one person ever said he was going to have full control of GOP, are you drunk or something?
Current federal debt is $36.3 trillion. At the current pace, debt will be $43.5 trillion by the time Trump leaves office. DOGE may shave a few cents off that total.
As a Canadian, in response to Trump’s threats I and my family have already begun to reduce consumption of US goods. There is not much we can do about food – but we are looking at place of origin on everything else.
At an end too is blind support for the US military – Canada did not join the IRAQ -2 fiasco – perhaps we will grow a backbone and not back other US interests if the US does not treat its allies as friends.
This is a dangerous road y’all are headed down….
Totally agree. Canada can easily match Trump 1-1 on tariffs
The people I know all over the US love Canada the place and Canadian people … but the current Canadian government is a global embarrassment.
I view the proposed new US policy as attempting to improve a few Canadian government policies, particularly those which harm the US … not an attack on the entire nation.
I disagree with Mish that Canada is in position to retaliate much on tariffs, though. Due to recent misguided policies the Canadian economy isn’t in a strong position right now, and is also much more dependent on the US economy than vice versa.
There are a minimum of 4 credible articles that provide details that the show the TJCA paid for itself. Even the WSJ had a position on why the act paid for itself. One point few ‘economist’ factored in was 776B in revenue from repatriation in the first tax year that new rules applied.
As many sages say the US doesn’t have a revenue problem, the government has an expense problem. The government has to be downsized and regulations that add to company expenses at the very least greatly minimized
“Do You Have Any Faith that Sheriff DOGE Will Reduce the Fiscal Deficit”
I say they already have. If you give them credit for stopping Johnson’s first “CR”.
“The budget fiasco of the past three days shows Trump does not have absolute control over the Republican party.”
Remind us please how reducing the number of pages of a bill by 93% and billions of dollars is a GOP failure?
The reality is there are almost 40 fiscally conservative republicans in the House, so they can make or break any legislation that doesn’t have Dem approval which will be pretty much anything that tries to cut costs. While I want the gridlock to go away, I’m fine with these GOP members gumming things up if it keeps bills with out-of-control costs from passing.
So far, having Mush, Vivek & company providing lots of social media influence appears to be a game changer.
“Remind us please how reducing the number of pages of a bill by 93% and billions of dollars is a GOP failure?”
It’s the official TDS perspective.
Unfortunately for the new administration, the way to cut spending and not go into debt more is to not spend or borrow more…Oh, wait…/sarc There are no solutions for what ails us, only a variety of choices, all which have pain included at no extra cost.
“One person close to Trump, who was granted anonymity…”
Yeah, right, we heard that one before. Politico? lol. Haven’t they been relegated to the supermarket tabloid stand next to the National Enquirer?
Liberal rags seem overly eager to call the new Trump presidency a failure even before he takes office. Seems to me they are grasping at straws.
I long for the quaint days when California was concerned about which kinds of straws were in the lattes.
Mish, you voted for the guy, and now you seem surprised that all we will get is nothing but chaos? Let me explain the real GOP agenda here. The GOP wants to cut taxes for the wealthy and hyper wealthy, and pay for it by eliminating Social Security, public education and Medicare for everyone else. Unfortunately, Trump had to lie to the people in order to get elected, and promised to improve their lives, when all the folks around him want just the opposite.
Once you get that, then all the greatest circus since Barnum’s makes perfect sense. People have been duped massively, the question is whether they will figure it out within the next couple of years.
Mish voted for himself. He is a never Trumper.
Don’t get out much?
@AndyM I’m an independent who knows a lot of people in both parties. I don’t know a single person who espouses the view you attribute to the entire Republican Party. You should critically re-evaluate the accuracy of your information sources.
I would add that the evidence I’ve seen indicates that “wealthy and hyper-wealthy” people support the Democratic Party more than the Republicans, on balance and in terms of campaign finance numbers.
Neither parties actions align with their professed ideals; one has to watch actions l, not promises nor marketing propaganda…
Where were your budget cuts? You are assuming DODGE does nothing?
DOGE will not do anything – other than gut whatever little is still left of regulations and laws, so that Musk and his ilk can make a few hundred billion more.
Trump will be governing from right of center. His Cabinet picks include a wide assortment of former Dems as well as conservatives.
As consequence if Johnson can not bring his caucus into line by creating a vision that all can get behind, they will be including moderate Dems in discussion. Musk already has said he would back financially moderate Dems in states where people vote the Blue line.
This in turn will marginalize the periphery whether that be Fiscal conservatives or left wing Dems.
Don’t get all too excited that Trump will be unable to govern.
If this assessment does not appear based in real world, consider the following.
there is one party that always follows whomever picks up the Tab. That is Dems.
Their ideology hinges upon their sacred belief in Follow the Money.
All bond traders know that Trump loves debt. I remember that this was first time mentioned in 2016. In politics debt is the cheapest way to buy votes. And now bond yields are back to 4.50%. What a surprise.
What recent administration doesn’t love debt? 10th year of budget projections from the Obama years was never a smaller deficit than the first year – it’s a D.C. thing. (see projected deficits at the top of page 144. as usual, no recession was projected for the next 10 years so these numbers were always unrealistically optimistic)
https://www.cbo.gov/sites/default/files/114th-congress-2015-2016/reports/51129-2016outlookonecol-2.pdf
Indeed, bonds traders do know Trump loves debt. 🙂
Based on current trends in inflation and politics, 10 year treasury bond yields may test the 5.0% level early 2025. That will translate into higher mortgage rates and will put a lid on the equity markets.
I am looking forward to some Trump/DOGE/Congress cuts of some seriously ridiculous programs. (However, the focus seems elsewhere: giant bills on tax cuts and border, both additionally costly.) It would be great to see DOGE getting ahead of this, instead of just sniping at a bill on he floor being voted on, which was lousy as any model of a grown-up approach to governance or management. What I just saw here (above) was a lot of math a third-grader can do, and I am not hearing a realistic plan from Trump/DOGE/Congress, that engages and answers that simple math. I welcome any such thing from those parties, or even something that falls short, but meanwhile has any vague realism. Still waiting.
Hang on Mish. The costs you cite are 10-year numbers. It’s unrealistic to demand offsetting savings or tariffs occur in one year.
Excellent point. I will address that in an addendum.
I didn’t see an addressing of dynamic or static budget situation …my point – tax cuts spur growth.
PJP foundation is typically very good (aka rationale/thoughtful analysis) .. did not have time to read source of your PJP intro chart; it matches CBO which is static scoring. wish I had time to dig more. Appreciate your summaries.
You need a surplus, not a balanced budget to reduce the deficit. Minimizing the expenses won’t work since not much can be saved from the current spending level. Where is the extra revenue?
Level spending is the start; with growth in the economy, we can “grow” out of deficit (yes, a tax revenue surplus via economy and tax revenue growth; but not tax rate growth).
Deficit is an annual thing, debt is the cumulative burden of all the annual deficits. A balanced budget will zero out the deficit, but a surplus is needed to reduce the federal debt.
Mish, It is only a “rude awakening” if you believe that there are only two parties in Congress. There are now 3 and Trump’s Maga at best controls only a third of a majority in both houses. Accordingly, this week was a win for him as the “omnibus (lots of pork for everyone) bill” was defeated and Mike Johnson will be replaced early in the new Congress – what fun that will be.
Trump is not Republican per se. He is independent. Assuming he should have ‘control’ over the Republican Party means he should control the ‘Liz Cheney-Rebublicans’? No! It is these people who side with similar personalities in the Democratic Party that have tried to tear down the US Constitution. Trump will gladly work with anyone who is a Constitutionalist, party affiliation is inconsequential.
“Constitutionalist”???
You’re delusional if you think Trump is a Constitutionalist. He can’t even show basic respect for the institutions he is leading – the military is a glaring example and sees the Constitution as a roadblock – not something to uphold.
Want to work for Trump – you take an oath to Trump, not the Constitution
Were you born challenged or did you catch TDS?
Wow, you must be a bright one. Have any more acronyms you learned?
I’ve heard Trump called a lot of things, but a constitutionalist would be one of the funnier ones.
Oh no. Trump has hardly even a tenuous hold.
The GOP is filled with traitors like McConnell, Rep Buck and dozens or even hundreds of others.
They may even force Trump to continue supporting Ukraine, in which case he should be impeached.
The Senate will be hard enough. It would not at all like breaking USMCA. To propose redoing USMCA would be a huge waste in time.
Breaking it outright would be so stupid I struggle to think is anything but an obvious bluff.
How many Republican Senators would vote against eliminating the Department of Education? 4 would kill it.
Primary those who do?
How totally stupid.