Criticism of Trump’s Tax Cuts as a Disaster
Former Google product manager and current Silicon Valley entrepreneur David Friedberg criticized the latest tax reform proposed by the Trump administration as a “disaster” on the well-known tech channel “All-In Podcast” on 5/19. He pointed out that the bill not only extends the tax cuts from the Trump era in 2017 but also includes promises to make tips and overtime pay tax-free, leading to a potential reduction of up to 4.1 trillion US dollars in revenue for the Treasury in the next decade, while only planning to cut spending by 1.5 trillion US dollars. Friedberg warned that the US finances have entered a “debt death spiral,” and if the chaos continues, just paying off the national debt interest each year would burn nearly 2 trillion US dollars, equivalent to 7% of the national GDP.
Criticism of Trump’s Tax Cuts, Extension of Cuts with Tax-Free Promises, But No Reduction in Spending
Friedberg pointed out the following highlights of what he deemed a “disastrous” Trump tax reform bill:
– Extension of Trump’s tax cuts from 2017 to 2034
– Addition of promises to make tips and overtime pay tax-free as part of the election platform
– A reduction of approximately 4.1 trillion dollars in Treasury revenue over the next ten years, equivalent to about 400 billion dollars per year, while only planning to cut spending by 1.5 trillion dollars
– Some Republicans even find this insufficient and suggest cutting over 2 trillion in the budget
He emphasized that these policies may appear to be tax cuts on the surface but could result in even larger fiscal deficits.
Returning Budget to Pre-Pandemic Levels and Halting New Spending to Address Fiscal Deficits
Friedberg proposed a solution that if he were in charge, he would:
– Return all federal expenditure budgets to pre-pandemic levels in 2019
– Simultaneously halt any new plans
He believed that implementing these two points could improve the US fiscal deficit.
SNAP Budget Cuts or More? “Just for Show,” Says Friedberg
Regarding claims that the new bill reduces welfare budgets, Friedberg directly contradicted this notion. He used the example of food stamp subsidies (SNAP):
“In 2019, before the pandemic, this subsidy cost only 600 billion dollars a year, and now it has surged to 1.2 trillion dollars. Even if the new bill aims to reduce it by 300 billion, dropping to 900 billion, the budget is still fifty percent higher than before the pandemic.”
As for Trump’s proposal to make tips and overtime pay tax-free, Friedberg believed it could be abused, warning that such tax exemptions could lead to a plethora of tax evasion cases, causing the system to collapse.
US Presidents Accumulating Debt, Entering “Argentinian Inflation Mode”
Friedberg traced the debt growth of past US presidents:
– Clinton: Increased debt by 3.92 trillion dollars in 8 years
– Bush: Surged by 5.4 trillion dollars in 4 years
– Obama, Trump, Biden: Each year about 1.2 trillion dollars
With the current annual fiscal deficit reaching 2.5 trillion dollars, accounting for 8% of the US GDP, he described this as entering an “Argentinian inflation mode.”
Intensification of the US Debt Death Cycle
Friedberg believed that the US is entering a “debt death cycle” where excessive debt leads to investors losing faith in the government’s ability to repay, demanding higher interest rates. This, in turn, increases interest payments, exacerbating the deficit, leading to further borrowing and more debt, perpetuating a vicious cycle.
He stated that it is only a matter of time before the 30-year Treasury bond rate rises to 6% or 7%, causing this vicious cycle to engulf the entire country.
Final Thoughts and Urgent Call for Action
Friedberg concluded by emphasizing that the current situation is a critical moment for the US facing fiscal doomsday. He called for the government to prioritize cutting spending, stabilizing finances, and waiting for new revenue models to take shape before considering expansion. Failure to act now could jeopardize the country’s future and credit.
He urged that fiscal issues should not be compromised for the sake of votes, and the government must address and resolve the problems at hand.