Thoughts for the Day, May 28, 2025: Our financial house needs some order.
We need to get our financial house in order.
Here are the opening paragraphs from a Detroit News editorial today. The country is heading to a day of reckoning. The country’s financial house is heading in the wrong direction, and it has been heading this way since 2000, the last year the country had a budget surplus.
Last week, Moody’s Investors Service joined Fitch and S&P Global in stripping the United States of its AAA credit rating. Citing soaring debt, chronic deficits and rising interest rates, Moody’s downgraded U.S. debt to Aa1 — placing America below Germany, Switzerland and Canada, and on par with Austria and Finland.
The message is clear: investors are losing confidence in America’s fiscal discipline. Without a credible plan to realign spending with revenue, the country will continue to face higher borrowing costs and global skepticism.
As of May 18, 2025, the national debt stood at $36.8 trillion, roughly $108,000 per citizen or $323,000 per taxpayer. That’s nearly 123% of U.S. GDP. For context, the ratio was 34.6% in 1980 and 53.9% in 2000.
State and local governments add another $3.2 trillion in debt.
Federal spending continues to surge. The current budget proposes $7.1 trillion in expenditures, with a projected $2 trillion deficit. Interest payments alone now exceed $1 trillion annually, outpacing defense spending and trailing only Social Security and Medicare/Medicaid.
Back in 2000, our national debt totaled $5.7 trillion, and the budget was balanced. Since then, fiscal restraint has deteriorated. Even accounting for inflation and economic growth the debt has increased by 547%—while GDP has tripled and the consumer price index has risen by 90%.
Getting our financial house in order requires a well thought out combination of tax increases and expense reductions. It takes a long-term view, and it takes politicians with guts. Clinton did it with a Republican majority in Congress. The country cannot tax its way out of this issue, nor can the country cut its way out of this issue.
Please call your members of Congress today. The U.S. Capitol switchboard is 202-224-3121. Tell the operator where you’re from and the operator will connect you to your representatives and senators. I tested this out today. It is very simple. They will ask for the congress member you want to contact. They will then switch you to that office.
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The “Big Beautiful Bill”
It is definitely big, but I am not sure it qualifies as beautiful, especially considering it is estimated to add $3 trillion to the national debt over the next 10 years.
Here are excerpts for today’s The Hill: The fiscal impact of President Trump’s “big, beautiful bill,” which one prominent budget hawk called a “debt bomb,” is becoming a significant political concern among Republican lawmakers who have made little progress toward offsetting the $3 trillion projected cost of the legislation.
Some GOP senators fear the bill’s failure to rein in federal spending in a substantial way over the next decade is fueling jitters in the bond market, where soft demand for U.S. debt has caused yields to climb in recent weeks.
And they worry that if Republicans pass Trump’s bill on party-line votes in both chambers, they will get blamed for heaping trillions of dollars onto the debt, and the economic consequences that may follow in the future.
“I think we’re having trouble selling our long bonds already,” warned Sen. Rick Scott (R-Fla.), who cited the rising interest rates.
Scott is one of at least four Senate Republican conservatives who are sounding the alarm over the long-term fiscal implications of the 1,116-page budget reconciliation bill that passed the House.
They support many of the bill’s components but argue it falls well short of what is needed to reduce annual federal deficits that are projected to grow from $2.2 trillion a year in 2025 to more than $2.5 trillion in 2035.
“I want to get a deal done; I support the president’s agenda. I support the border, I support the military, I support extending the Trump tax cuts — but we have to live in reality. But we got to live in reality here: We got a fiscal crisis,” Scott said. This is my Quote of the Day
Here is a summary by the Washington Post of the “bill” as passed by the House. I have included the estimated impact on the deficit for each provision.
· Extend Trump’s 2017 Tax Cuts and Jobs Act. Cuts taxes for individuals of nearly all income levels, concentrating most of the benefits among the wealthiest earners and corporations. The business tax cuts are permanent, but the individual portions expire at the end of the year, meaning that if Congress doesn’t act, tax rates will go up on most households. The Republican bill would extend the lower rates for individuals. Increases deficit by $2.2 trillion
· Increase the standard deduction: The Tax Cuts and Jobs Act doubled the standard deduction, the baseline amount of income filers can collect tax-free. This legislation would preserve that policy and add to it for the next four years, increasing the deduction by up to $2,000 for married couples filing jointly and $1,000 for single filers, to $32,000 for couples and $16,000 for individuals. Increases the deficit by $1.3 trillion
· Cuts to Medicaid: To meet budget goals, Republican plans to cut Medicaid spending could strip coverage from 8.7 million people and lead to 7.6 million more uninsured people over 10 years. The legislation calls for new requirements for beneficiaries, including co-pays for those above 100 percent of the federal poverty level and work requirements for many able-bodied, childless adults….Reduces the deficit by $792 billion
· A little SALT: The bill quadruples the cap on the state and local tax deduction, or SALT, which lets filers write off the amount they paid in local taxes from their federal tax bill. The 2017 tax law capped the SALT deduction at $10,000, but that limit expires at the end of the year. The Republican proposal raises that cap to $40,000. Increases the deficit by $660 Billion
· Making states pay for SNAP: The legislation would cap future expansion of SNAP, the Supplemental Nutrition Assistance Program formerly known as food stamps, and pass on more of the cost for administering the program to state governments. Reduces the deficit by $295 Billion
· Increase the child tax credit — for some: The child tax credit is a tax break for filers with children. The Republican measure would increase the credit to $2,500 per child, from $2,000…The legislation limits eligibility to parents or guardians with Social Security numbers. Increases the deficit by $793 billion
· A border wall, other barriers and immigration restrictions: The bill designates more than $140 billion for the Trump administration’s border and immigration crackdown. More than $50 billion of that total would go toward completing the wall along the U.S.-Mexico border and other fortifications, including at maritime crossings. Roughly $45 billion would go to building and maintaining detention centers to house families of deportees, and $14 billion is marked for deportee transportation. Increases the deficit by $147 billion
· New taxes on colleges and universities: The legislation aggressively taxes income generated by the endowments of colleges and universities. Current law imposes a 1.4 percent tax on those institutions. This bill creates a new system that would set varying tax rates depending on the size of the endowment per enrolled student. Reduces the deficit by $22 billion.
· Savings accounts for newborns: The proposal would give newborn babies a $1,000 savings account that the legislation calls a “Trump account.” Parents or beneficiaries could contribute $5,000 each year to that account until the beneficiary is 31 years old. The idea mirrors a pitch from Democratic Sen. Cory Booker (New Jersey) for “baby bonds.” Increases the deficit by $17 billion
· No tax on tips: The legislation would allow a tax deduction for the total amount of tipped income received. It contains some guardrails to prevent “highly compensated employees” from claiming their earnings as tips and specifically identifies food service, hair care, nail care, aesthetics, and body and spa treatments as applicable professions to receive eligibility for the deduction. Increases the deficit by $37 billion.
· No tax on overtime: Exempts overtime wages from taxes through a new deduction. The legislation wouldn’t allow deduction of overtime wages from tips or for “highly compensated employees,” and requires filers to use a Social Security number when claiming the deduction, essentially deeming noncitizens ineligible. Increases the deficit by $124 billion.
· No tax on car loan interest: The bill would allow purchasers of American-made cars to deduct up to $10,000 in car loan interest payments for four years. For tax filers earning more than $100,000 (or $200,000 for married couples filing jointly), the loan interest deduction would decrease by $200 for every $1,000 of additional income. Increases the deficit by $57 billion.
· A bonus deduction for seniors: an extra $4,000 to the standard deduction for people over 65 years old. The policy would be in place for four years and would taper off as a recipient’s income increased. Increases the deficit by $71 billion
· Billions for defense: There is roughly $150 billion in the bill for the Defense Department, spread over a number of priorities: $34 billion for the munition and defense supply chain; $33.6 billion for shipbuilding; and $20 billion for missile defense and space capabilities Increases the deficit by $148 billion
· Repeal Biden student loan forgiveness: repeal the Biden administration’s student loan forgiveness program and making other changes to loan repayments. Decreases the deficit by $295 billion
· Tax credits for home schooling or private school: Increases the deficit by $2 billion
· Rescind money to fight climate change: The proposal would gut elements Inflation Reduction Act. It would eliminate a federal tax credit of up to $7,500 that consumers can receive for buying an electric vehicle. Reduces the deficit by $678 billion
· New oil and gas production: Reduces the deficit by $20 billion
· Auction electromagnetic spectrum: The electromagnetic spectrum is necessary for everything from wireless technologies to military communications and radars. The legislation would renew the Federal Communications Commission’s authority to auction off bands of spectrum. Reduces the deficit by $88 billion
· Cut protections for federal workers: reduces benefits and protections for government workers. Reduces the deficit by $16 billion
· Raise the debt ceiling: The House bill would raise the debt limit by $4 trillion to cover the cost of implementing this bill
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There’s an epidemic going on at Comerica Park
On Monday, it was Javy Baez of the Tigers who got ejected for arguing a strike call with home plate umpire Phil Cuzzi on a pitch that was low and outside.
On Tuesday, it was San Francisco Manager Bob Melvin who was ejected for arguing a ball call by home plate umpire Tony Randazzo on a pitch that was just below the zone. Melvin was not really arguing about this pitch, he was fed up with Randazzo’s inconsistent strike zone for the entire game. In the previous inning Randazzo called a San Francisco player out on a pitch that was well out of the strike zone. There were others that didn’t go the Giants way and Melvin was fed up with Randazzo and he let him have it. See my Video of the Day.
Because of video replay, ejections are rare in the MLB. Furthermore, arguing balls and strikes is against the rules, which leads to frustration for players and managers because they have no recourse. Look for this to change as the MLB is considering adding an appeal process where a team can ask for a video recall of a pitch (like the other major sports there will be limits on how many appeals can be made in a game). The other option being considered is using technology to call balls and strikes. This has already been implemented in the minor leagues and was tested in the MLB during spring training.
A few more days like Monday and Tuesday at Comerica Park, and you can bet changes will be sooner rather than later.
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Quotes of the Day: “I want to get a deal done; I support the president’s agenda. I support the border, I support the military, I support extending the Trump tax cuts — but we have to live in reality. But we got to live in reality here: We got a fiscal crisis,” Republican Senator Rick Scott of Florida
Orchid of the Day: The baseball gods: After umpire Phil Cuzzi ejected Detroit Tiger Javy Baez on Monday, the baseball gods saw to it that in Tuesday night’s game, Baez was the Tiger third baseman, and Cuzzi was the third base umpire. Baez and Cuzzi spent the entire evening within a few feet of each other. See my Question of the Day
Onion of the Day: The “big, beautiful bill”. Its tax reductions, which disproportionately benefit the wealthy, are being funded by reducing benefits for the poor and underserved.
Lyrics of the Day: “Cause when it comes to bein' lucky, she's cursed
When it comes to lovin' me, she's worst, But, when it comes to bein' loved, she's first. That's how I know.”
If you think you know the answer, send me your response in the comments section of the blog.
Answer to Lyrics of the Day for May 26, 2025: American Soldier by Toby Keith
Question of the Day: I wonder what MLB umpire Phil Cuzzi and the Tigers Javy Baez said to each other as they spent most of the evening on Tuesday at third base a day after Cuzzi ejected Baez for arguing a third strike?
Video of the Day: Bob Melvin’s ejection in the Tiger/Giant game on Tuesday.
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Nobody in DC cares about fiscal responsibility. They only want to pad their pockets. A City full of corruption and crooks
The first cut is the deepest. Rod Stewart