Jessica Riedl
Fellow @Brookings.edu. Past: Manhattan Institute (2017-25) Sen. Portman chief economist (2011-17), budget policy for 4 prez campaigns. Fiercely independent and tribeless. Views mine.🏳️🌈
- NEW from me @thedispatchmedia.bsky.social. Congressional GOPers are proposing Reconciliation 2.0 to finally achieve all the big spending cuts they could not get in the OBBBA. In reality, it would surely become yet another panderfest of tax cuts & spending hikes. 🧵 thedispatch.com/article/repu...
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View full threadReconciliation 2.0 is sure to morph into yet another $1- to $2 trillion panderfest of tax cuts and spending hikes before the election. Instead of cutting deficits, GOP hawks will be pressured to vote for yet another budget buster or incur the president's wrath.
- The best way to stop the runaway train of budget-busting reconciliation bills is to not let them out of the station in the first place. Even with the best of intentions, fiscal hawks should not awaken the sleeping giant of reconciliation in 2026. (/F)
- Q: So what's the harm of letting fiscal hawks at least try another reconciliation bill? Because Reconciliation 2.0 would quickly be taken over by White House & Congressional leaders, stripped of the savings, and packed with another round of "must-pass" tax cuts & spending hikes.
- Consider Trump's priorities that would surely be added to another reconciliation bill: - $500 billion in new defense spending - Up to $600 billion in tariff rebates - More farm tariff bailouts. Plus another debt limit hike to rob Democrats of any leverage next Congress.
- Another reason Reconciliation 1.0's cost exploded was President Trump. He took Social Security and Medicare savings off the table. Then he demanded huge new spending and even more tax cuts. And GOP lawmakers were not going to get in his way.
- So, what makes GOP deficit hawks think they can suddenly pass all those huge unpopular spending cuts that were blocked last year? Esp. when: - It's not part of a must-pass tax cut bill - The House majority is smaller - A midterm election approaches. It's simply not happening.
- For a party holding the presidency and Congress, reconciliation has become an annual "Get out of jail free" card for all the tax cuts & spending hikes they could never pass under regular order. Since 2001, the reconciliation process has added $16 trillion in new debt.
- GOP deficit hawks - despite months of mapping out offsetting spending cuts - were routed in Reconciliation 1.0 (the OBBBA). Achieving 217 of 220 House GOP votes for most of their bold offsets proved impossible. They couldn't even quietly bury them in a must-pass tax cut bill.
- NEW from me in @thedispatchmedia.bsky.social. DOGE's most successful program elimination was itself, as it has reportedly closed down. I explain why its failure to deeply slash spending was so predictable, and what that means for deficits. 🧵 thedispatch.com/article/why-...
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View full threadOf course, savings may not have been DOGE's real goal. - Musk likely got major access to proprietary info and ability to steer contracts. - Trump got to fire "disloyal" Feds. - Congress got a distraction while they cut taxes by $5 trillion. - MAGA voters got "liberal tears."
- Ultimately, DOGE was yet another gimmicky attempt to close the $1.8 trillion budget deficit with smoke & mirrors. Sorry, there are no shortcuts. Fixing the budget will require a combination of real benefit cuts, and real tax increases. And not just for your political enemies. /F
- Problem #2: DOGE was incompetent. Cutting waste is hard enough with top experts. It is nearly impossible with a bunch of 23yo tech bros with no real expertise in public administration, economics, or policy. The resulting gaffes ranged from infuriating to hilarious.
- Problem #3: DOGE was often illegal. Only legislation passed by Congress and signed by the president can cancel enacted spending. Moreover, Musk was never Senate confirmed, confidential data was reportedly accessed, and the courts determined that DOGE regularly broke the law.
- The Treasury spending tables suggest DOGE savings perhaps in the neighborhood of $14 billion. This figure represents: 0.2% of the $7 trillion federal budget. 5% of the $275 billion net spending increase in 2025. 0.7% of Elon Musk's $2 trillion goal. 😳
- Problem #1: DOGE was conceptually flawed. 2/3 of spending goes to Social Security, Medicare, defense, veterans, & interest that were mostly off the table. Even the remaining 1/3 included spending MAGA likes. So DOGE was left to make small, symbolic cuts to "trigger the libs."
- Professional news: After 8 years and 300 publications at the Manhattan Institute … … I’m excited to join the Brookings Institution as a budget & tax fellow in its Tax Policy Center. New home, but same, center-right, fiscal hawk, free market economic analysis.
- Let's say you take out a $400,000 mortgage loan at 6.25% - and choose a 50-year mortgage instead of 30 years. In return for saving $283 monthly, you will pay an extra $421,302 in interest over the life of the loan. Or if you sell at 15 years, will have paid down just $29,000 in equity. Not good.
- NEW from me @thedispatchmedia.bsky.social. Secretary Bessent has proclaimed that monthly budget figures show a rapidly declining budget deficit. But he is confusing small timing shifts for major policy changes. Deficits are set to continue rising. 🧵 thedispatch.com/article/defi...
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View full threadWait - Didn't DOGE drastically cut deficits in the second of half of 2025? Haha, you're funny. The only evidence of DOGE savings is a $12 billion reduction in State Dept & foreign aid funding. And the IRS layoffs will cost more money than that in tax evasion and fewer audits.
- So, no, there is no deficit reduction miracle. DOGE, tariffs, oil & gas revenues - all were supposed to balance the budget and pay off the debt. Instead, big tax cuts and spending hikes pushed projected deficits towards $3T-$4T within a decade. Ignore the spin, watch the data.
- Yes, the 2025-2H deficits were smaller than the 2H deficits in 2023 & 2024. That's also an accounting timing issue - the govt "booked" several years of OBBBA student loan savings in August & Sept. They didn't achieve the savings, they just counted the NPV ahead of time.
- That leaves $110 billion in higher revenues from tariffs in the second half of 2025. That is real - but also not guaranteed to last due to the courts, policy changes, and revenues lost to Americans switching out of imports. And its far smaller than the ballooning OBBBA cost.
- Secretary Bessent brags that deficits fell from $1,307 billion in the first half of FY 2025 (Oct-Mar) down to $468 billion in the second half of the year (Apr-Sept). He credits Trump's aggressive savings policies.
- The problem? Monthly deficits *always* shrink in the second half of the fiscal year because the later April-Sept period includes big revenues from the April 15th tax deadline, and 3 of the 4 quarterly corporate tax due dates. Falling deficits are due to tax due dates, not policy.
- I'm trying to figure out how sending $7 billion to Africa to save 20 million lives from HIV (many of whom are kids) is an outrage (America First! We can't afford it) ... yet somehow sending $20 billion to Argentina is affordable, wise, and responsible.
- Yes, the final cost will be less than $20 billion (depending on what we do with the pesos and whether we can get full value dollars back), but even a $5 billion final cost could have saved millions of lives in Africa. Seems a higher priority to me.
- NEW from me. Trump wants to take over the Federal Reserve and lower interest rates in part because he believes it will cut federal budget interest costs by "$1 Trillion per year." In @thedispatchmedia.bsky.social, I show that fiscal dominance would NOT reduce interest costs very much. 🧵
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View full threadOverall, fiscal dominance is a dangerous consequence to soaring debt - it paralyzes the Federal Reserve and kills its ability to slow inflation and stabilize the economy. We saw this after World War II.
- It's a lazy gimmick to think we can keep cutting taxes and expanding spending and just pay for it by forcing the Fed to make government borrowing nearly free. Politicians need to stop looking for easy, fake solutions and make the tough decisions on deficits. (/F)
- In fact, inflationary cuts in the fed funds rate may raise - not lower - long-term interest rates. Thus, I estimate even a *full-point* cut in the Fed funds rate would save maybe $44 billion next year. White House OMB data shows even less savings. That's out of a $7T budget.
- If we want lower interest rates on the debt, back in the 2010s the Treasury missed the opportunitiy to lock more of its debt into 2-3% rates for 30 years. Some of us were screaming back then to do this.
- First, yes, interest costs are burying the budget. 2021 - $352 billion 2025 - $1 trillion (approx) 2035 - $2 trillion (projected) Interest has soared past Medicaid, defense, and Medicare to become the second-biggest item in the federal budget.
- $9 trillion of the federal debt will roll over in the next year, plus $2 trillion in new borrowing equals $11 trillion subject to new interest rates. Also, the market determines the interest rate paid by the Treasury on its debt, and the Fed Funds rate has limited impact there.
- Trump campaigned on a trade war and immigration crackdown. And farm-heavy counties still gave him 78% of the vote. Sorry guys, you voted for this. Enjoy the consequences!
- NEW from me. In the @washingtonpost.com. I examine the emerging debt crises that are destabilizing the British and French governments - and how America faces similar economic & fiscal challenges on an even deeper level. 🧵 www.washingtonpost.com/opinions/202...
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View full threadAmerica has a longer leash than France and the U.K. because were a huge, powerful economy and the world's reserve currency. But eventually, the laws of math and economics always win, and the chaos of France and Britain will head our way unless we get out ahead and reform.
- (And before you shout "easy, just the tax rich!", watch the video below. It can save some money, but nearly enough). bsky.app/profile/jess...
- NEW from me. My new video for @reason.com says fine, tax the rich, but recognize that it cannot eliminate more than a small fraction of the soaring budget deficits. And no, those old 91% tax rates and the European tax systems do not prove otherwise. www.youtube.com/watch?v=o0x1...
- Second, retiring boomers and low fertility rates (and likely immigration limits) are strangling long-term economic growth by limiting the number of workers. It means all growth must come from labor productivity, which itself is not great.
- Third, the last hope was that the resulting budget deficits could at least be funded with low interest rates. Instead, interest costs have tripled to $1 trillion and are the 2nd largest budget item after Social Security - and may double again within a decade. So even more debt.
- Surging debt recently collapsed the French government, which also had its debt downgraded. Same issues: - Aging population and low fertility rates slow economic economic growth & tax revenues. - Senior benefit costs soar. - Resulting deficits worsened by rising interest rates.
- Which brings us to the U.S., and our deficits headed towards $4 trillion within a decade and as high as 250% of GDP within three decades. First, the demographic challenge is raising senior benefit costs while limiting taxpaying workers.
- All 3 countries face: 1) Aging population and low fertility - which along with productivity slows econ growth. 2) It also means deficits from soaring old-age spending & slowing tax revenues. 3) Interest rates steeply rising on these growing deficits
- The U.K. is in deep trouble, and after last year's tax hikes were plowed into new spending, the deficit continued growing amid calls for even larger tax hikes.
- MAGA Twitter is really a sight to behold right now. One cis white male tragically murdered another, and somehow the *transgender community* is responsible and must be stripped of their constitutional rights. It is just dangerous ugliness from unhinged, fanatical bigots.
- This political era is all about vengeance & escalation. Impose maximum suffering on the other side. They started the war, and they are evil, sick, and must be destroyed. Civility & grace is for losers & wimps. Real leaders fight - no apologies, no mercy. We desperately need de-escalators.
- NEW from me. My new video for @reason.com says fine, tax the rich, but recognize that it cannot eliminate more than a small fraction of the soaring budget deficits. And no, those old 91% tax rates and the European tax systems do not prove otherwise. www.youtube.com/watch?v=o0x1...
- Here's the article version. It explains that taxing the rich can surely be *part* of a broad deficit reduction deal - and even suggests policies - but we still must fix SocSec & Medicare and probably raise middle class taxes too. The budget math is unforgiving. reason.com/video/2025/0...
- And for anyone who really wants to explore further, here is my 2023 study walking through all the modeling and data in excruciating detail. manhattan.institute/article/the-...
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- Thus, giving Trump unlimited impoundment power would be extraordinarily dangerous - Congress and the courts must step in. (Excuse any typos in this thread, I had surgery this morning and am a bit foggy). thedispatch.com/article/trum...
