Get the latest market trends in your inbox

Stay on top of the latest market trends and economic insights with the Axios Markets newsletter. Sign up for free.

Please enter a valid email.

Please enter a valid email.

Subscription failed
Thank you for subscribing!

Catch up on coronavirus stories and special reports, curated by Mike Allen everyday

Catch up on coronavirus stories and special reports, curated by Mike Allen everyday

Please enter a valid email.

Please enter a valid email.

Subscription failed
Thank you for subscribing!

Denver news in your inbox

Catch up on the most important stories affecting your hometown with Axios Denver

Please enter a valid email.

Please enter a valid email.

Subscription failed
Thank you for subscribing!

Des Moines news in your inbox

Catch up on the most important stories affecting your hometown with Axios Des Moines

Please enter a valid email.

Please enter a valid email.

Subscription failed
Thank you for subscribing!

Minneapolis-St. Paul news in your inbox

Catch up on the most important stories affecting your hometown with Axios Minneapolis-St. Paul

Please enter a valid email.

Please enter a valid email.

Subscription failed
Thank you for subscribing!

Tampa-St. Petersburg news in your inbox

Catch up on the most important stories affecting your hometown with Axios Tampa-St. Petersburg

Please enter a valid email.

Please enter a valid email.

Subscription failed
Thank you for subscribing!

Please enter a valid email.

Please enter a valid email.

Subscription failed
Thank you for subscribing!

The GOP tax bill cuts taxes by $1.5 trillion over the next decade and will accelerate growth of the federal debt under any forecast.

Expand chart
Reproduced from the Committee for a Responsible Federal Budget; Chart: Axios Visuals

The bottom line: Expect Republicans to defend these tax cuts while Democrats step up a defense of government spending — particularly if Republicans turn next to welfare reform next year. But at some point, a reckoning is coming, and the only way to raise taxes or reform popular government programs is to do it on a bipartisan basis, which isn't how things have been working in Washington.

Congressional Republicans, most of whom are self-described budget hawks, are set to today pass into law a tax cut bill that will add between $1.5 and $1.7 trillion to the federal deficit when taking into account both economic growth and expirations no one expects to take effect, according to the Committee for a Responsible Federal Budget, a group that favors shrinking the deficit:

  • Looking ahead, this worsens the country's fiscal outlook, but it was going to be a problem regardless.
  • Entitlement spending is set to balloon in the near-term future as baby boomers hit retirement age and their Medicare and Social Security benefits kick in.

What happens next, part I: Democrats are enraged by the Republican process on tax reform. They'll fight back if they retake control of Washington:

  • "Democrats are going to have to rejigger their internal process and forget about being the only party that believes in responsible government, because we can't take much more of this massive assault on domestic spending," said Jim Manley, a former aide to Democratic Senate Leader Harry Reid.
  • And while House Speaker Paul Ryan has said he wants to do entitlement reform next year, most people say this is highly unlikely to be successful.
  • "I don't see the political environment in 2018 supporting something like this," said Doug Holtz-Eakin, president of the American Action Forum, and a Republican economic adviser.
  • That also means a $1 trillion-dollar infrastructure package is unlikely to happen next year.

What happens next, part II: At some point the growing deficit will have to be faced, and whether that's future tax increases to raise revenue, or entitlement reform to decrease spending, it's going to be very difficult to pull off.

  • "In order to meet the criteria of not increasing poverty and hardship … there will have to be a mix of increased revenues as well as a mix of" decreased spending, said Sharon Parrott of the Center on Budget and Policy Priorities, a left-leaning group. And pulling that off will "require a different policy-making environment."
  • "It's the hardest problem," Holtz-Eakin told me.

Bottom line: "We're not going to make it 10 years. Somewhere, someone's going to have to do it ... With or without tax reform, this was in the cards," Holtz-Eakin said.

Go deeper

Bipartisan group of senators unveil $908 billion COVID stimulus proposal

Sens. Joe Manchin (D-W.Va.) and Susan Collins (R-Maine) in the Capitol in 2018. Photo: Tom Williams/CQ Roll Call

A bipartisan group of senators on Tuesday proposed a $908 billion coronavirus stimulus package, in one of the few concrete steps toward COVID relief made by Congress in several months.

Why it matters: Recent data shows that the economic recovery is floundering as coronavirus cases surge and hospitals threaten to be overwhelmed heading into what is likely to be a grim winter.

Inside Patch's new local newsletter platform

Illustration: Annelise Capossela/Axios

Patch, the hyperlocal (and profitable) local digital news company, has built a new software platform called "Patch Labs" that lets local news reporters publish their own newsletters and websites, sources tell Axios.

Why it matters: It follows a growing trend of journalists going solo via newsletters at the national level.

Scoop: Politico stars plot new Playbook

Anna Palmer and Jake Sherman. Photo: Alex Wong/Getty Images

Three of Politico’s biggest reporting stars plan to launch a competitor to the company’s Politico Playbook franchise, sources tell me. 

Why it matters:  Jake Sherman, Anna Palmer and John Bresnahan will launch a daily newsletter in 2021 as a stand-alone company, the sources say. In effect, they will be competing against the Playbook franchise they helped create and grow.