The Billionaire Tax, The Busted Federal Budget, and the Future of the American Experiment

Peter Robinson (0:00)

The architect of California's proposed billionaire tax says it will raise state revenues by 100 billion dollars. According to our guest today, that estimate is about 125 billion, too high. Josh Rauh on Uncommon Knowledge now.

Welcome to Uncommon Knowledge. I'm Peter Robinson.

A fellow at the Hoover Institution and a professor of finance at Stanford Business School, Joshua Rauh did his undergraduate work at Yale and his graduate work in economics at MIT. During the first Trump administration, he served as both an economic advisor to the Congressional Budget Office, and as chief economist at the White House Council of Economic Advisors. Professor Rauh knows everything there is to know about tax and fiscal policy. But don't worry, he has a special guest for talking about it in a way that anyone, that would be me, that anyone can understand. Josh, thanks for joining us.

Joshua Rauh (1:04)

Thank you so much for having me.

Peter Robinson (1:07)

First question, could we have you take a look at President Trump remarks that he made earlier this very month of September?

SPEAKER_3 (1:15)

If the Republicans win the House of Representatives and the United States Senate, both of them, because of our economic, tremendous economic success, like in history, we've never had anything like what's happening, but because of our tremendous strength and success economically, I will issue a dividend to every adult citizen in the United States of America for $5,000.

Peter Robinson (1:48)

On a scale of 1 to 10, 1 being what a mistake and 10 being brilliant, how would you rate the president's proposal to give every adult American 5 grand?

Joshua Rauh (1:59)

Well, I'm going to give it a 2, and I'll tell you why I'm not giving it a 1

Peter Robinson (2:02)

All right.

Joshua Rauh (2:03)

I find it very disappointing, first of all. This is not the fiscal policies of the Republican Party that I once knew. These are not the fiscal policies that I would support. What I do think we have to recognize with President Trump is that sometimes he says things that he doesn't really actually mean, and he's making a political statement with that.

Scott Besson was in Congress testifying. Someone asked him, could these checks be given out in a physically responsible way? He said, yes, I think it could be done in a physically responsible way. That is true, technically, if we cut $1.5 trillion out of other parts of the budget, 1.5 trillion is what it would cost. It would cost 1.2 trillion. So we would then save 300 billion by doing it.

Overall, very disappointing to hear the administration coming out with such policies. I've learned over time not to take too literally any policy that the president proposes. Therefore, I'm giving it a two just in that general context. But overall, I find it very disappointing. I find it disappointing that during a time when the Republicans have controlled the White House in Congress, that we're running multi-trillion-dollar deficits still. Fundamentally, during what is still peace time despite the conflict in Iran and other conflicts around the world.

Peter Robinson (3:15)

Okay. Let's go to the budget. And take me through this as if I were, which I am, a very slow student. In an overview of the congressional budget... so with federal budget, in an overview of the congressional budget office's most recent budget and economic outlook, which the CBO produces once a year, you wrote, and I'm quoting your sub stack, the fiscal reality check you wrote, if you like fiscal responsibility, read it and weep. Weep. But for two years now, we've had Republicans in control of the House, the Senate, and the White House.

We'll come to the numbers, but very briefly, just the politics. How can this be that you see something you want to weep that makes you want to weep when Republicans have been in control for 24 months, 28 months?

Joshua Rauh (4:05)

Well, Peter, it's quite likely that if Democrats were in control, it would be worse, much worse. Okay.

Peter Robinson (4:12)

So that's... We can sell ourselves that it's not as bad as it might be.

Joshua Rauh (4:14)

Well, that's right. That's one reference point. But the fundamental dynamics going on here is that it's very, very hard to reduce spending at the federal level because it really has to come through Congress. We had Doge and Elon Musk, and those were basically attempts to reduce spending through the executive branch, through the administration. And there are various ways that that can be done. And Doge ultimately might have cut $100 billion of spending out of a budget that is around $7 trillion. So we're talking about a pretty small effect. For reductions in spending that are really meaningful, they have to go through Congress. And we saw with last year's reconciliation bill that it's very, very difficult to get spending cuts through because even with the reforms of Medicaid, which I do think were valuable and probably saved around $1.2 trillion over 10 years for the federal government, those were even very difficult for Republicans to stand behind because many Republicans come from states where there are many people who are on Medicaid and they get very frightened about this idea. One other thing I will say is that I do think that the way that the CBO projects and describes our fiscal situation, the way they score bills is a little bit unfair to Republican tax policy. Let me explain what I mean by that.