By Andy Sullivan
WASHINGTON (Reuters) – U.S. President Donald Trump’s propaganda legislation will effectively transfer wealth from younger Americans to older generations.
They say that while the bill includes tax breaks for parents, newborns, private students and other young Americans, those benefits will exceed the trillions of dollars it has increased to $36.2 trillion in Treasury bonds.
In the long run, this could reduce economic growth and allow young people to bear higher taxes and mortgages.
“Futures are kind of holding their schoolbags,” said Kent Smetters, director of Penn Wharton’s budget model.
The nonpartisan research group found that if the bill becomes law, a 40-year-old earnings in his lifetime would effectively lose $7,500 in his lifetime. By comparison, a 70-year-old with the same income will end up with a wealthy man of $17,500.
Several factors lead to this difference.
Compared with young workers whose income age peaks, young workers do not have much less income. They will also be more vulnerable to cuts in the Student Aid and Medicaid Health Program, which covers four of 10 hospital-born births in the U.S.
“In the short term, these gains will certainly tend toward higher earners, which is usually a good proxy for age,” said Jessica Riedl of the conservative Manhattan College.
But, analysts say the biggest factor is that the bill will increase the $3 trillion in Treasury bonds. This is likely to raise interest rates in the coming years and requires the government to invest an increasing portion of its budget in debt services rather than other purposes.
“There is a clear intergenerational transfer here,” said John Ricco of Yale Budget Lab.
Republican lawmakers said the bill passed the House and is now being heard in the Senate, which will help young Americans by making Medicaid more sustainable and boosting economic growth and entrepreneurship, which will help young people enter the workforce.
The bill also follows Trump’s campaign pledge to pay new tax breaks for tilted income and overtime pay, which Republicans say could help young workers in service and hourly wage jobs.
Savings Account
The bill will also create a $1,000 savings account for newborns and expand child tax breaks, although details vary between the House and Senate versions.
House Republican Representative Steve Scalise said after the bill passed in May that the legislation would increase paid salaries for median-income families with two children, $4,000 to $5,000.
However, this calculation does not take into account the increase in increased costs, and many low- and middle-income households will have to cut costs for health care, student loans and groceries.
The Congressional Budget Office and other external analysts found that these expenses would exceed any savings these families might get from the tax cuts, and low-income families wouldn’t be able to fully obtain the child tax credit and other targeted tax breaks.
This model is true for poor Americans of all ages.
The bill includes target tax relief for those over 65 whom Trump promised during last year’s election, but many are not paying enough income tax to qualify for the criteria.
“Tax cuts are basically useless for low-income older people,” he said.
Still, these seniors benefit from another Trump campaign commitment, as the bill avoids social security for Medicare, senior health plans and U.S. pension plans, from the kind of cost reduction it applies to Medicaid.
As the population ages, squeezes out other government spending, and health insurance and social security grow rapidly, it is expected to be short of funds in 2033.
But both Trump and his democratic rivals have vowed to protect the two politically popular plans from reorganizations that will bring future generations to the problem.
“I think in the end Republican and Democratic lawmakers have been engaged in intergenerational theft for a long time,” Riddle said.
(Reported by Andy Sullivan; Edited by Scott Malone and Mark Porter)
