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Unleash Prosperity Hotline
Issue #1281
06/09/2025
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1) CBO and Media Are All Wrong: Big Beautiful Bill Doesn't Add to Deficit

UP co-founder Larry Kudlow has recalculated the borrowing impact of the Trump Tax Bill. He's reached the opposite conclusion of the CBO - whose wild score of $2.4 trillion added to the deficit was screamed across the TV and newspapers headlines last week.

Here's a typical headline:
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But when using a current budget/tax policy baseline (in other words, averting a $4 trillion tax increase), the revenues from the 10% tariff, and taking into account the positive economic impact of the lower tax rates and other pro-growth policies in the bill, here's a more sensible forecast using real-world scoring:
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2) Why Not Two or Three Big Beautiful Bills?

Chicago Cubs hall of famer Ernie Banks used to famously say "let's play two" before the start of a day game in beautiful Wrigley Field.

That's what Speaker Mike Johnson is now suggesting on budget cutting. Here's what Johnson told reporters over the weekend:

Everyone here wants to reduce spending. All of us want to return to pre-pandemic spending levels. We do but you have to do that in a sequence of events. We have a plan. OK? This is the first of a multi-step process as I mentioned.

We're going to have another reconciliation bill that follows this one. Possibly a third one before this Congress is up because you can have a reconciliation bill for for each budget year, each fiscal year. So that's ahead of us.

We're also doing recisions packages. We got the first one delivered this week from the White House and that will codify many of the DOGE cuts. There'll be a series of those that come along and we have the actual spending bills, the regular appropriations process upcoming, where we will spend less money.
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We've always believed this strategy makes the most strategic sense. Get the tax bill that everyone agrees on signed, sealed and delivered for a beautiful bill signing on the Fourth of July.

Then follow that up with DOGE savings, rescission bills, and the 10% across the board sequester cut of every domestic discretionary and Pentagon program. That will permanently lower the baseline spending of all programs and save trillions over a decade - and bring a big smile to the faces of our friends and Senate budget hawks Ron Johnson and Rand Paul.
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3) And Don't Forget About Capital Gains

The Big Beautiful bill would keep U.S. tax rates on businesses and investment as low as possible to keep America globally competitive. That includes the 21% corporate rate and the lowering of the personal income tax rates across the board.

But the capital gains rate remains too high at 23.8%, with states adding another roughly 3 points. That's higher than most of our key competitors. See chart. Lowering the cap gains rate to 15% and indexing taxable gains for inflation in exchange for ending the step-up basis at death would cause an unlocking effect and immediately RAISE revenue for the government, while reallocating trillions of dollars of investment to their best and highest returns.
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4) Trump's Shrinking the Government Workforce

What a difference a change in president can make.

When Biden was president, the government workforce kept growing and growing.

Now, the federal workforce growth has slowed to a crawl.

The May employment report shows that for the first time since August 2023, government was not in the top two sectors for 12-month job growth. Federal government payrolls (excluding the postal service) have declined every month this year and in May were at the lowest level since November of 2023.

The Trump administration has wiped out a whole year's worth of hiring by the federal government. Although those declines have been offset by hiring at the state and local level, total government payrolls at all levels in May were effectively unchanged since January (up 1,000 or less than 0.01%) when Trump took office.
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5) Gavin Newsom Wants to Return Power Back to the States - Hooray!

What are we to make of Democrats who are actually threatening to undermine federal taxing and spending authority? California Governor Gavin Newsom declared on Friday that he might cut off tax payments to Washington if federal grant cuts to the state's universities by President Trump become a reality.
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Newsom isn't alone. California Assembly Speaker Robert Rivas says any cuts in federal grants to California are "unconstitutional and vindictive....we must look at every option, including withholding federal taxes."

In New York City, where Democrats are holding a primary for mayor this month, two of the candidates, former state legislator Michael Blake and State Senator Jessica Ramos, are suggesting withholding the city's federal tax dollars.

We're strongly in favor of returning as much power to the states as possible in keeping with the forgotten 9th and 10th Amendments. These Democrats are grandstanding, of course, and hypocritical - after all, they supported these federal spending programs in the first place - but they are right that the federal government has usurped far too much power of the purse.

So maybe it's time for a giant federal tax cut - which is essentially what Newsom is suggesting - and leaving the money in the states where it belongs.

At the very least, they are right that it's time for a national discussion about how to devolve power back to "the states and the people."
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6) They Have Fallen Back in Love with Elon..

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