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Any discussion of how to change our fiscal path should focus first on generating additional revenue lost to these tax cuts.
When jobs are plentiful and business profits soar, that means good news for federal tax revenues. At least, that’s how it’s supposed to work.
For 15 years after the Tax Reform Act of 1986 went into effect, that’s exactly what happened: Changes in the U.S. unemployment rate were a strong predictor of changes in our federal tax revenues as a percent of the GDP; a drop in the unemployment rate caused revenues as a percent of GDP to increase. But since the beginning of the 21st century, a series of tax cuts under presidents George W. Bush and Donald Trump have shattered the link between tax revenues and employment. Revenues as a percent of GDP dropped significantly, and now they no longer grow much when the economy strengthens.
After news that the federal deficit grew despite a strong economy, amid rising interest rates, there are renewed fears about the nation’s fiscal outlook. With these fears typically come calls to reduce spending. But the U.S. doesn’t have a spending problem; it has a revenue problem caused by tax cuts.
The Bush and Trump tax cuts broke our modern tax structure: Revenues are significantly lower and no longer grow much with the economy

Between 1995 and 2000, the unemployment rate fell from 5.6% to 4.0%, and revenues rose from 17.9% to 20.0% of GDP—the equivalent of taking in an additional $600 billion per year after adjusting for the size of the economy. When the unemployment rate fell a similar amount between 2015 and 2019, going from 5.4% to 3.7%, revenues dropped from 17.9% of GDP to 16.3%—the equivalent of taking in $450 billion less per year after adjusting for the size of the economy.
Why did this happen? Because during that same time, the Bush tax cuts, their bipartisan extensions, and later the Trump tax cuts slashed taxes, significantly lowering overall revenue. Importantly, a disproportionate share of the benefits from these cuts accrued to very rich Americans, profitable corporations and wealthy heirs.
This newfound pattern of low revenues even in times of high employment has persisted up to the present day. In fiscal year 2023—which just ended September 30—the unemployment rate averaged 3.6%, the lowest since 1969. However, because of these large tax cuts, revenues were a paltry 16.5% of GDP.
These lower revenues have a profound impact on the finances of the nation. Prior to the tax cuts being enacted, the Congressional Budget Office projected long-term stability of the debt-to-GDP ratio. Yes, the CBO projected rising spending driven by Medicare, Medicaid and Social Security. But the agency also projected that revenues would be able to keep up indefinitely without any additional tax increases, due to real wage gains leading to higher revenues. Now, however, the CBO projects that debt is on track to rise as a percent of GDP indefinitely, with revenues now significantly lower and no longer projected to match primary (noninterest) program costs.
Two points explain this. The first involves a concept called the fiscal gap, which measures how much primary deficit reduction is required to stabilize the debt-to-GDP ratio. The 30-year fiscal gap is smaller than the size of the Bush tax cuts, their extensions and the Trump tax cuts under current law over the next 30 years. Therefore, mathematically and unequivocally, without those tax cuts, the debt ratio would be declining, not rising.
Second, even though the debt ratio is rising, spending can’t be blamed. The CBO’s 2012 long-term budget outlook was the last time debt was projected to decline indefinitely—because that projection was made before the Bush tax cuts were largely permanently extended. And relative to the CBO’s 2012 projection, current projections of program costs are down, not up. In short, if you were trying to explain how we got from the CBO’s 2012 projection of a declining debt ratio to its current projections of a rising debt ratio, changes in spending have lowered the future debt path, but revenues have declined significantly more than spending. Changes in revenues are therefore entirely responsible for going from a declining debt ratio to an ever-growing debt ratio.
Both revenues and spending are lower than earlier projections, meaning low revenues are responsible for persistent primary deficits

The first step in effecting change is proper diagnosis. Those who look to blame spending to close the primary deficit are looking in the wrong place. If not for the regressive tax cuts initiated under presidents Bush and Trump, we would have been looking at a stable debt-to-GDP ratio. Any discussion of how to change our fiscal path should focus first on generating additional revenue lost to these tax cuts.
President Joe Biden has a lot of reasons to be furious with his national security team who, against his better judgment, systematically pressured him for 18 months to do an about-face on Saudi Arabia.
The White House has reportedly been in a state of "spasm and panic" since Wednesday, when it became clear that several of the U.S.'s Persian Gulf partners, led by Saudi Arabia and the United Arab Emirates, were set to commit what the White House considered "a hostile act": an extensive cut in oil production coordinated with Russia's Vladimir Putin, which will send oil prices soaring and very likely harm Democrats in the U.S. midterm elections in November.
In response to the American president bending the knee to him (who can forget the infamous fist bump), MBS put a dagger in Biden's back.
Instead of pressing the kingdom to stop undermining U.S. interests, Biden was told to mend fences with Saudi Crown Prince Mohammed bin Salman. In response to the American president bending the knee to him (who can forget the infamous fist bump), MBS put a dagger in Biden's back.
The Saudi-led cut is particularly disastrous because it is far more aggressive than what the members of OPEC+ had been signaling. The impact will not only fall heavily on the U.S. and global economies, but it will also bleed into other areas of geopolitical importance: Higher oil prices could help Russia finance its war on Ukraine and possibly also weaken the resolve of countries supporting Ukraine, particularly European powers.
A distressed White House had little choice but to admit that Saudi Arabia and other U.S. partners in the Persian Gulf were "aligning with Russia."
This is precisely what I, and many other observers of the Middle East, predicted would happen. In June, I wrote: "The most likely outcome of Biden's meeting with the crown prince is that Saudi Arabia and the UAE will pocket Biden's many concessions and offer tactical collaboration against Russia and China in the short run, while keeping their options open to betray Washington down the road."
It appears MBS deliberately provided Biden with a false sense of security by offering a slight increase in oil production in July, only to stab him in the back months later with a massive production cut at a time when Biden was most vulnerable.
The irony is that Biden initially did not want to travel to Saudi Arabia and had no inclination to appease the Saudi dictator. The trip, and the entire idea that appeasing Riyadh was a strategic imperative, shows a clear lack of imagination in U.S. policy when it comes to the Middle East. Brett McGurk, the national security council director for the Middle East explained in November 2021 that Biden aims to bring U.S. foreign policy "back to its basics" in the Middle East rather than rethinking it more fundamentally.
Pulling off the Saudi trip was a "herculean effort," according to one U.S. official, which entailed weekly meetings with national security adviser Jake Sullivan. McGurk also played a crucial role in convincing the president that America had no choice but to embrace the Saudis.
Instead of his advisers, Biden should have listened to the American people.
Throughout it all, it was Biden himself who was reportedly the "biggest hurdle." Even after he had approved the about-face, he publicly remained hesitant and uncomfortable, going as far as to deny that there actually would be a meeting between him and MBS. "I'm not going to meet with MBS," Biden told reporters on June 17. "I'm going to an international meeting. And he's going to be a part of it." Yet once in Saudi Arabia, MBS ended up serving as Biden's escort throughout most of the visit, which must have been embarrassing to Biden.
Biden should have stuck to his instincts. None of the arguments in favor of appeasing the Saudis were convincing. He never had a realistic chance of persuading the Saudis to increase oil production in a meaningful way. Integrating Israel into the Middle East without ending Israel's occupation of Palestinian territories would not stabilize the region. Appeasing MBS would not solidify a delicate cease-fire between Saudi Arabia and Yemen in the long term (the truce collapsed earlier this week). Nor could Biden convince the Saudis and Emiratis to align themselves closer to the U.S. against Russia and China without offering them rock-solid security guarantees, which would run completely counter to U.S. interests.
Instead of his advisers, Biden should have listened to the American people. Fewer than one-quarter of Americans supported the idea of the president going to Saudi Arabia.
In some quarters on Capitol Hill, patience is now running out with Biden's Middle East policy. Several Hill staffers I spoke to Wednesday were furious about this predictable fiasco and expressed support for a shake-up in Biden's national security team. Two lawmakers have already prepared a response; New Jersey Democrat Rep. Tom Malinowski tweeted that "this is a hostile act by Saudi Arabia and the UAE, designed to hurt the United States and our allies and to help Russia, despite President Biden's overtures," adding that he and Rep. Sean Casten will be introducing legislation calling for the U.S. to withdraw our troops from Saudi Arabia and the UAE.
Now, that is advice Biden would be wise to take.
All the latest headlines about President Joe Biden's July trip to Saudi Arabia focus on a deal to push down gas prices. In reality, he is making a much more sinister and dangerous calculation than most realize: He is reportedly planning to offer the dictators in Saudi Arabia and the United Arab Emirates--where all but two of the 9/11 terrorists came from--a defense pact that commits American lives to defend their regimes. What could go right?
Committing American lives to defend these Arab dictatorships is far more scandalous than an embarrassing presidential handshake with the Saudi crown prince.
When Biden ran for the White House, he pledged to break with then-President Donald Trump's Middle East policy: Bring U.S. troops home from the Middle East, renew the Iran nuclear deal, end the war in Yemen, and "make the Saudis the pariah that they are." But after refusing to take necessary steps to return to the Iran deal, and with rumors abounding that he is about to offer the UAE and Saudi Arabia a defense pact, Biden's policy is increasingly looking like a continuation of Trump's Middle East strategy.
Biden isn't just forgiving Saudi Crown Prince Mohammed bin Salman for his direct role in the beheading of Washington Post columnist Jamal Khashoggi in return for a Saudi promise to pump more oil. As Biden admitted last week, this Middle East trip is about regional security--and that of Israel in particular. "The commitments from the Saudis don't relate to anything having to do with energy," Biden told reporters June 12. "It happens to be a larger meeting taking place in Saudi Arabia. That's the reason I'm going. And it has to do with national security for them--for Israelis."
Rumors have been circulating in Washington for months that Biden is seeking to expand Trump's signature foreign policy initiative--the Abraham Accords--which normalized diplomatic relations between Israel and Bahrain and the UAE; Biden wants to bring Saudi Arabia into a similar kind of arrangement with Israel. Details are beginning to leak of how he will try to get Saudi Arabia to take critical steps toward recognizing Israel. And the most alarming one is that the United States is offering a major security pact to the autocratic regimes in Saudi Arabia and the UAE.
According to a source close to the ruler of the Emirates, this would be a "binding strategic defense cooperation pact" that goes beyond anything the U.S. has agreed to in the region before. A former Biden adviser, David Shapiro, confirmed to Newsweek magazine that Saudi Arabia was looking for assurances that the U.S. will "retain significant military presence in the region to help Saudi Arabia address the threats it faces from Iran," as well as to take Saudi Arabia's side in its gruesome war in Yemen.
Committing American lives to defend these Arab dictatorships is far more scandalous than an embarrassing presidential handshake with the Saudi crown prince. Biden will in one swoop break his promises of bringing troops home from the Middle East, making Saudi Arabia pay a price and ending the war in Yemen.
And arguably, Biden's arms sales-boosting defense pact is the reason why he is breaking his pledge to return to the Iran deal as well, since that would require delisting Iran's Revolutionary Guard from the U.S. terrorist list, which would infuriate Israel and Saudi Arabia and jeopardize the defense pact.
For the U.S., this amounts to an awful deal. It's all give and no take, because none of what the Gulf states are offering is likely to pan out.
To start with, establishing full diplomatic relations with Israel is a concession to Israel, not to the U.S. It does not advance U.S. security one iota. Nor does it bring peace to Israel and Palestine, or stability to the Middle East, which the experience thus far with the Abraham Accords already has proven. Indeed, peace is not really the objective. Rather, according to Jared Kushner's August 2021 annual strategy document of the Abraham Accords Peace Institute, the objective is to "move beyond the Arab-Israeli conflict."
In that spirit, the Biden administration has not pressed Israel for any concessions to the Palestinians as part of this agreement. Instead, Biden has requested that Israel refrain from any provocative actions in the occupied West Bank and Jerusalem that could inflame tensions ahead of his visit. Once his visit is over, Biden will presumably have no objections to Israel's ongoing repression of the Palestinians. Indeed, Israel's creeping annexation of Palestinian territory has accelerated since the Abraham Accords were signed. As Zaha Hassan and Marwan Muasher write in Foreign Affairs, "The truth is that the accords have not advanced peace in the Middle East because Israel's aim in signing the accords was to redirect world attention away from its military occupation, not to end it."
This is not a recipe for peace, but for violence. Not surprisingly, during the first three months of this year, almost 50 Palestinians were killed by Israel, and Palestinians have killed 18 Israelis. The Palestinian deaths are a fivefold increase over the same period the previous year, while the comparative increase in Israeli deaths is even greater.
Secondly, Biden's gamble is also unlikely to push down skyrocketing gas prices. Experts are skeptical that the Saudis sit on enough unused capacity to push down American gas prices substantially. The root of the problem is Washington's overreliance on Saudi Arabia--a dependence that will only grow more damaging to U.S. interests as Biden moves closer to the Wahhabi kingdom at the expense of diversifying America's relations in the Middle East. For instance, Iran has an estimated 85 million barrels of oil stored onshore and offshore that could almost instantly be put on the market, presuming, of course, that Biden would return to the Iran nuclear deal.
Thirdly, Biden's defense pact is not likely to make the Middle East overall more secure. The Abraham Accords--contrary to claims that they are a creative new approach to security in the Middle East--continue a four-decade-long, failed American strategy in the region: That of organizing the region around the goal of isolating and containing Iran. As Biden officials themselves have admitted, this strategy has been a source of conflict in the region rather than a force for stability. "Most of the region's dysfunction has roots in Iran's exclusion," Biden's Iran envoy Rob Malley said in late 2021.
The most likely outcome of Biden's meeting with the crown prince is that Saudi Arabia and the UAE will pocket Biden's many concessions... while keeping their options open to betray Washington.
Organizing the rest of the region against Iran will be a boon for arms producers, but it will not create security. Iran is already widely outspent on arms and defense by Saudi Arabia, Israel, and the UAE, and an American commitment to defend these states has, in fact, made their foreign policies more aggressive and risk-accepting in the past. Faced with a united Israeli-American-Saudi-UAE front, in the midst of an escalating Israeli campaign to assassinate Iranian officials, Iran may be more likely to make the political decision to build a nuclear bomb. (American, European, and Israeli intelligence services all agree Iran has not made that decision thus far.)
Perhaps the most important commitment the U.S. will seek to extract from Saudi Arabia and the UAE is alignment with America's strategy to confront Russia and China. "The Saudis will make certain commitments about remaining fully aligned with the United States in its competition with Russia and China," Shapiro told Newsweek. But there's little to suggest that Biden's strategy of showering the Saudi crown prince and the ruler of the UAE, Mohammed Bin Zayed, with concessions will bring about a sustainable Saudi-Emirati commitment to the U.S. side in the great power competition of this century.
The Saudi crown prince has driven an uncompromising line with Biden--and won. He famously shrugged off Biden's refusal to engage with him during the initial stage of his presidency. "I simply do not care," he told The Atlantic, and patiently waited for Biden to cave. The Saudis are already dictating the terms of Biden's visit, forcing Biden to see the crown prince before he is allowed to meet any other Saudi official. Giving the crown prince more is not likely to make him more malleable, as political scientists Patricia Sullivan, Brock Tessman, and Xiaojun Li's research shows that "increasing levels of U.S. military aid significantly reduce cooperative foreign policy behavior with the United States."
The most likely outcome of Biden's meeting with the crown prince is that Saudi Arabia and the UAE will pocket Biden's many concessions and offer tactical collaboration against Russia and China in the short run, while keeping their options open to betray Washington down the road. If they truly believed that they shouldn't bet against China and Russia in this competition, they would not have needed all of these American concessions to align themselves with the U.S.
From the very moment then-President Barack Obama concluded the Iran nuclear deal, Israel, Saudi Arabia, and the UAE opposed it and favored an arrangement that would further tie the U.S. to the Middle East and to their own security interests. By quitting the Iran deal and signing the Abraham Accords, Trump took the first steps toward acquiescing to the demands of these states. Biden is now completing what Trump started.
The Congressional Progressive Caucus, the biggest bloc of liberal lawmakers in Congress, on Dec. 7 endorsed a bold bill proposed by Rep. Mark Takano, D-Calif., which would seek to implement a four-day workweek. It's a measure that has no real prospect of becoming law in the near term, but it's a compelling idea that's garnering more attention worldwide--and it could serve as a potential point of focus for the American left in the future.
Shorter workweeks should be viewed as a human rights imperative.
Shortening working hours has been a major point of focus for workers, both organized and unorganized, around the world for centuries. In the U.S. and Europe in the 19th century, wage workers often worked six or 6 1/2 days a week, and could endure brutal labor for 100 hours over the course of a week. In the early 20th century, the American organized labor movement successfully lobbied for an eight-hour workday, or a 40-hour workweek, based on the principle that workers deserve to divide their 24-hour days equally among rest, work and leisure.
But since then, efforts to shorten how much Americans work have largely stalled, work hours have crept up, and the U.S. has fallen behind peer countries. Americans work far, far more than people in most other affluent countries; from over here, France's 35-hour workweek can seem like a ludicrous fantasy. And while Americans have zero legally guaranteed paid vacation days, many European countries require employers to provide their workers with several weeks of paid time off--Austria, for example, mandates 25 paid workdays off and 13 paid holidays every year.
"People are spending more time at work, less time with loved ones, their health and well-being is worsening, and their pay has remained stagnant. It's time for change," Takano said in a statement about his bill. He has framed the legislation as an opportunity to recalibrate work-life balance amid a broader reconsideration of how Americans work--and have been exploited--during the pandemic.
If it's enacted, the bill wouldn't actually put a ceiling on how many days someone could work in week. Rather, it would require that employers pay overtime--time and a half--after 32 hours of labor. It wouldn't include certain kinds of workers, like gig workers and salaried employees exempt from overtime. But it would cover the majority of American workers, Dean Baker, a senior economist at the Center for Economic and Policy Research, told me, and would also have the power to reshape norms for salaried workers who aren't eligible for overtime.
The idea is that the policy would nudge businesses--and employees--to rethink work in the form of fewer hours or more efficiency in the workday, or some blend of the two. Baker said that when France reduced its workweek--which also worked by reducing the hours before overtime kicked in--it was expected that it would provide new jobs for workers to take up the work that wouldn't get done in a shorter week. Instead, it mainly caused a "substantial" boost in productivity. "Employers figured, OK, I don't want to pay the [overtime] wage premium, so I'm going to figure out how to restructure my workplace so I can get more work per hour out of workers," Baker said.
If it's enacted, the bill wouldn't actually put a ceiling on how many days someone could work in week. Rather, it would require that employers pay overtime--time and a half--after 32 hours of labor.
When I asked Baker whether such a law would destabilize the U.S. economy, especially businesses with slim profit margins, he said he believed that while some businesses would be pushed over the edge, "you'll see the vast majority of businesses adjust to it," particularly if it is phased in.
The four-day workweek has become a subject of increasing fascination around the world in recent years--and experiments with it tend to look promising. Researchers who oversaw a study of 2,500 Icelandic workers conducted over several years described trials with a four-day workweek with no cuts in pay as a "resounding success." The report on the study said workers' well-being "dramatically increased," while "productivity and service provision remained the same or improved across the majority of trial workplaces."
Simultaneous boosts in well-being and productivity have also been reported at companies in the U.S., New Zealand and Japan. Businesses that have had success with the model have reported using strategies to streamline the work day by doing things like reducing meetings and blocking out time for uninterrupted work. It also seems to help that employees also are able to attend to personal business outside of work hours with the spare time, making any given day more focused. Governments are taking increasing interest in the matter as well--Spain and Scotland, for example, are planning four-day workweek trials by subsidizing employers who give workers an extra day off.
These experiments are worth watching closely. Shorter workweeks should be viewed as a human rights imperative--a way to ensure that every person is guaranteed a meaningful amount of free time to rest, to play, to reflect, to organize and build power, to pray, to wander. Or to do something else entirely: whatever they want.