Economist and market commentator Peter Schiff is cautioning against President Donald Trump's latest tax and spending package, saying it could do more harm than good for the U.S. economy.
The Wrong Direction
A day after Trump signed the bill into law during a July 4 picnic at the White House, Schiff took to social media to argue that Trump's approach is flawed. "Trump’s tax cuts, which add to budget deficits, won’t grow the economy," Schiff posted on X. "Instead they’ll result in higher long-term interest rates and inflation."
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According to Schiff, real growth comes from policies that boost supply, not just demand. "To grow an economy, tax cuts need to stimulate supply, not demand. They need to increase savings and investment, not consumer spending," he wrote.
When one X user replied, "Consumer spending is what drives the economy," Schiff fired back, "Wrong, a productive economy enables consumers to spend."
Schiff's warnings follow a wave of criticism from economists who believe the bill's impact on the federal deficit and inflation could be significant.
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Trillions In New Deficit Spending
The Congressional Budget Office estimates Trump's newly signed bill will add $3.3 trillion to the deficit over the next 10 years. Some economists, including Kent Smetters of the University of Pennsylvania’s Wharton School, say the U.S. was already on an “exploding debt path” even before this legislation.
"It's like the house is burning down and we're throwing in some accelerant instead of some fire extinguisher," Smetters told ABC News on Friday. "We're not too big to fail."
Former Congressional Budget Office Director Douglas Elmendorf told ABC News that the bill “will make interest rates higher and makes the risks of falling into a doom loop higher than it would be otherwise.”
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Millions Could Lose Health Coverage
In addition to deficit concerns, the bill includes $1.2 trillion in cuts to Medicaid and food assistance. The CBO estimates it will result in 11.8 million Americans losing health coverage.
AFL-CIO President Liz Shuler called it "the worst job-killing bill in American history," saying it gives “a $5 trillion gift to the wealthy while stripping support from working families.”
Trump Defends The Bill As Pro-Growth
Despite the pushback, Trump has argued that stronger economic growth and tariff revenues will offset the cost of the legislation. “Our country is going to explode with massive growth … This bill sets us on course for enormous prosperity in the new and wonderful Golden Age of America,” Trump wrote on Truth Social on July 1.
But many economists remain unconvinced. “Bond markets can be really, really disciplinary,” Smetters told ABC News. “If we fall into a doom loop, then the U.S. has to make dramatic cutbacks in federal benefit programs like Social Security and Medicaid and sharply raise taxes. That will be really bad for people’s standard of living.”
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