Project 2025: The Disastrous Economic Consequences
/Bob Srenaski, Guest Contributor
Note from Lynn: I saw the need for someone to analyze the financial and economic consequences of Project 2025 and communicate them to us. I asked Bob Srenaski to do that job for two reasons: 1) As everyone knows, I have no expertise in math or finance; 2) Bob is better qualified for this job than anyone I know. His career in international business spanned nearly 40 years; he retired as the CEO of a multinational corporation. Bob has degrees in Economics from the University of Detroit and the University of Wisconsin – Madison. I know him, personally, as a lecturer in geo-economics over the past seven years for the Lifelong Learning Institute at the University of Wisconsin – Green Bay. I trust his analysis and recommend it to you – and I advise you read it all the way to the end. Here’s Bob’s report.
Project 2025 should be viewed as the Heritage Foundation’s transitional roadmap to socially and economically return America to the mid- 19th and early 20th centuries when there were no personal income or corporate taxes, no “job killing” business regulations, no labor laws, no worker or child labor protections, no social safety net programs such as Social Security and Medicare. In other words, it was a period of unfettered classic capitalism on steroids.
It was a time when a relatively small cadre of “Robber Baron” industrialists and East Coast financial titans accumulated such immense wealth through monopolies and interlocking financial organizations that they cumulatively wielded vastly more power than the entire United States government. Their power was so great that the United States Treasury Secretary had to go begging the New York financial oligarchs in 1895 for a $25 million loan so the country could meet its “gold standard” financial obligations. That need was caused by the government’s total dependence on import tariffs, rather than taxes, to support the value of the dollar under the international gold standard and to fund the entire cost of the federal government. (The 16th Amendment to the constitution that gave congress the power to “lay and collect taxes on incomes” passed in 1913).
While the extremist Heritage Foundation’s authors of Project 2025 (PJ25) plan to deconstruct the greatest economy in the world (4.4% of the world’s population, 24% of the world’s annual economic output, and 30% of the world’s entire wealth), their extreme ideology ignores reality – unfettered classic capitalism on steroids historically produced a continuum of economic and societal disasters for the country, and in the case of the Great Depression, for the world. In the U.S. during the Great Depression, nearly half the 20,000 banks failed, and their individual depositors and small businesses lost everything – no FDIC-insured bank deposits until the “New Deal” in 1935. Five states were left with no operating banks. Millions of citizens were thrown onto the streets to live on handouts from the declining population that still had jobs. Thousands “rode the rails” from town to town, seeking decreasing employment opportunities while living on handouts.
The policies advocated in Project 2025 are not new – they’re a replay of those late 18th and early 19th century laissez faire, “anything goes,” unfettered capitalism that will inevitably destroy the greatest economy in world history.
Those early days of the United States were a roller coaster of recessions, banking crises, and depressions. The general population worked hard, toiled from dawn to dusk, barely made a subsistence living, and died young. The wealthy few who controlled the economy and government, however, lived like kings in garish mansions.
1815 Depression 1815 – 1821 6-years
1839 Depression 1839 – 1843 4-years
1865 Depression 1865 – 1867 3-years
1873 Depression 1873 – 1879 5.5-years
1882 Depression 1882 – 1885 3-years
1893 Bank Panic 1893 – 1894 17-mos.
1907 Bank Panic 1907 – 1908 13-mos.
Great Depression 1929 – 1941
It was the economic and social devastation of the Great Depression generated by that unfettered, extreme capitalism that caused the peaceful overthrow of the Hoover administration in the 1932 election and produced the revolutionary “New Deal” Social Security programs, the securities and banking regulations, and the Federal Deposit Insurance Corporation that contributed to the post WWII bourgeoning economy in which all levels of society benefited at nearly the same growth rate until 1980. That was followed in the mid-1960’s by the “Great Society” programs that lifted the less fortunate and created the Medicare, Medicaid, and other “Safety Net” programs. Those programs in their various forms are today embedded in the foundational structure of the greatest economic power in world history – a mid-range balance between capitalism and socialism. Given that history, the country would do well to heed George Santayana’s 1905 societal admonition: “Those who cannot remember the past are condemned to repeat it.”
PJ25’s Economic Deconstruction Plans – Taxes and Deregulation
The Heritage Foundation’s ultimate goal is to return the country to the unfettered capitalism of the 19th century:
Destroy social safety net programs.
Cut taxes for the wealthy.
Slash corporate tax rates and ultimately eliminate corporate taxes.
Replace current taxes with sales taxes and import tariffs.
Destroy the Federal Reserve which in 2008 saved the U.S. and world economy from a global meltdown worse than the Great Depression.
Destroy every form of regulatory authority that might stand in the way of unbridled corporate capitalism.
And, ultimately, defund the federal government to a minimum – only necessary – skeletal structure.
In other words, PJ25 will ultimately take the country back to the mid-1800’s and early 1900’s when the country was ruled by a cadre of ultra-wealthy oligarchs, not unlike Russia today, and will inevitably deconstruct the world’s greatest economy.
PJ25’s Tax Philosophy
“Treasury should make balancing the federal budget a mission-critical objective. The federal budget absorbs enormous resources from the economy, both in money taken from taxpayers and in money borrowed. The budget should be balanced by driving down federal spending while maintaining a strong national defense and not raising taxes.” (p. 702)
Clearly, PJ25 embodies the philosophy of the president of Americans for Tax Reform, Grover Norquist, who infamously stated: “Our goal is to shrink government to the size where we can drown it in a bathtub.”
“The federal income tax system heavily taxes capital and corporate income and discourages work, savings, and investment. The public finance literature is clear that a consumption tax would minimize government’s distortion of private economic decisions and thus be the least economically harmful way to raise federal tax revenues. There are several forms that a consumption tax could take, including a national sales tax, a business transfer tax, a flat tax, or a cash flow tax.” (p.698)
That “defund the government” philosophy was first implemented in the 1981 Economy Recovery and Tax Act (ERTA), the genesis of the since-debunked “Supply-side” economic theory that drastically cut federal taxes for corporations and the wealthiest Americans with the promise that the benefits would “trickle down” to the middle and lower classes. That legislation was largely responsible for the third largest national debt percentage increase in U.S. history and the growing income disparity that is currently so huge. It coincided with the emergence of a new radical organization named The Heritage Foundation.
Personal Income Taxes
This chart shows the current personal Federal Income Tax brackets.
Be aware that no person pays the full 37% “top bracket” because the tax is progressive. For example, a high income person pays the 10% rate on the first $11,600, then 12% on the $35,550 taxable amount between the $11,600 and the $47,150 income. The calculation continues from bracket to bracket until the 37% tax applies only to the amount of income over $609,350 for a single tax filer.
PJ25 plans to reduce those seven brackets to just two: 15% and 30%.
“The Treasury should work with Congress to simplify the tax code by enacting a simple two-rate individual tax system of 15 percent and 30 percent that eliminates most deductions, credits and exclusions. The 30-percent bracket should begin at or near the Social Security wage base to ensure the combined income and payroll tax structure acts as a nearly flat tax on wage income beyond the standard deduction.” (p.728-729)
Bear in mind that the majority of U.S. households earn substantially less than $168,600 per year in wages – the Social Security wage base after which Social Security and Medicare taxes do not apply. Those households will face substantially higher taxes with the 15% rate since they also pay 7.65% of their wages for Social Security and Medicare payroll taxes. So their actual tax rate will be 15% + 7.76% = 22.65%. Currently, the bottom half of American taxpayers, who earn less than $46,000 a year, pay an effective income tax rate of 3.3%, not including FICA withholding— which reflects their income taxes after deductions, tax credits and other benefits. That will increase from 3.3% to 15%. Under that 15% and 30% two-bracket plan, the typical family of four with an annual income of $100,000 will pay $2,600 in additional federal income tax under the 15% flat tax on their income due to the loss of the 10% and 12% tax brackets. (Per the U.S. Census Bureau, 66% of all U.S. households had total income of $100 thousand or less in 2022).
If the Child Tax Credit is also eliminated, as hinted in Project 2025, that family of four would pay an additional $6,600 compared with today's tax system. The combination of replacing the 10% and 12% brackets with the 15% bracket plus the possible elimination of the Child Tax Credit will increase taxes for a family of four with $100 thousand income by a staggering $9,200, not including the continuing payroll taxes for Social Security and Medicare. PJ25 would also eliminate the deduction of state and local taxes (START), i.e. state income and local property taxes. Consequently, the 15% proposed tax will financially destroy two-thirds of U.S. households and devastate the U.S. economy, which is nearly 70% dependent on consumer spending.
Alternatively, eliminating the current 32%, 35%, and 37% current brackets with the proposed 30% new bracket would result in a $325 thousand tax cut for millions of families of four earning $5 million and more per year, while the 45,000 households in America with more than $10 million annual income would each see an average annual tax cut of $1.5 million. (Source: Center for American Progress)
Clearly, implementation of PJ25’s plan will be a financial bonanza for the wealthy while inflicting outrageous tax increase burdens on the middle class and the working poor.
Corporate Taxes
The statutory corporate tax rate was 50% from the 1950’s until the early 1980’s. During the 50% corporate tax rate era, 27.5% of total federal government tax revenue came from corporations. The 1981 Economic Growth & Tax Reduction Act (ERTA) reduced that rate from 50% to 35%. In 2017, the Tax Cuts & Jobs Act cut the rate again from 35% to only 21%. The consequence of those cuts was that, instead of corporations paying 27.5% of total federal government taxes as they did in the 1950-1960 period, they paid only 8% of total federal taxes in 2022, so the burden of financing the federal government was shifted to 54% from individuals’ income taxes plus 30% taxes paid by workers through their payroll deductions for Social Security and Medicare. Those corporate tax rate cuts are the primary driver of the growing national debt.
The PJ25 plans to further reduce the corporate tax rate from the current rate of 21% to 18% will further cut corporations’ share of total federal revenues to even significantly less than the current 8%.
“The corporate income tax is the most damaging tax in the U.S. tax system. The corporate income tax rate should be reduced to 18 percent. Capital gains and qualified dividends should be taxed at 15 percent. (p.728)
Note that the corporate tax rate cut from 35% to 21% in 2017 has been estimated to have added approximately $2 trillion to the national debt and actually created no net new jobs and no significant new business investment. Approximately 83% of that tax cut’s benefits went to corporations and the top 10% of the wealthiest individuals.
Many of the provisions of the 2017 Tax Cuts & Jobs Act (TCJA) are set to expire in 2025. If they are extended and the corporate rate is cut from the current 21% to 18%, as advocated in PJ25, the aggregate effect will be to increase the national debt by at least $5 trillion. Those actions will not increase employment, since the country is already at full employment. However, the reduction to 18% as advocated in PJ25 has been estimated to give an additional $24 Billion annual tax cut to the Fortune 500 largest corporations. Bear in mind that there are literally thousands of non-Fortune 500 corporations that will also reap those tax cut bonanzas.
The 2021 Inflation Reduction Act (IRA) addressed the problem of hundreds of corporations using “loopholes” and other arcane provisions in the federal tax laws to legally avoid paying any taxes on huge annual profits that they proudly report to “Wall Street” investors. The corporations publicly report those profits to boost their stock prices, increase executive bonuses, increase stockholder dividends, and – in a significant number of cases – buy back their corporation’s stock, thereby increasing the price of the remaining shares still on the markets.
The 2021 Inflation Reduction Act finally addressed those problems of immensely profitable corporations not paying any tax by imposing a minimum 15% tax on their publicly reported operating profits and stock buy-back profits, as well as other tax avoidance operations. PJ25 plans to eliminate that 15% tax as well as others and again make it possible for immensely profitable corporations to pay zero taxes.
“Intermediate tax reform should repeal all tax increases that were passed as part of the Inflation Reduction Act, including the book minimum tax, the stock buyback excise tax, the coal excise tax, the reinstated Superfund tax, and excise taxes on drug manufacturers to compel them to comply with Medicare price controls.” (p.728)
PJ25 also attacks corporations’ employee benefits programs such as health insurance by using federal legislation to reduce the ability of corporations to declare those benefits as business expenses (fewer expenses – more profits). The plan puts a dollar cap on the cost of those employee benefits expenses and does not allow the “cap” to be adjusted for inflation. As the cost of employee health insurance continues to increase, the “cap” on what the corporation is allowed to pay (deduct from its taxes) for employee benefits does not change with inflation, which forces the employees to pay an increasingly greater share of that cost. Eventually employees will be forced to pay all of the health insurance and benefits costs (deducted from their pay), or get insurance coverage on their own. The apparent motivation is to increase corporate profits by ultimately forcing employees of corporations to pay for their own health insurance in the private sector from profitable insurance corporations.
“The current tax code has a strong bias that incentivizes businesses to offer employees more generous benefits and lower wages. Wage income is taxed under the individual income tax and under the payroll tax. However, most forms of non-wage benefits are wholly exempt from both of these taxes. To reduce this tax bias against wages (as opposed to employee benefits), the next Administration should set a meaningful cap (no higher than $12,000 per year per full-time equivalent employee—and preferably lower) on untaxed benefits (Employee health insurance, etc.) that employers can claim as deductions.
“The limitation on benefit deductions should not be indexed to increase with inflation. Employers should also be denied deductions for health insurance and other benefits provided to employee dependents if the dependents are aged 23 or older.” (p.697/729)
PJ25 also calls for the total elimination of tax credits for such environment improvement items as solar panels, wind power investments, energy reduction home investments, electric vehicles, etc. The project also suggests that a universal “flat tax” might be adopted in the future to completely eliminate the entire federal government’s existing personal income and corporate tax structure. The flat tax would amount to the equivalent of an estimated 45% or more sales tax on everything, or alternatively “. . . shrink government to the size where we can drown it in a bathtub,” which appears to be the ultimate aim of the Heritage Foundation and its financial backers.
That proposal reflects the utterly extreme economic ideology of the P25 creators to eliminate all corporate and business taxes, capital and inheritance, and all other taxes and replace them with the regressive tax on consumers.
Moreover, PJ25 would make it practically impossible to increase any current taxes, especially the current ultra-low corporate tax rate.
“Supermajority to Raise Taxes. Treasury should support legislation instituting a three-fifths vote threshold in the U.S. House and the Senate to raise income or corporate tax rates to create a wall of protection for the new rate structure. Many states have implemented such a supermajority vote requirement.” (p.698)
International Tax Havens
A trend has been developing: corporations are changing their legal registrations to countries that have the lowest tax rates without physically changing their actual headquarters locations. It’s called a “corporate inversion.” A prime example is the Eaton Corporation which in 2012 purchased a company in Ireland and declared Dublin its new corporate headquarters (on paper) and country of legal incorporation. It has been reported that the re-registration allows Eaton to avoid over $160 million in U.S. taxes per year while it continues business as usual, including hundreds of millions in U.S. government contracts. And the corporate officers and staff are still located in the U.S. in the same – but now officially “former”– corporate headquarters buildings. Hundreds of other corporations have done those “inversions.”
To counteract that tactic, the current administration has supported an international effort to establish a universal 15% minimum corporate tax rate. The PJ25’s authors are adamantly opposed to universal tax harmonization:
“Tax competition between states and countries is a positive force for liberty and limited government. The Biden Administration, under the direction of Treasury Secretary Janet Yellen, has pushed for a global minimum corporate tax that would increase taxation and the size of government in the U.S. and around the world. This attempt to ‘harmonize’ global tax rates is an attempt to create a global tax cartel to quash tax competition and to increase the tax burden globally. The U.S. should not outsource its tax policy to international organizations.” (p.698)
If, as asserted, the universal corporate tax would increase the size of governments, then the historically precipitous decline in the U.S. corporate tax rates from 50% to the current 21% should have resulted in a huge decrease in the size of the federal government. Instead, federal government employment has remained nearly the same in 2024 as in 2000. What has substantially changed is its ballooning national debt.
Internal Revenue Service
The IRS is viewed by corporate America and foreign corporations with U.S. operations as the enemy of stockholders.
“The Internal Revenue Service is a poorly managed, utterly unresponsive and increasingly politicized agency, and has been for at least two decades. It is time for meaningful reform to improve the efficiency and fairness of tax administration, better protect taxpayer rights, and achieve greater transparency and accountability.
“The federal income tax system heavily taxes capital and corporate income and discourages work, savings, and investment.” (p.698)
“The operating budget of the IRS should be held constant in real terms.” (p. 701)
Defunding the IRS has been an ongoing objective of one political party and of corporate lobbyists. That effort has been successful in the annual budgets passed by Congress since 2010 that have resulted in the IRS’s funding being reduced by over 25% since 2011 and its enforcement staff by over 30%. That decade of “defunding the IRS” has resulted in virtually unbridled tax cheating by wealthy individuals and corporations, because the IRS no longer has sufficient trained professional staff to conduct those necessary complex audits. The IRS has estimated that, because of its inability to conduct audits of wealthy individuals and corporations, the total of “uncollected taxes” annually exceeds the total of “collected” taxes by about $765 billion per year – an amount sufficient to fund all public K–12 schools in the U.S. for nineteen years.
The top executives of the IRS are two presidential appointees, the Commissioner and the Chief Counsel. All other employees are federal government career employees. PJ25 proposes complete politicization of the organization with some leadership positions subject to Senate confirmation and others subject to no approval. It is reasonable to conclude that, if PJ25 becomes law, the President will submit the candidates for Senate approval and will be able to directly appoint those not requiring that approval. In both cases, the IRS will be completely controlled by the President.
“As a practical matter, it is impossible for these two officials to overcome bureaucratic inertia and to implement policy changes that the IRS bureaucracy wants to impede. That is why, notwithstanding decades of sound and fury, almost nothing has changed at the IRS. For the IRS to change and become more accountable, more transparent, and better managed, there is a need to increase the number of presidential appointments subject to Senate confirmation, and not subject to Senate confirmation. At the very least, Congress should ensure that the Deputy Commissioner for Services and Enforcement, the Deputy Commissioner for Operations Support, the National Taxpayer Advocate, the Commissioner of the Wage and Investment Division, the Commissioner of the Large Business and International Division, the Commissioner of the Small Business Self-Employed Division, and the Commissioner of the Tax Exempt and Government Entities Division are presidential appointees. (p.731)
After the implementation of the PJ25 plan, it is reasonable to project that tax collections from high-income individuals and corporations will plummet, while collections from middle- and lower-income individuals whose wages are automatically reported on W-2 forms will increase substantially with the implementation of the 15% minimum tax rate as reported earlier in this document. These declining government tax revenues will undoubtedly provide the new PJ25 administration with justification to attack the major “safety net” programs. The public will then become aware of the plans for those programs that were not disclosed in the PJ25 document.
Social Security, Medicare, and Medicaid
It is astounding that the PJ25 authors chose to keep secret their plans to solve the looming shortfalls in the Medicare and Social Security trust funds. The authors wrote that their proposals for those programs simply could not be “covered here in depth.” Notably, that line in the PJ25 document was co-authored by economist Stephen Moore, who has been a vociferous advocate for slashing and privatizing Social Security, once calling it a “Ponzi scheme.”
Kevin Roberts, the president of the Heritage Foundation, has also gone on record to say the PJ25 “Mandate for Leadership” manifesto is just the basis of their plan and “there are parts of the plan that we will not share with the Left.” Last month, his organization called for raising the Social Security retirement age from 67 to 69 for full benefits, and the author of that analysis, Rachel Greszler, is listed as a Project 2025 contributor.
“Many Treasury Department issues cut across multiple parts of Treasury or other governmental agencies. Several are discussed in this chapter, but not all can be covered here in depth. Other issues of concern include China, cybersecurity, digital assets, digital services taxes, international debt defaults, Iran, Social Security and Medicare Trust Funds and private sector pensions, sanctions policy, and treasury auction and debt issuance.” (p. 710)
However, the authors’ unrevealed planned attack on Social Security, Medicare, and Medicaid is reflected in their perpetuation of the myth that America’s “safety net” programs are the sole drivers of the nation’s growing national debt.
“HHS is home to Medicare and Medicaid, the principle drivers of our $31 trillion national debt. The first year that Medicare spend was visible on the books was 1967. From that point on through 2020 – according to the Main Street Initiative’s analysis of official federal tallies – Medicare and Medicaid, combined, cost $17.8 trillion, while our combined federal deficits over that same span were $17.9 trillion. In essence our deficit problem is a Medicare and Medicaid problem.” (p.283)
The truth is that there are three principal drivers of the debt: (1) the most costly, profit-driven, unregulated U.S. healthcare system with the worst patient health outcomes of all the world’s developed nations; (2) the defunding of the IRS, and the wanton destruction of the nation’s tax system (tax cuts for corporations and wealthy individuals) needed to adequately fund the federal government and the “safety net” programs; and (3) the unaccountable Defense Department’s inept management and wanton wasteful spending.
Nevertheless, the authors advocate for a change in the Medicare system that is clearly directed at ultimately turning the program over to huge private sector insurance corporations.
Medicare
In 1997 congress passed the Balanced Budget Act (BBA) which had a significant impact on traditional Medicare. The new idea was that Medicare beneficiaries could now be given a lump sum—in effect, a “voucher”—that could be used to pay for a private insurance plan similar to a model used by some private employers, as well as the Federal Employees Health Benefit Program (FEHBP). The rationale was that the policy would promote competition with government Medicare and be more efficient by allowing beneficiaries to shop for competing healthcare programs. But instead of the vouchers being issued directly to citizens, private insurance companies were allowed to buy the vouchers so they could more efficiently administer the healthcare program “on behalf of the Medicare enrollees.” Those programs became Medicare Advantage. That legislative action essentially “privatized” a portion of the program in which the insurance companies get the participants’ “voucher” payments from the government and negotiate payments with the healthcare providers. It is in effect a private insurance industry program subsidized by the U.S. government.
Currently, when Americans reach age sixty-five, they are automatically eligible for the “original” federal government Medicare program whereby Medicare pays the healthcare providers – it is their automatic default program. Or, they can choose the option to enroll in an insurance company’s “Medicare Advantage” plan. Until recently most Americans were still in the “original” government Medicare program by default – they did not choose to sign up for an insurance company plan. But recently, slightly over 50% of eligible persons have moved to the insurance companies’ “Advantage” plans.
Medicare Advantage is an insurance industry profit plan, and the profits are enormous. The companies get paid a flat fee per enrollee from the government, and their profits are derived from two sources: (1) Medicare patients’ co-payments, and (2) the difference between what the government pays the insurance company and the amount the insurance companies pay the care providers. The current situation is that the medical care results are declining and the hospitals are financially challenged due to insufficient and overdue payments from the insurance companies. Many hospitals are closing, especially in rural areas that have, in some cases, become “healthcare desserts,” and the insurance companies are making record profits.
PJ25 will make Medicare Advantage plans the new default Medicare plan. To get “Original Medicare,” seniors will need to effectively “opt out” of an “Advantage Plan.” Per PJ25, “Make Medicare Advantage the default enrollment option,” thereby effectively driving seniors into the arms of the insurance corporations. The possible ramifications of this change are enormous, but the national Medicare budget plan details of the Heritage Foundation are “secret,” as noted earlier.
The authors, however, did take a strong stand on one aspect of Medicare – Part D prescription drug plan. (Hint: destroy Part D):
“Repeal harmful health policies enacted under the Obama and Biden Administrations such as the Medicare Shared Savings Program and Inflation Reduction Act Medicare Part D Reform. The Inflation Reduction Act (IRA) created a drug price negotiation program in Medicare that replaced the existing private-sector negotiations in Part D with government price controls for prescription drugs. These government price controls will limit access to medications and reduce patient access to new medication. This ‘negotiation’ program should be repealed . . .” (pp. 467 – 470)
That will effectively restore the outrageously high price of insulin and prevent the federal government from negotiating reductions in the prices of other critical life-sustaining medicines.
Medicaid
PJ25 unsurprisingly advocates for turning the entire Medicaid program over to the individual states, which can impose virtually any restrictions and participant requirements – not only to minimize any state costs and impose ideological mandates such as abortion abolitions that would not be acceptable in a federal program, but also to deny coverage related to women’s reproductive rights. States could also entirely opt out of the program and substitute their own, stripped down, minimalist programs. Minimal oversight would be solely in the hands of political appointees who will be ideologically opposed to the program.
“More broadly, the federal government’s role should be oversight on broad indicators like cost effectiveness and health measures like quality, health improvement, wellness, and should give the balance of responsibility for Medicaid program management to states. This reform would include adding Section 111535 waiver requirements in some cases (such as imposing work requirements for able-bodied adults) while rescinding requirements in others (such as non–health care benefits and services related to climate change).” (p. 469)
There already are over twenty-five million U.S. citizens with absolutely no healthcare because their income exceeds 138% of the $15,060 Federal Poverty Level income for a single person. Subsequently the Affordable Care Act was expanded for those whose income exceeds the federal poverty level but is not high enough to afford commercial insurance. The expansion provides tax credits to subsidize the cost premiums for buying private insurance through the Affordable Care Act public marketplace in states that agreed to participate in the expansion.
State participation in Medicaid is voluntary, and all states have participated since 1982. However, ten states have refused to participate in the expansion under the Affordable Care Act mentioned above, despite the federal government’s subsidizing 90% of the states’ costs. Most of those non-participating states are in the Southeast plus Texas, Kansas, Wyoming, and Wisconsin. By turning Medicaid program management over to the states, the PJ25 plan will substantially increase the number of poor, uninsured U.S. citizens, as it already has in those ten states.
The Federal Reserve, Banks and Money
The “Fed” is the country’s central bank. Every country has one to safeguard the country’s banking and financial systems, control the money supply, promote economic growth and full-employment, control inflation, and – most important – to get the economy back on track when it inevitably goes “off the rails” into a recession before that becomes a depression. The U.S. FED has two objectives: (1) achieve full employment, and (2) achieve price stability – low inflation.
The FED uses regulation enforcement and other tools to maintain the stability of the banking system, and it uses management of the money supply and movement of interest rates to adjust the economy and keep it from crashing or from uncontrolled inflation. When the Fed was first created in 1913, it was part of the Executive Branch and was directly controlled by the Secretary of the Treasury – a political office. Unfortunately, in some cases, the politicians pressured the FED to keep interest rates low to stimulate the economy and employment during presidential election years. Those measures caused extremely high inflation in the immediate post-WWII period. So, in 1951, an agreement was reached to make the FED independent from the treasury department; that gave it the unique status of being “independent within the government” so that neither the Congress nor the president can dictate the Fed’s policy decisions.
As mentioned above, the Federal Reserve controls the nation’s money supply. (“Federal Reserve Note” is on the top of your paper money.) It can increase the money supply and cut interest rates to stop a recession. Conversely, it can decrease the money supply and increase interest rates to slow the economy when inflation is too high and will potentially get out of control.
At one time many decades ago, the world’s money supply was on the “Gold Standard” which, by international agreement, meant that the amount of money any country could issue was directly dependent upon the amount of gold the country possessed. A country’s economic wellbeing was therefore dependent on how much gold it could mine – a commodity it had to find and dig out of the ground. The “Gold Standard” was a failure during the first and second world wars and abandoned by all countries after WWII. Today the value of a country’s money is determined by currency trade rates which, in turn, reflect the strength of each country’s economy as well as its political stability. So today, the U.S. dollar’s strength on the international currency exchanges is determined by the “Good Faith and Credit of the United States,” as well as some other very complicated factors such as the strength of its economy, its national debt funding, its political outlook, etc. Today no country’s money value is dependent upon any type of commodity like gold or silver. The PJ25’s authors are determined to fundamentally change America’s money and banking system that has worked so effectively for so long:
“A core problem with government control of monetary policy is its exposure to two unavoidable political pressures: pressure to print money to subsidize government deficits and pressure to print money to boost the economy artificially until the next election. Because both will always exist with self-interested politicians, the only permanent remedy is to take the monetary steering wheel out of the Federal Reserve’s hands and return it to the people.” (p.735)
In the short-term, PJ25 recommends (plans) the appointment of a commission of politicians to direct the policies of the FED – in other words, eliminate its independence and put it under the authority of Congress and the President.
“Have elected officials compel the Fed to specify its target range for inflation and inform the public of a concrete intended growth path.” (p.740)
The first item on that agenda will be to eliminate the FED’s full employment mandate and focus only on price stability (inflation).
“Eliminate ‘full employment’ from the Fed’s mandate, requiring it to focus on price stability alone.” (p.732, 740)
Apparently the welfare of workers and of their families is of no concern to the PJ25 authors.
Finally, the true mission of the 2025 authors is the total elimination of the Federal Reserve and return of the country to the banking anarchy of the late 1890s and early 1900s – “Free Banking” and the “Gold Standard.”
“Appoint a commission to explore the mission of the Federal Reserve, alternatives to the Federal Reserve System, and the nation’s financial regulatory apparatus.
“In free banking, neither interest rates nor the supply of money is controlled by the government. The Federal Reserve is effectively abolished, and the Department of the Treasury largely limits itself to handling the government’s money.” (p.741)
“Commodity-Backed Money. For most of U.S. history, the dollar was defined in terms of both gold and silver. The problem was that, when the legal price differed from the market price, the artificially undervalued currency would disappear from circulation. There were times, for instance, when this mechanism put the U.S. on a de facto silver standard. However, as a result, inflation was limited.” (p.741)
The real problem the PJ25 authors have with the FED is its statutory and financial independence from the Executive and Legislative branches of the federal government. Not only does the FED not depend on taxpayer funding, but it also actually earns substantial profits and pays them to the Treasury Department (the taxpayers). Those payments have averaged approximately $90 billion per year over the last ten years.
The FED makes money through its domestic and international financial clearing house transactions such as checks, credit cards, etc., including operating an automated clearinghouse for international currency and loan transactions. Example: Average DAILY Transactions processed by the FED in 2022: 18 billion transactions, with a value of $38.6 trillion. Average value of a transaction: $2,089.00. It also profits from the interest it charges banks on its short-term loans offered them as well as on its purchases of U.S. Treasury bonds and, in some extreme circumstances, its Mortgage Backed Securities (MBS).
Consumer Finance Protection Bureau
The Federal Reserve, “the FED,” also funds the Consumer Financial Protection Bureau which, because it was set up in 2011 as a subsidiary of the FED, is also independent of Congress. Through 2022 the agency has put $17.5 billion back in the pockets of financially victimized Americans in the form of monetary compensation, principal reductions, canceled debts, and other consumer relief resulting from CFPB enforcement and supervision work. The CFPB successfully filed lawsuits against huge banks that defrauded homeowners during the Great Recession of 2008 and separately burdened customers with charges for nonexistent “ghost” accounts and services. CFPB also forced reforms of the parasitic “payday lender” industry.
Because the CFPB is literally out of the reach of the legislative and executive branches, since it requires no taxpayer funding and is a subsidiary of the “independent within the government” Federal Reserve, it is targeted for destruction by the Heritage foundation, per PJ25:
“On February 27, 2023, the Supreme Court granted the petition for a writ of certiorari. The Court should issue its final decision by 2024. The CFPB is a highly politicized, damaging, and utterly unaccountable federal agency. It is unconstitutional. Congress should abolish the CFPB and reverse Dodd–Frank Section 1061, thus returning the consumer protection function of the CFPB to banking regulators and the Federal Trade Commission. Provided the Supreme Court affirms the Fifth Circuit holding in Community Financial Services Association of America, the next conservative President should order the immediate dissolution of the agency—pull down its prior rules, regulations and guidance, return its staff to their prior agencies and its building to the General Services Administration.” (p. 839)
The PJ25 authors insist that “Congress should abolish the CFPB . . . thus returning the consumer protection function of the CFPB to banking regulators and the Federal Trade commission,” both functions whose professional staffs will be replaced by ideologically radical political appointees, according to the PJ25 plan for the next administration.
Banks and Financial Deregulation
“One of the priorities of the incoming Administration should be to restructure the outdated and cumbersome financial regulatory system in order to promote financial innovation, improve regulator efficiency, reduce regulatory costs, close regulatory gaps, eliminate regulatory arbitrage, provide clear statutory authority, consolidate regulatory agencies or reduce the size of government, and increase transparency.” (p.705)
In 1933 the “New Deal” put in place the Emergency Banking Act, featuring the Glass-Steagall provision which provided for two types of banks in the U.S.: consumer-type banks, which are not allowed to use customer deposits for risky speculative investments that led to the massive bank failures of the Great Depression, and Investment Banks that can invest in speculative corporate transactions, but cannot take consumers’ deposits. PJ25 advocates erasing those regulatory borders and letting all banks engage in virtually any risky investments with depositors’ money.
Bank Deregulation
In response to lobbying by the financial industry, the Graham Leach Bliley Act became law in 1999; it allowed financial institutions to again use depositors’ funds to engage in more risky investments. That legislation essentially reversed the “New Deal” bank safety regulation known as Glass-Steagall, and that change significantly contributed to the financial crisis - banking meltdown of the 2008 Great Recession. PJ25 will INCREASE financial risk.
“It was never a good idea either to restrict banks to taking deposits and making loans or to prevent investment banks from taking deposits. Doing so makes markets less stable. Policymakers should create new charters for financial firms that eliminate activity restrictions and reduce regulations in return for straightforward higher equity or risk-retention standards. Ultimately, these charters would replace government regulation with competition and market discipline, thereby lowering the risk of future financial crises and improving the ability of individuals to create wealth.” (p.705)
Again, PJ25 advocates for replacing regulations created because of financial institutions’ history of grievously damaging actions with laissez-faire unbridled market competition.
“The new Administration should establish a more streamlined bank and supervision by supporting legislation to merge the Office of the Comptroller of the Currency, the Federal Deposit Insurance Corporation, the National Credit Union Administration, and the Federal Reserve’s non-monetary supervisory and regulatory functions.” (p. 705)
More Banking Deregulation
In the aftermath of the 2008 financial crisis (“The Great Recession”) that was caused by the proliferation of an unregulated “shadow banking” industry that brought down the entire U.S. and European banking systems, the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (Dodd-Frank Act) became law. While the PJ25 authors want to dismantle the entire legislation, they have singled out two provisions that they apparently find unjustifiably onerous.
Housing America
The Treasury Department plays a role in managing the conservatorships of Fannie Mae (Federal National Mortgage Corporation) and Freddie Mac (Federal Home Loan Mortgage Corporation), which are public corporations backed by federal government guarantees. Fannie Mae was created in 1935 to make it possible for citizens to purchase homes for the first time on extended payment mortgages (typically 20% down, 80% thirty-year fixed-rate mortgages). Freddie Mac was created in 1971 to further expand the housing financing process. Those agencies buy those standardized mortgages issued only to qualified buyers, gather them in geographically diversified multi-million-dollar pools, and sell securities backed by those mortgage pools. Those are called Mortgage Backed Securities (MBS), the proceeds of which are then used to buy more mortgages. The process is continuous, thereby making housing affordable with 30-year mortgages on a continuous basis.
According to PJ25, those organizations should be “wound down” and housing financing should be “privatized.”
“The Congress should work to end the conservatorships and move toward privatization of these massive housing finance agencies. This would restore a sustainable housing finance market with a robust private mortgage market that does not rely on explicit or implicit taxpayer guarantees. Direct government ownership has worsened the risks that government-sponsored enterprises (GSEs) pose to the mortgage market, and stock sales and other reforms should be pursued. Treasury should take the lead in the next President’s legislative vision guided by the following principles: Fannie Mae and Freddie Mac (both GSEs) must be wound down in an orderly manner. The Common Securitization Platform should be privatized and broadly available. Barriers to private investment must be removed to pave the way for a robust private market. The missions of the Federal Housing Administration and the Government National Mortgage Association (“Ginnie Mae“) must he right-sized to serve a defined mission.” (p. 706)
“The Federal Reserve should be prohibited from picking winners and losers among asset classes. Above all, this means limiting Federal Reserve interventions in the mortgage-backed securities market. It also means eliminating Fed interventions in corporate and municipal debt markets.” (p. 734)
Again, the PJ25 authors falsely place the blame for the recently high housing prices on the Federal Reserve, which purchased substantial amounts of MBS Mortgage-Backed Securities to drive the economic recovery from the 2008 Great Recession and the COVID recession.
“A primary driver of higher costs during the past three years has been the Federal Reserve’s purchases of mortgage-backed securities (MBS). Since March 2020, the Federal Reserve has driven down mortgage interest rates and fueled a rise in housing costs by purchasing $1.3 trillion of MBSs from Fannie Mae, Freddie Mac, and Ginnie Mae. The $2.7 trillion now owned by the Federal Reserve is nearly double the levels of March 2020. The flood of capital from the Federal Reserve into MBSs increased the amount of capital available for real estate purchases while lower interest rates on mortgage borrowing—driven down in part by the Federal Reserve’s MBS purchases— induced and enabled borrowers to take on even larger loans. The Federal Reserve should be precluded from any future purchases of MBSs and should wind down its holdings either by selling off the assets or by allowing them to mature without replacement.” (p.735)
The reality is that the current high housing prices are due to the strong economy coming out of the COVID economic crisis during which the housing industry virtually shut down. That post-COVID economic burst created much more demand for houses than the construction industry could supply. A second reason is that existing home owners refinanced their mortgages at the historically low interest rates that were created to stimulate the post-COVID economy. Existing home owners refinanced their mortgages at the low rates and are simply refusing to sell their homes because their new mortgage payments are lower than apartment rent, condominium payments, or a new mortgage on a new home.
FINAL COMMENTS
Recipe for the Second Great Depression
Beyond its explicit extreme political/social ideology – e.g., anti ESG, DEI, and CRT – that permeates the entire PJ25 plan, its underlying foundation is FINANCIAL. It is the restoration of the laissez-faire commercial structure of the late 1800’s and early 1900’s that produced the Great Depression. That can be traced to the 1973 birth of the wealth-funded Heritage Foundation as a non-profit public policy research institute based in Washington, D.C. Heritage's stated mission is to formulate and promote conservative public policies based on the principles of free enterprise, limited government, individual freedom, traditional American values, and a strong national defense. The reality is that the Heritage Foundation’s Project 2025 is anti-government, specifically anti-regulation, and certainly anti-tax as explored in the previous pages of this document.
Throughout the document, the authors attack virtually every financial rule and regulation in every federal government agency and department, especially every department of the Treasury and Labor Department, Federal Trade Commission (FTC), Agriculture Department, the Federal Reserve, and most egregiously, the Consumer Financial Protection Bureau.
“One of the priorities of the incoming Administration should be to restructure the outdated and cumbersome financial regulatory system in order to promote financial innovation, improve regulator efficiency, reduce regulatory costs, close regulatory gaps, eliminate regulatory arbitrage, provide clear statutory authority, consolidate regulatory agencies or reduce the size of government, and increase transparency.” (p.737)
“This underlying principle should guide U.S. financial laws. Policymakers should create new charters for financial firms that eliminate activity restrictions and reduce regulations in return for straightforward higher equity or risk-retention standards. Ultimately, these charters would replace government regulation with competition and market discipline, thereby lowering the risk of future financial crises and improving the ability of individuals to create wealth.” (p.737)
Balancing the Budget – Defunding Government
Whether slashing financial support for public education or the social safety net programs, PJ25 is a plan to radically “defund” government.
“Treasury should make balancing the federal budget a mission-critical objective. The federal budget absorbs enormous resources from the economy, both in money taken from taxpayers and in money borrowed. The budget should be balanced by driving down federal spending while maintaining a strong national defense and not raising taxes.” (p.702)
Balancing the federal government’s annual fiscal budgets is certainly a laudable goal. Consider the actual 2023 Federal government’s financial performance:
2023 Budget: $6.1Tr Spending, $4.4Tr Tax Revenue = $1.7 Trillion deficit
Safety net programs plus national debt interest were 70% of total spending.
National Defense and Veterans Administration were 19% of total spending.
The remaining cost of the entire government was only 11% of expenditures.
Continuously slashing corporate taxes further from 21% to 18%, extending the 2017 TCJA tax cuts, 83% of which went to corporations and the extremely wealthy, radically cutting taxes by capping the individual income tax rate at 30%, slashing the capital gains tax rate, supporting the ability of wealthy individuals and corporations to continue to hide their wealth in international “tax havens,” prohibiting tax increases of any kind for any reason, continuing to defund and politicize the IRS, and supporting international tax havens for corporations and wealthy individuals to hide their wealth from public scrutiny will only make the annual fiscal situation worse. Moreover, the financial foundation of the country is in jeopardy.
Destruction of the U.S. Safety Net
“The budget should be balanced by driving down federal spending while maintaining a strong national defense and not raising taxes.” (p.702)
That cannot not be accomplished without defunding Social Security, Medicare, Medicaid, and other social safety net programs. Social Security, Medicare, Medicaid CHIPS, Affordable Care Act insurance premium subsidies, and other miscellaneous “safety net” programs account for 62% the federal budget. The national debt interest plus the defense department and veterans’ administration account for 27%. Only 11% of total budget funds the entire federal government. Clearly, the only method by which the PJ25 “balance the budget” mission can be accomplished is by attacking the “safety net” programs, the largest of which are Social Security and Medicare/Medicaid, which accounted for 49% of the total federal government’s 2023 expenditures. The Heritage Foundation’s Project 2025 budget balancing plan is obvious:
The as yet “secret” plan to address the looming deficit in the Social Security Trust Fund is likely to “privatize” the system by converting it to a system of personal annuities with corporate investment firms. It is possible that current social security recipients will have their payments reduced and provided in annuity payments which they will have the option to take out or continue to invest.
Medicare will likely also be “privatized,” as previously discussed, under insurance company
Medicare Advantage plans, with the payroll taxes going to insurance premiums for policies with restricted coverages and higher copayments.
Medicaid is likely to eventually become the prerogative of the individual states.
In addition to these tragic attacks, one should not ignore the transfer of corporations’ employee insurance costs to their employees.
Without the defunding/privatization of those “safety net” programs, it will be impossible for Project 2025 to accomplish its primary objective of “balancing the budget” while further reducing the taxes of corporations and the most wealthy individuals. Clearly, that inevitable attack on the core components of the “safety net” is consistent with the Heritage Foundation’s goals with regard to “government,” which were succinctly captured by the previously quoted statement of Grover Norquist: “Our goal is to shrink government to the size where we can drown it in a bathtub.”
Project 2025 – Beyond the Outer Limits of Economic Rationality
Free banking would produce a “stable and sound” currency and a “strong” financial system, “while allowing lending to flourish.” Alternatively, the next Administration should “consider the feasibility of a return to the gold standard.” (p.732)
For the PJ25 authors to even consider those possibilities is beyond the limits of rationality:
It would destroy the Federal Reserve system and all state and federal banking regulations and return to the “free banking” era of the nineteenth century, “whereby neither interest rates nor the supply of money would be controlled by any government entity.” It would be a return to the “free banking” financial anarchy of 120 years ago that led to the Great Depression.
Returning the U.S. to the Gold Standard was best described in 1921 by Lord Beaverbrook who was a multimillionaire by age 31:“It is an absurd and silly notion that international credit must be limited to the quantity of gold dug up out of the ground. Was there ever such a mumbo-jumbo among sensible and reasonable men?”
Despite refusing to unveil its plans for the futures of the Social Security and Medicare trust funds, it is known that there is also an extensive plan to actually implement Project 2025 immediately after the new Heritage-backed administration takes office in January 2025:
The 180-Day Playbook, which the Heritage Foundation describes as a “comprehensive, concrete transition plan for each federal agency,” is being kept hidden from you and me.