UPDATED: The OBBB (Orange Billionaire Bastard’s Boondoogle), Arizona’s Economy, and the Coming Budget Fights Defining the 2026 Election

Trump and the MAGA Congress have shut down the government to ensure that their vision for our economy is enacted. In the simplest terms, it’s a disaster for Arizona’s people and economy.

It will shatter our state budget, push the quickest growing sectors of our State’s economy into recession or depression, directly kill many people with medical neglect as they lose heathcare access and their hospitals close, and destroy good-paying jobs throughout our economy, while children literally go hungry to pay for tax cuts for millionaires and billionaires.

It is probably the most damaging and reckless budget ever passed… since the last budget the Trump Regime was able to effect, which OBBB continues and extends. It sucks trillions out of the real economy that provides people jobs and vital services just to hand over $5 Trillion of it over to the oligarch class while larding another $3.5 Trillion onto our deficit.

Here my summary presentation on its impact here in AZ (needless to say, I didn’t spend any time on making it pretty…):

I’ll post video of the presentation and QA once available, but I have a few thoughts about the knock-on effects from this budgetary terrorism here in AZ that is destined to become the biggest political challenges of next year’s Arizona election cycle.

UPDATED: The budgetary effects i describe on Arizona’s budget and economy are pretty much baked in now. The national Democrats have decided to fight only (thus far?) on the field of the ACA subsidy cuts. So, even if ‘victorious’ in the Phyrric shutdown battle, the best outcome would be restoration of that portion of the budget and avoiding the effects on ACA exchange customers. I doubt that there will be any significant amerioration of the rest of the OBBB’s impacts.

If my assumption holds, we will see one immediate fallout in AZ: the loss of nutrition assistance to a ton of folks who formerly qualified for SNAP and related programs who are suddenly dependent on other assistance – or nothing. Governor Hobbs has already pointed out that there is not sufficient money sloshing around the system to backfill this major revenue loss to the state to help these people. If the cuts start to bite this year, that will create a leadership crisis outside of the legislative session that will be quite challenging to navigate for the Governor. I honestly can’t think of what she can do outside of possibly calling a special session for the purpose and demanding the MAGA legislature act – which they are unlikely to do, even if chained to their desks at the Capital. Which may be very good fight to have for the Governor from a political perspective (who could possibly fumble hungry kids versus tax cuts for billionaires?), though a terrible outcome for those affected.

The next issue I forsee as a result of the OBBB on Arizona is the issue of conforming changes to the Arizona income tax laws next year. Generally, it is fairly uncontroversial that when there are changes to the Federal income tax, states generally adopt conforming changes in their state income tax laws, mainly for clarity and administrative efficiency. Under OBBB, however, those conforming changes are projected to cost the state coffers many, many millions of dollars in lost revenue. I expect that this will set up a fight (or at least it should…) between the MAGA lege – who will be hot to adopt those conforming changes – and our Governor and her executive team, who should NOT want to adopt those changes. This will be a central and critical budget fight that will partially structure Hobbs’ and the AG and SS re-elect campaigns. If the Governor backs down and signs a budget with those conforming changes, I think it could be a political disaster for her.

Next, the State government will lose literally hundreds of million in revenue for SNAP, Medicaid, and education (and potentially those conforming income tax changes) up to 2029 under the OBBB. There will need to be additional revenue for the state. Period. There is too big a hole to cut your way to a balanced budget, especially as our AZ Supreme Court has told the MAGA Lege they are unconstitutionally underfunding public education already. Even if Hobbs is reelcted under such conditions, if these problems aren’t addressed the budget squeeze will severly limit what she might achieve in a second term.

Where will the needed revenue come from? Historically, there is only one place the MAGA or GOP Lege has EVER been OK getting additional revenue: a temporary supplimental sales tax. I can almost guarantee that the result will be a proposed Referenda to raise the revenue with an additonal increment of sales tax. That will almost certainly be the MAGA Lege’s initial offer to address the problem – once they drag their caucus kicking and screaming to the realization they HAVE to have more revenue, which will not be easy.

For several reasons that is a fucking terrible solution.

The most important one being that Arizona already has one of the highest combined (state and local) sales tax rates in the nation (definitely in the top 10), and Arizona consumers are pissed enough already with continuing inflation and a burgeoning affordability crisis. They aren’t going to like paying more for everything they buy. It’s a political dud, and likely wouldn’t even pass if proposed.

Next, – and this is the reason MAGA/GOP have generally turned to this solution in a budget crisis (usually of their own making, in might add…) – sales tax is the very definition of a highly regressive tax: the poor and working class pay much more of their incomes for an increment of sales tax than the wealthy.

Next, sales tax revenues are EXTREMELY sensitive to economic downturns – a small loss of consumer confidence or mild recession has outsided effect on projected revenues, which generally assume unrealisticly sunny economic forcasts.

Next, Arizona is already overly dependent on the sales tax for it’s revenue base, which is why we have had so many severe budget crunches over the past couple decades. Making us more reliant in a time when our economy seems to be at the mercy of a mad king who tosses around tariffs at nations who simply piss him off personally seems a poor plan to me.

Finally, I guarantee any proposed Referenda for a new sales tax will be sunsetted on a very short schedule – maybe as short as just a year. Which, given that we are pretty much stuck with much of the effects of the OBBB until 2029 at least, will be unlikely to be sustainable.

For those reasons, When Hobbs sqaures off about the conforming tax changes, she must also demand a recission of the flat income tax. It’s a popular position and it would be a good start in fixing the major revenue crisis MAGA and Ducey’s reckless cuts have put us in. Hobbs should also throw down on a demand to END the revenue sucking black hole of universal ESA vouchers. People overwhelmingly dissapprove of the ESA program and the more they understand it, the more they dislike it. Sticking it to the wealthy assholes sending their kids to tony private schools, and lining their own pockets and college funds, is a political winner.

Unless she fights on this ground – no conforming tax changes, no more flat tax, and no more ESAs – I think she loses the budget fight, and loses the Governor’s race next year. END UPDATE.

RESOURCES:

Here is some of the preliminary research queries on Perplexity to gather the facts and anaysis done on the OBBB.

Here are various governments’ reports and analysis on which I relied:

Arizona’s Joint Legislative Budget Committee Report.

Pima County’s Analysis of the impact.

Arizona Physician’s Association analysis of OBBB’s impacts on health care.

finally, CBO’s reports on the impact of HR1 (OBBB). You will need to dig a bit to get to the bottom lines in these, and that is by design, I’m sure.

Feel free to use this material and the presentation to do your own investigation and spread the word to your own communities of interest about just how bad this will be for Arizona. And never forget: every single Republican Member of Arizona’s ConDel voted for it – regardless of their rhetoric and excuses.

Let me know if you would be interested in a presentation to your club or organization. I don’t think enough people appriciate what’s coming at us – even if the Dems succeed in restoring the ACA subsidies they seek in this shut down fight.

Now, for a surprisingly accurate run down of how MAGA is trying to sell the massive cuts to health and nutrition programs and the lies those excuses contain we turn to the inimitiable John Oliver. Enjoy!