According to a recent estimate by the Congressional Budget Office (CBO), President Trump’s “big, beautiful bill” would increase the nation’s deficit by $2.4 trillion over nearly a decade.
The CBO reported that the proposed tax cuts, alongside additional measures, aim to eliminate expiration provisions in the Trump Signature 2017 tax law, but these cuts are projected to decrease revenues by more than $3.6 trillion during the same period.
On the flip side, the agency estimated that federal spending reductions, which include reforms to Medicaid and the Supplemental Nutrition Assistance Program, would save about $1.2 trillion during this time frame.
House Republicans have set a minimum target to cut spending by $1.5 trillion in conjunction with the new tax system.
It’s worth noting that Wednesday’s analysis included an extra $174 billion in deficits due to the interactive effects of various components of the law that prior estimates did not consider.
The estimates suggest the tax cuts would incur significant costs, especially as Trump and other Republicans increased their criticisms of nonpartisan budget analysts.
House Ways and Means Committee Chairman Jason Smith (R-Mo.) pointed out that they hope to disclose a report indicating that the CBO recorded $1.7 trillion in the 2017 tax cut.
Nevertheless, scrutiny regarding the package’s cost persists, particularly from Finance Hawks who are advocating for deeper spending cuts. Some have proposed that the Senate might narrow the tax provisions in the bill to trim costs.
Yet, there are GOP senators who have raised concerns over suggested reforms to Medicaid, which also include labor requirements aimed at achieving significant savings on the spending side.
The CBO noted that the bill, as it stands, would “increase the number of uninsured individuals by 10.9 million by 2034.” This figure encompasses about 1.4 million people without verified citizenship or immigration status who would no longer receive coverage from state-only funding programs by that time.
Additionally, the CBO indicated that the bill would lower the total benchmark premium, on average, in an Affordable Care Act market plan by an estimated 12.2% by 2034.
Changes to the legislation are anticipated soon in the Senate, with hopes of getting the bill passed by early July.
The national debt has surged following the federal government’s trillions spent on rescue measures in response to the Covid-19 pandemic, which saw various segments of the global economy shut down.
Overall debt levels have risen from around 100% of annual GDP to about 120%, remaining there since 2021. The U.S. total debt is roughly $36 trillion, meaning the additional $2.4 trillion represents about 6.7% of that total over the nine-year accounting period.
On a positive note, Deutsche Bank analysts noted that this package could reflect progress in deficit reduction, estimating the federal government’s fiscal deficit as a percentage of GDP to be around 6.5-7% over the next few years.
On Wednesday, Republicans expressed enthusiasm about their second-quarter GDP outlook, which the Atlanta Fed projected could grow by 4.6% after a contraction in the first quarter, spurred by rising imports.
Updated at 10:51am
