Much has been written about the great harm Republicans’ “One Big Beautiful Bill” (OBBB) would do to the federal government’s finances and the financial well-being of low-income Americans. But less appreciated is how adding trillions of dollars to the deficit during a time of high price pressures, and making major cuts to safety-net programs that help cushion the economy during downturns, would undermine economic stability.
When the country enters a recession and demand from the private sector drops, deficit-financed spending is an essential tool governments use to help fill the void and restore the economy to full strength. Conversely, policymakers should rein in deficits to prevent inflation and restore the country’s fiscal reserve when the economy has recovered. Last year, the economy grew at a healthy 2.4% annual rate. Although President Trump’s counterproductive trade policies have threatened to reverse this trend, the nation’s unemployment rate has so far remained stable around 4.2% — a historically low level. Meanwhile, the inflation rate remains stubbornly above the Federal Reserve’s 2% target after years of rising prices. Normally, this would be the perfect time for Congress to cut deficits, clamp down on inflationary pressures, and put debt on a sustainable path.
But despite campaigning against the fiscal excesses and inflationary policies of the Biden administration, Republicans’ OBBB pours fuel on the fire by pumping trillions of dollars into the economy when they’re not needed. In addition to extending the already-unaffordable tax cuts passed in President Trump’s first term, this bill tacks on expensive new provisions such as eliminating taxes on overtime and tips. Moreover, many of these provisions are temporary, supercharging the short-term impact on our deficit at precisely the time when our nation needs the opposite: nearly three-fourths of the House bill’s roughly $3 trillion deficit increase would occur in just the first four years after passage.
Yet in addition to sabotaging the government’s ability to fight inflation now, OBBB would also make it more difficult for the government to fight future economic downturns. Pointlessly piling on debt now can make it harder for the government to borrow more during a recession when it’s actually needed. And some of the few policies Republicans have included to reduce the cost of the bill would undermine programs that are most helpful in supporting the economy through those recessions, such as the Supplemental Nutrition Assistance Program (SNAP).
SNAP is a strong “automatic stabilizer” because spending on benefits increases automatically when the U.S. economy slips into recession, as falling incomes cause more people to become eligible for support. An integral feature of SNAP is that administrators may also waive the program’s work requirements when an area “does not have a sufficient number of jobs,” which often occurs during a recession. Under federal rules, various geographic areas can demonstrate their eligibility for these waivers through several criteria, including averages of unemployment rates, eligibility for special unemployment benefits, and more, ensuring that benefits are not stalled when needed the most.
OBBB removes this flexibility. States would only be able to request waivers for counties, while the only acceptable metric to prove a weak labor market would be an unemployment rate above 10%. For context: During the worst of the Great Recession, the national unemployment rate only hit 10% in a single month, while 40% of counties never reached that threshold at all. In addition, the House bill includes new cost-sharing requirements for states, which would require states to pay up to 25% of SNAP’s cost depending on the state’s payment error rate (the Senate has proposed limiting cost-sharing to 15% in its version of the bill).
Although reducing improper payments is certainly an admirable goal, this legislation undermines that effort by cutting federal support for SNAP administrative costs. And taken together, OBBB’s changes would be especially detrimental during recessions. Because most states are legally not permitted to run budget deficits, they are forced to make painful budget cuts when revenues fall during downturns. At the same time, payment error rates for SNAP and other similar programs tend to rise as states scramble to process a new wave of applications. Thus, the GOP cost-sharing requirements would force states to shoulder a growing share of SNAP costs when they can least afford it, likely leading to spending cuts that prolong recessions.
Republicans might claim that these fears are overblown because Congress is free to change SNAP’s waiver and cost-sharing requirements during a crisis (as it has done in the past). However, requiring Congress to pass legislation to unlock SNAP leaves the program vulnerable to political gridlock, and undermines its ability to automatically stabilize the economy. Moreover, if these requirements are suspended during future recessions, they will fail to generate the savings that Republicans claim will pay for their costly tax cut and make the bill’s deficit impact that much worse. By piling on debt during a time of high prices and low unemployment, while making it needlessly more difficult to fight future downturns when the situation is reversed, OBBB undercuts any argument one could make that Republicans are the party of fiscal responsibility and stable economic growth.
The tax portion of the Senate’s reconciliation plan would cost $4.2 trillion over 10 years — roughly $500 billion more than the House’s legislation. However, if all the tax policies in both bills were made permanent, the Senate version would cost $400 billion less than the House bill (which would cost $5.2 trillion over 10 years). Importantly, the Senate bill’s price tag is expected to grow once Senate Republicans reach a deal to increase the cap on the state and local tax deduction, and none of these cost estimates include additional interest on the debt that the legislation would rack up.
