From our Budget Breakdown series highlighting problems in fiscal policy to inform the 2025 tax and budget debate.
This piece originally appeared in Forbes and was written by PPI’s Ben Ritz.
House Republicans passed their “One Big Beautiful Bill Act” early Thursday morning in defiance of several warnings that it would have big negative consequences for the United States: bigger budget deficits, bigger borrowing costs, and bigger regressive wealth transfers than any other partisan reconciliation bill in history.
The bill would add more than $3 trillion to budget deficits over the next decade — a figure that would swell to more than $5 trillion if the nominally temporary policies within it are made permanent, as leading Republicans have made clear they intend. The timing could hardly be worse: Just last week, Moody’s became the final major credit-rating agency to downgrade U.S. government debt. Their rationale was clear: Washington’s failure to “reverse the trend of large annual fiscal deficits and growing interest costs” has eroded confidence in America’s long-term fiscal trajectory. Since the announcement, yields on 20- and 30-year Treasury bonds even reached 5% —a threshold rarely seen over the past few decades.
Rising yields have big consequences for the federal budget. Already, the federal government spends more on interest payments than on Defense or Medicare, making it the second-biggest line item in the budget after Social Security. If the “One Big Beautiful Bill” becomes law, interest costs over the next decade could be roughly $2.7 trillion bigger than the official scorekeepers at the Congressional Budget Office currently project. Within 30 years, not only would interest costs more than double as a share of economic output, but the national debt would grow to levels so big that CBO’s economic forecasting model could no longer function.
The effects on federal finances aren’t the only “big” problems with this bill. The bill’s main offsets come from big cuts to spending on anti-poverty programs, such as Medicaid and SNAP. Earlier this week, the Congressional Budget Office published an analysis showing the bill would increase after-tax incomes for people in the top 10% by roughly the same proportion as it would cut after-tax incomes for people in the bottom 10% —a big regressive transfer of wealth from the poorest Americans to the richest.
If the No Tax on Tips Act that passed the Senate this week becomes law, it could cost around $120 billion over 10 years — freeing up Republicans to enact more tax cuts for the rich of equal size in their “One Big Beautiful Bill” without paying for it. Furthermore, the bill would only provide a tax cut for the 2% of households that have a tipped job, while doing nothing for the millions of working-class families that don’t (besides saddling them with the costs).
