What's happened
As of late July 2025, the Congressional Budget Office (CBO) projects that President Trump's $3.4 trillion tax-and-spending bill will increase the US national debt by $3.4 trillion over the next decade. The legislation extends 2017 tax cuts, introduces new tax breaks, and enacts major spending cuts to Medicaid and food stamps, resulting in 10 million Americans losing health insurance by 2034. Meanwhile, tariff revenues have surged to nearly $30 billion monthly but remain insufficient to offset the growing deficits.
What's behind the headline?
Fiscal Impact and Deficit Growth
The CBO's analysis reveals a paradox: despite $1.1 trillion in spending cuts, primarily from Medicaid and SNAP, the bill's extensive tax cuts lead to a net increase in the deficit by $3.4 trillion over ten years. This disconnect highlights the bill's prioritization of tax relief for wealthier Americans over sustainable fiscal policy.
Medicaid and Healthcare Coverage
The bill enforces stricter work requirements for Medicaid recipients and limits states' ability to tax healthcare providers, which will reduce Medicaid funding and cause 10 million Americans to lose health insurance by 2034. Changes to the Affordable Care Act's special enrollment periods further restrict access to subsidized coverage, disproportionately affecting low-income populations.
Tariff Revenues: A Partial Offset
Tariff revenues have surged under Trump's aggressive trade policies, reaching nearly $30 billion monthly by mid-2025. However, even sustained tariff collections over a decade, projected at around $2.5 trillion, fall short of covering the bill's added deficits. Economists warn that tariffs increase consumer prices, disproportionately impacting low-income families.
Political and Social Consequences
The legislation deepens partisan divides, with Republicans touting tax cuts and border security funding, while Democrats criticize the bill for harming vulnerable populations and increasing inequality. Public opinion polls show skepticism, with nearly half of Americans believing the bill will hurt their families.
Forecast and Implications
The bill will likely exacerbate income inequality and strain social safety nets, increasing the number of uninsured and food-insecure Americans. Rising deficits may pressure future administrations to consider tax increases or further spending cuts. Tariff-driven inflation could compound economic hardships for low-income households, challenging the administration's claims of economic strength.
Overall, the OBBBA represents a significant shift in US fiscal policy, favoring tax cuts and border enforcement over social welfare, with long-term consequences for public health and economic equity.
What the papers say
Bloomberg highlights the unprecedented Medicaid cuts and the bill's undermining of the Affordable Care Act, noting that 10 million people will lose insurance coverage (Bloomberg, 24 Jul 2025). The Independent's Eric Garcia details the CBO's findings, emphasizing the bill's simultaneous spending cuts and tax breaks, and the impact on Medicaid, SNAP, and ACA enrollment rules (The Independent, 22 Jul 2025). The Guardian's Lauren Aratani reports on the $3.4 trillion debt increase and the bill's permanent tax cuts, including the removal of clean energy subsidies and increased border security funding (The Guardian, 21 Jul 2025). Al Jazeera and Nikkei Asia provide context on tariff revenues, with Al Jazeera noting that tariff collections, though substantial, will not cover the bill's deficits (Al Jazeera, 24 Jul 2025; Nikkei Asia, 17 Jul 2025). The NY Post discusses the tariff windfall and the administration's defense of its trade policies amid rising inflation concerns (NY Post, 16 Jul 2025). These sources collectively illustrate the complex fiscal and social trade-offs embedded in the legislation and its broader economic context.
How we got here
The 'One Big Beautiful Bill Act' (OBBBA), signed by President Trump on July 4, 2025, is a sweeping fiscal package that extends previous tax cuts, introduces new tax deductions, and enacts significant spending cuts, especially to Medicaid and the Supplemental Nutrition Assistance Program (SNAP). The bill passed narrowly in Congress amid partisan debate, aiming to reduce deficits but projected to increase the national debt substantially.
Go deeper
- How will the Medicaid cuts affect low-income Americans?
- Can tariff revenues realistically offset the bill's deficit increase?
- What are the political reactions to the bill's passage?
Common question
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What Does the New US Tax Law Mean for You?
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How Does Trump's New Tax Bill Impact US Debt?
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How Will the New US Tax and Spending Bill Impact You?
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More on these topics
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Donald John Trump is an American politician, media personality, and businessman who served as the 45th president of the United States from 2017 to 2021.
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The Congressional Budget Office is a federal agency within the legislative branch of the United States government that provides budget and economic information to Congress.