The ugly truth about Trump’s big, beautiful bill

Editor’s note, May 22, 8:30 am ET: The House passed a version of Trump’s bill early Thursday morning. It now goes to the Senate, where Republicans say they want more changes to the bill. This story was originally published on Monday. President Donald Trump’s second term has so far been dominated by his aggressive use of executive power — but now, he’s finally trying to get something through Congress. This week, Republicans in the House of Representatives will attempt to pass what Trump has deemed the “one big, beautiful bill.” It is the centerpiece — really, the only major piece — of Trump’s legislative agenda. He’s trying to stuff everything he wants into this, in hopes of ramming it through both the House and Senate on a party line vote. Trump wants a few main things from the bill. First is preventing the “Trump tax cuts” he passed back in 2017 from expiring at the end of the year. Second is passing, in some form, a bunch of new tax breaks he promised during the campaign, such as “no tax on tips.” Third is spending a bunch more money on immigration enforcement and the military. Fourth is an increase in the debt ceiling (the limit on new debt the government can issue, which Congress periodically has to agree to raise). All this is quite expensive, so how will Republicans pay for it? Mostly, they won’t: The vast majority of it will be unpaid for and just increase the debt, while other costs will be hidden with gimmicks. But the House GOP has proposed paying for some with deep cuts to Medicaid, clean energy, student loans, and food stamps, among other areas. The problem is that Republicans have narrow majorities in both chambers and deep disagreements on policy. Fiscal hawks are demanding deeper spending cuts. Some Republicans have complained about the Medicaid cuts; others dislike the clean energy cuts. One key group is demanding the rollback of a Trump tax hike that mostly hit affluent people in blue states back in 2017 — an expensive change that would blow up the bill’s budget math. So right now, the big, beautiful bill is a big, ugly mess. But even if Republicans resolve their differences and pass something, it may not get much prettier. Trump is proceeding as if we’re still in the low-inflation, low interest-rate environment of the 2010s. But things are different now, and running up the deficit yet again may have some painful economic consequences. What Republicans want in the big, beautiful bill Let’s walk through what’s in the House version of the bill, starting with the big things Trump and Republicans want. Keep the expiring “Trump tax cuts” In his first year as president in 2017, Trump’s major legislative accomplishment was his tax bill that lowered rates for most people. To make that bill look less costly, Republicans used the time-honored trick of setting those new lower tax rates to expire eventually — at the end of 2025. So if Congress does nothing, most Americans’ income taxes would increase next year. Because this would be quite unpopular, the political world believes this extension is by far the most likely provision to make it into the final bill. It’s a “must pass.” Policy-wise, keeping these lower tax rates in place is nothing new, it just continues the (irresponsible) status quo. From a budgetary perspective, though, it’s by far the most expensive thing in the bill — it would increase the deficit by about $4 trillion over the next decade. Add (some version of) Trump’s new promised tax cuts During the campaign, Trump promised to do various nice-sounding things, including ending taxes on tips, overtime, and Social Security income. House Republicans’ bill tries to at least somewhat make good on these promises, adding new tax deductions for tipped income and overtime income, and a higher standard deduction for seniors. But because these are expensive, the GOP is playing even more blatant games with the budget math than usual: They’re setting these new tax breaks to expire at the end of 2028. Basically, Trump is creating a huge budget mess for his successor to clean up (as a Simpsons episode predicted he would back in 2000). There’s one more twist here. Trump funded the old 2017 tax bill in part by hiking taxes on affluent blue-state people, by sharply limiting the state and local tax (SALT) deduction. House Republicans from New York and California have long loathed this policy and they’re pushing hard to roll it back as much as they can. The problem is that doing so is very expensive, so GOP leaders are resisting. Mass deportation, border, and military money Then there’s Trump’s new spending priorities: immigration and military spending. Trump wants about $50 billion for his border wall and other border facilities, and billions more for US Customs and Border Protection. He also wants money for his planned “Golden Dome” missile defense shield, shipbuilding, munitions, and other military priorities. A debt ceiling increase The debt ceiling is the legal limit on new debt the US government can issue; every few years we get close to hitting it, and Congress has to raise it — or else risk an economic crisis if we do hit it. This typically leads to bipartisan negotiations, posturing, and in some cases high-stakes political showdowns. Trump is not interested in dealing with Democrats on this, so he’s just throwing it in this bill. (Doing this adds another element of urgency to try to force squabbling Republicans to unite: Treasury Secretary Scott Bessent has said the debt ceiling must be raised by mid-July.) The controversial spending cuts House Republicans are proposing to offset (some of) these tax cuts Over the next decade, extending the old Trump tax cuts would cost about $4 trillion. Plus, his new tax breaks (for four years) and his military and border spending, would cost another $1 trillion — so the cost of the bill is about $5 trillion. Most of this, again, just won’t be paid for. But Republicans are proposing some spending cuts to pay for some of it — a little less than half. Their top targets are Medicaid, clean energy, student loans, and food stamps. Big cuts to Medicaid (over $600 billion) The House GOP proposed new Medicaid policies that, in practice, would amount to steep cuts and make more than 7 million people uninsured, according to Congressional Budget Office estimates. These policies include work requirements for Medicaid recipients (who aren’t seniors, pregnant, disabled, or caregivers). They also include several other new requirements for paperwork and eligibility checks. Critics say that these added hurdles will inevitably result in many rightfully qualifying recipients losing their coverage — and argue that that is likely the point. The bill also would punish states that use their own money to fund health coverage for unauthorized immigrants by cutting their federal Medicaid funds. (Fourteen mostly blue states and the District of Columbia currently fund coverage for children even if they are undocumented.) Clean energy cuts (over $600 billion) The House bill would roll back many of the new tax credits that the Biden administration created for clean energy, including credits for electric vehicles, clean power production, energy efficiency, and even nuclear power. Critics say this could badly hurt or even decimate a booming industry, and that it would hurt the fight against climate change by marking low or zero-carbon energy more expensive. Student loan cuts (over $300 billion) The bill also overhauls the student loan program, creating bigger and costlier requirements for repayment of loans, limiting future loan availability, and ending certain loan or repayment programs. Food stamp cuts ($300 billion) Finally, the House GOP is also proposing deep cuts to the Supplemental Nutrition Assistance Program (SNAP), or food stamps. It would require states to start paying a share of the program’s costs — between 5 percent and 25 percent, depending on their payment error rates. It would also expand work requirements, already in place for many recipients, to 55- to 64-year-olds. The problem is that it isn’t 2017 anymore — and blowing up the deficit could hurt a whole lot more Many of these cuts are controversial, even among some Republicans, and it’s unclear which will make it into the final version of the bill. But currently, House GOP fiscal hawks are saying all this isn’t enough, and they’re demanding even steeper cuts, saying it would be completely irresponsible to add so much to the deficit otherwise. While many of the cuts they’re proposing would target the most vulnerable and seem cruel, they have a point about the deficit. Trump and GOP leaders are proceeding as if conditions are similar to 2017 — a time when interest rates were low, inflation was low, and Trump could pass a big deficit-increasing tax cut bill with few negative economic consequences. And indeed, both parties have tuned out warnings about the deficit and debt for years. But conditions have changed. The US just went through a period of its highest inflation in decades. Interest rates remain high, in an attempt to prevent such inflation from roaring back. US Treasury bond rates are also high, which many interpret as signaling investors are concerned about the budget deficit. Years of big spending are adding up, and interest payments on the debt are rising. All that is to say that a big budget-busting bill could be much more damaging to the economy than it was in 2017. And yet Republicans appear to be going full steam ahead anyway. It remains to be seen whether they can actually come to an agreement and pass a bill — but even if they do pull it off, they should be wary of getting what they wish for.

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The ugly truth about Trump’s big, beautiful bill