[Reuters Breakingviews] ‘Big Beautiful Bill’ portends vast ugly costs

By Gabriel Rubin

WASHINGTON, July 1 (Reuters Breakingviews) - Donald Trump just won the most Pyrrhic of victories. The Republican-controlled Senate on Tuesday narrowly passed the U.S. president’s budget proposal, misleadingly dubbed the “One Big Beautiful Bill.” It mortgages the country’s future by teeing up a fiscal disaster, setting back the transition away from fossil fuels, and cutting off millions of Americans from healthcare coverage. The consequences will be unsightly.

The legislation hinges on the GOP’s lust for lower taxes. A corporate rate slashed to 21% from 35%, with an expiry date, during Trump’s first term would be made permanent. Along with a range of reductions for individuals, they will cost Uncle Sam some $5 trillion, or $3.3 trillion after spending cuts.

To partially cover the tab, $1 trillion is being taken from healthcare initiatives, including the Medicare and Medicaid programs serving elderly and poor people. Nearly 12 million will lose insurance, according to the Congressional Budget Office. Another $500 billion comes from scrapping President Joe Biden’s clean energy subsidies. Resetting the broader policy baseline also deceptively makes the total expense of the package look lower.

It's an incredibly myopic plan. Although senators removed provisions making it easier for oil and gas companies to drill on federal land and offshore, rapidly phasing out support for nascent U.S. solar and wind industries threatens to accelerate the effects of climate change, slow job creation and thwart the ascent of power-hungry artificial intelligence. Domestic GDP growth also may take a hit. A dollar in Medicaid spending, for example, leads to more than a dollar’s worth of economic activity.

Deficit mitigation is no longer a congressional priority and any reduction in government spending largely represents a smoke screen for cutting humanitarian aid or financial regulation. The U.S. dollar has weakened by more than 10% this year, as trade tensions and mounting government debt fuel investment concerns.

At least some harmful ideas were chopped. The Consumer Financial Protection Bureau survives, states will have the power to regulate AI for a decade, and foreign companies were spared Trump’s 20% “revenge tax.” Overall, however, the bill is likely to be as much a political albatross as it is an economic one.

Public polling on it is atrocious. Nearly three in five surveyed by Fox News in mid-June opposed the proposal. The resulting rise in national debt from 120% of GDP, which the Penn Wharton Budget Model estimates will far outpace economic growth, also prompted Elon Musk to reignite his feud with the president. Tesla’s CEO vowed to start a new political party and fund challengers to Republicans who support the legislation, which now heads back to the House of Representatives. Trump is likely to have his big, beautiful bill, but it will get ugly, fast.

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CONTEXT NEWS

With Vice President JD Vance casting the tie-breaking vote, the Republican-controlled U.S. Senate on July 1 passed President Donald Trump's wide-ranging tax-cut and spending proposal. It now goes back to the House of Representatives for consideration.

The bill extends corporate and individual tax reductions implemented in 2017 during Trump's first term and slashes about $500 billion in clean-energy subsidies and $1 trillion from government-run healthcare insurance programs.