Written by Julian Schumacher
On July 3rd, 2025, the U.S. Congress passed President Trump’s “One Big, Beautiful Bill Act” (BBB), which combines a wide range of tax cuts with spending increases. It was introduced as a plan to boost growth and support working Americans, but has been widely criticised for adding to the federal debt, weakening key social programs, and benefiting the wealthy most of all.
One of the bill’s main features is that it extends and expands the 2017 tax cuts. The lower corporate tax rate and reduced income tax brackets, which were set to expire, are now made permanent. The BBB also increases the standard deduction slightly and offers temporary deductions for certain groups, like seniors and hourly workers. There’s even a provision for tipped employees to deduct part of their tip income. At first glance, these changes seem aimed at helping the middle class.
However, most of the gains go to those at the top of the income distribution. Research from the University of Pennsylvania’s budget model shows that the richest 0.1% of Americans will profit close to $300,000 annually in tax benefits. In contrast, people earning under $18,000 are projected to lose over $1,000 per year by 2033. The reason is that many of the bill’s tax breaks are offset for poorer households by cuts in government programs they depend on.
A major source of these losses is the reduction in spending on healthcare and food assistance. Medicaid, which covers low-income families, faces a funding cut of around $1 trillion over ten years. This could lead to millions losing insurance or facing more limited coverage. The Supplemental Nutrition Assistance Programme is also restricted under the new rules. States with error rates above a certain level are required to co-fund benefits, which makes it harder for people to qualify and stay enrolled.
In the short term, the combination of tax reductions and increases in spending, particularly in sectors such as defence and construction, may provide a modest boost to increase demand. This could temporarily increase GDP growth. Indeed, lower- and middle-income households may experience short-lived consumption gains as disposable incomes rise. Moreover, by injecting further fiscal stimulus into an inflationary environment, the BBB risks reinforcing upward price pressures. In response, the Federal Reserve may be compelled to maintain a more restrictive monetary policy stance than would otherwise be necessary, thereby offsetting some of the bill’s short-run benefits through tighter credit conditions.
The long-run consequences are more concerning. Independent forecasts, including from the Congressional Budget Office and the Committee for a Responsible Federal Budget, estimate that the BBB will add approximately $5.5 trillion to the national debt over the next decade. This expansion of the deficit is not paired with any significant increases in revenue or growth-enhancing structural reforms. By 2055, interest payments on the federal debt are projected to consume around 6% of GDP annually, up from roughly 3% in 2025. This growing burden will reduce the government’s fiscal flexibility in the future, limiting its ability to respond to recessions, invest in infrastructure, or finance social insurance programs without resorting to further borrowing.
Another problem is how the bill affects investment. When the government borrows more money, it increases the demand for credit, which can push up interest rates. As borrowing becomes more expensive for everyone, private companies may decide not to invest in new projects, particularly in high-tech or long-term ventures. This is known as the “crowding out” effect, and over time, it can slow economic growth by reducing innovation and productivity gains.
Supporters argue that tax cuts help drive investment, but this isn’t always the case, especially when the cuts are unfunded and skewed toward the wealthy. High-income households tend to save much of their income, so the extra money may not go back into the economy quickly. Moreover, when deficits grow as a result of tax cuts, they can cancel out any positive effects by raising borrowing costs and increasing uncertainty. The way the money is spent also matters. While the BBB includes infrastructure spending, much of it is focused on projects like border security and military base construction. These may serve political goals, but they don’t necessarily contribute to long-term economic growth the way public transit, clean energy, or broadband access would. At the same time, the bill reduces funding for programs that support education and healthcare, two areas that are critical for building a productive workforce. By shifting money away from public investment in people and future-oriented infrastructure, the bill may weaken the foundations of long-run growth. Education cuts could reduce the quality and accessibility of schools, especially in poorer communities. Health care cuts could make it harder for people to get treatment, lowering workforce participation and productivity over time.
There is also a broader issue of fairness as the bill delivers notable tax relief to high-income individuals. According to the Penn Wharton Budget Model, the top 20% of earners will see an average annual income increase of nearly $13,000 after taxes and transfers. Much of this additional income comes indirectly through lowered corporate taxes, which are usually assumed to benefit wealthier households who own stocks. At the same time, the poorest American households see net losses rather than benefiting from the bill. The University of Pennsylvania suggests that Americans earning under $18,000 per year will lose $1,300 per year by 2033 as services, subsidies, and safety net programs that made up a large part of their effective income are being cut or made harder to access. For instance, Medicaid, an insurance company for low-income Americans, is subject to cuts in federal spending of over 1 trillion over the next 10 years, potentially stripping up to 12 million Americans of healthcare coverage by 2035. The Supplemental Nutrition Assistance Programme eligibility is also tightened, requiring states with high error rates to co-fund benefits, resulting in 1.3 million people receiving fewer or no food stamps.
There are alternative approaches that might achieve stronger, more equitable growth. For example, targeted tax credits for working families, combined with investments in childcare, education, and infrastructure, would likely have higher returns in terms of GDP growth and social mobility. These kinds of policies help build a healthier, more skilled, and more productive workforce without generating the same level of debt.
Beyond the domestic effects, the bill may also weaken the United States’ position in the global economy. As debt levels rise and deficits remain high, international investors may become more cautious about U.S. Treasury bonds. If confidence in America’s long-term fiscal outlook declines, the government may have to offer higher interest rates to attract buyers, increasing the cost of borrowing even further. Over time, this could reduce the appeal of the U.S. dollar as the world’s reserve currency, which has long given the United States a unique economic advantage. A weaker dollar might help exports, but it would also make imports and foreign debt more expensive, potentially adding to inflationary pressures.
In addition, the BBB reflects a more inward-looking economic strategy, with spending directed toward border security, military bases, and other politically charged projects. This comes at a time when long-term growth increasingly depends on international cooperation—whether in climate investment, global supply chains, or digital infrastructure. The bill sends a signal of retreat rather than renewal, which may increase policy uncertainty. Businesses planning investments over 10 or 20 years are likely to take such signals into account. By prioritising short-term political goals over long-term stability, the BBB may ultimately discourage the very investment it intends to promote.
In conclusion, the Big Beautiful Bill may be big, but it is not beautiful from an economic standpoint. While it may offer modest short-term growth through tax relief and increased spending, these gains are outweighed by the risks it imposes: higher debt, slower long-term growth, worsening inequality, and reduced government capacity. By diverting resources away from essential services and towards high-income households and low-productivity projects, the bill undermines the foundations of sustainable and inclusive growth.
Daily magazine for entrepreneurs and business owners