In an extraordinary act of sheer political muscle, Donald Trump and the Republican leadership in Congress succeeded on pushing through one of the most transformational pieces of legislation in many years, which would substantially tilt the playing field in favor of the wealthy and leave many of those closer to the bottom worse off. Among many other things, it is the most significant rollback of a social welfare program in my memory.
The centerpiece of the legislation involves extending the tax cuts put in place by Trump’s first-term tax package, the Tax Cuts and Jobs Act. Those tax cuts – along with associated increases in the standard deduction and the child tax credit – were set to expire at the end of this year. To fulfill Trump’s campaign promises, the bill includes temporary tax deductions for limited amounts of overtime pay, car loan interest, tips and Social Security. The package also includes more spending on the border and on defense.
But it also makes substantial cutbacks in three significant domestic programs: Medicaid, clean energy and student loan charges.
The scale of the bill would be hard to understate. Whether you assume that the new temporary tax cuts are extended or not, it would raise the size of the deficit by more than any of the other major legislative packages passed in the last eight years, including the Covid rescue packages.
Probably the most significant element of the package involves the sharp rollback in Medicaid coverage, achieved in large part by imposing a work requirement on able-bodied Americans who are eligible for Medicaid. According to estimates from the CBO, over 10 million Americans are likely to lose their coverage, bringing the number of uninsured about halfway back to where it was before the passage of the Affordable Care Act That figure takes into account the increase in Medicaid cuts imposed by the Senate to $841 billion from $750 billion.
All told, the One Big Beautiful Bill would be the most regressive piece of legislation passed in decades, if ever. The tax cuts substantially benefit the rich; someone in the top 20% would receive a cut of $7,066 per year (2.7% of their income) while someone in the bottom 20% would receive on average a $71 tax cut (0.3% of their income). But when the changes in Medicaid and other programs are factored in, the regressivity gets much worse. A top income household would be $6,055 better off while a household at the bottom would be $560 worse off.
The OBBBA would substantially worsen our already troubling deficit and debt levels. Even without the legislation, our deficit was projected to rise from just under $2 trillion to $2.5 trillion over the coming decade. Now the deficit would hit $3.1 trillion a decade from now.
Nor is the legislation expected to help economic growth. An array of private forecasters see only a small addition to growth and one even sees a small detriment in some years. But the White House is projecting nearly 5% additional growth in 2028, which would take the rate of growth in that year to the highest since 1984, the Covid years excepted.