Trump's "One Big Beautiful Bill":
National Debt Projected to Rise by $3.3 Trillion Over Ten Years
Concerns Over Further Downgrade of U.S. Credit Rating
There is a warning that if the large-scale tax cut plan being pursued by U.S. President Donald Trump becomes a reality, the ratio of U.S. national debt to gross domestic product (GDP) could soar to 125% by 2035. Experts have pointed out that even if the tax cuts contribute somewhat to U.S. economic growth, it will not be enough to offset the pace at which national debt is increasing. There are also observations that, since tax increases will be inevitable starting next year if the bill does not pass, this could be a negative factor in next year’s U.S. midterm elections.
On May 22 (local time), the so-called “One Big Beautiful Bill” (Mega Bill), which barely passed the U.S. House of Representatives, is centered on extending the 2017 tax cut policy that Trump passed during his first term. Specifically, it includes: ▲ income tax reductions ▲ expansion of child tax credits ▲ exemption of taxes on tips and overtime pay ▲ expansion of estate and gift tax exemptions ▲ corporate tax cuts.
In addition, more than $50 billion is allocated to strengthening border security, and construction of the Mexico border wall will be resumed. To secure funding, hundreds of billions of dollars will be cut from Medicaid (health coverage for low-income individuals), food assistance programs, and clean energy tax benefits, with $800 billion in cuts to Medicaid alone.
The Financial Times (FT) analyzed, “The bill is a budget that includes a large number of former President Trump’s key pledges, such as tax cuts and border wall construction, and is seen as an important watershed for gauging the direction of his economic policy in a possible second term.”
According to the University of Pennsylvania’s Wharton School, if this bill is finalized, U.S. national debt is projected to increase by about $3.3 trillion over the next decade. As a result, the debt-to-GDP ratio, currently at 98%, is estimated to rise to 125% by 2035. This would be the highest level since World War II.
The Donald Trump administration claims that, along with the bill, it can reduce the fiscal deficit by more than half from 6.4% in June 2024 to around 3% by the end of the term through tax cuts and deregulation. The White House Council of Economic Advisers forecasts that these measures could result in up to 5.2% real growth, the creation of 7.4 million jobs, and an increase in investment of up to 14.5% over the next four years.
However, experts have analyzed that, even if the tax cuts contribute somewhat to economic growth, they will not be sufficient to offset the increase in national debt. There are also concerns that this could negatively impact the U.S. credit rating. Maurice Obstfeld, senior fellow at the Peterson Institute and former chief economist at the International Monetary Fund (IMF), pointed out, “Given that the U.S. recently lost its AAA credit rating, this bill could drag the U.S. Treasury down to a BBB rating.”
Meanwhile, there is analysis that whether the tax cut bill passes will affect President Trump’s governance in the latter part of his term and his future political position. If the bill fails to pass, the tax cuts will expire, making tax increases inevitable starting next year. Furthermore, both the House and Senate midterm elections are scheduled for next year. This is why President Trump is pressuring Congress daily to pass the tax cut bill.
FT stated, “If the bill does not pass, broad-based tax increases will be inevitable starting next year, which could be a negative factor in the midterm elections.”
There are also opinions that passing the bill could backfire. The Democratic Party regained the majority in the House of Representatives in the 2018 midterm elections by focusing criticism on President Trump’s 2017 tax cuts.
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