Donald Trump’s debt-raising tax package narrowly averted default—but fiscal experts warn it sets the U.S. economy on a crash course with long-term structural risk.
At a Glance
- The bill raises the U.S. debt ceiling by $5 trillion and extends Trump-era tax cuts.
- Key offsets come from sweeping cuts to Medicaid, Medicare, and social assistance.
- The Congressional Budget Office projects a $3.3–$3.4 trillion deficit increase over 10 years.
- U.S. markets surged on the news, but bond markets remain tense over fiscal sustainability.
- Democrats warn the bill could strip up to 12 million people of healthcare by 2035.
What the Bill Does
The “One Big Beautiful Bill,” passed narrowly in the House, lifts the federal borrowing limit by $5 trillion while extending the 2017 Trump tax cuts. It introduces expanded business incentives and increases defense and border-security spending—but relies heavily on deep cuts to entitlement programs for budget offsets.
While the legislation prevents a default crisis, critics say it dramatically weakens America’s fiscal foundation. Major reductions are planned across Medicaid, Medicare, and the Supplemental Nutrition Assistance Program, to be phased in over a 10-year horizon.
Watch a report: Trump’s Spending Bill Clears Senate Hurdle
Market Reaction and Bond Tensions
Markets reacted with short-term optimism: U.S. equity benchmarks rallied to new highs, and bond yields held stable as investors digested the implications of the new fiscal path. The 10-year Treasury yield hovered near 4.25%, a sign that investors expect higher long-term borrowing costs.
Still, analysts warn that the bill shifts America’s debt trajectory into more dangerous territory. While it solves the immediate crisis, it postpones a reckoning with structural imbalances in the federal budget.
Long-Term Risks and Healthcare Fallout
The Congressional Budget Office estimates the bill will add $3.3 to $3.4 trillion to the federal deficit through 2035. Healthcare advocates say the legislation could result in up to 12 million Americans losing coverage—primarily through Medicaid eligibility cuts and premium support reductions.
Policy experts have also flagged its long-term impact on federal debt servicing and inequality. By locking in permanent tax relief for corporations and high earners, while slashing safety net programs, the bill has ignited fears of a growing fiscal imbalance that disproportionately harms low-income Americans.
Though Republicans celebrate the bill as a “win for growth,” critics say it sacrifices fiscal responsibility for short-term political gain—leaving behind a ticking time bomb that future administrations may struggle to defuse.
