Trump Is Set to Cement a Budget-Busting Legacy, Adding to the National Debt

Yomiuri Shimbun

17 hours ago

President Donald Trump on Thursday cemented one of the most consequential – and expensive – economic legacies in modern American presidential history, as his Republican allies in Congress approved a second sweeping tax cut that will deepen the nation's fiscal imbalances for years to come.
In the president's first term, Trump oversaw a roughly $8 trillion increase in the federal debt, which surged due to his first-term tax cuts and emergency spending approved by Congress during the coronavirus pandemic.
Trump's second term began with billionaire Elon Musk in the administration vowing to reduce the federal debt by cutting government spending by more than $1 trillion, following substantial increases to the debt during the Biden administration. But those efforts fizzled as Musk has left the administration, and the second Trump tax cuts are projected to add more than $4 trillion to the national debt, once interest costs and likely policy extensions are accounted for.
Taken together, the Trump tax laws mark one of the most significant fiscal expansions in peacetime U.S. history. Economists disagree about the extent to which Trump has exceeded the deficit binge of his predecessors, in part because nobody knows how much revenue the White House will ultimately raise in new tariff revenue. But the One Big Beautiful Bill, which centers on trillions in tax cuts across income brackets, represents the biggest component thus far of the president's deficit-increasing policies.
When interest costs and likely extensions are included, the legislation is more expensive than the combined cost of Trump's first-term tax law, the 2020 covid stimulus package, and President Joe Biden's 2021 stimulus plan, said Jessica Riedl, senior fellow at the Manhattan Institute, a center-right think tank. Riedl said that Trump's deficit increases surpass all prior presidents since at least Lyndon B. Johnson, in the 1960s.
Other economists, including former Obama official Jason Furman, said George W. Bush probably added more to the deficit overall, though Furman also pointed out that Bush did so while inheriting a budget surplus – whereas Trump took office while deficits were already high.
Already, the national debt as a share of the economy was larger last year than it was anytime outside of World War II, the aftermath of the 2008 financial crisis or the covid pandemic. Deficit concerns contributed to Moody's downgrading of the U.S. credit rating in May – the third major credit agency to do so – over lack of progress on deficits.
'President Trump has added more red ink than any president since at least LBJ, and he is doing it on top of deficits that had already been soaring,' Riedl said.
Biden also added to the national debt, primarily with a $1.9 trillion stimulus package during the first year of his administration. Biden also attempted to cancel roughly $400 billion in student debt, though that effort was later blocked by the Supreme Court.
The White House has adamantly rejected economists' criticisms, arguing that the new tax bill does not worsen the nation's fiscal outlook and that the administration's agenda overall improves it.
A White House memo last month pointed to more than $1 trillion in cuts to Medicaid and other programs in the legislation, which amount to the largest spending reductions on the U.S. safety net in modern history. Treasury Secretary Scott Bessent and other officials have also pointed to the administration's broader strategy, which includes higher tariff revenue, cuts to federal regulations they say will unlock growth, and other spending cuts not yet approved.
In total, the White House memo says, these measures will reduce federal deficits by up to $6.9 trillion over 10 years. The memo also contends that the nonpartisan Congressional Budget Office's projections of the deficit impact of the bill are misleading, because they assume the expiration of the 2017 Trump tax cuts. The administration says that assumption isn't politically realistic. On its own, the memo claims, the new tax bill actually reduces projected deficits by over $1.4 trillion over the next decade, in part by spurring additional growth.
Budget experts on the left, center and right, as well as on Wall Street, have strongly disputed these claims. Trump's tax law locks in trillions of dollars in revenue losses without equivalent spending cuts, widening structural deficits at a time when the nation's debt is already historically high, these analysts say. While the administration says factoring for economic growth decreases the bill's price tag, the legislation could also cause the Federal Reserve to leave interest rates higher in response to the fiscal stimulus, which would in turn slow the economy. When factoring in economic growth, the Penn Wharton budget model, the Yale Budget Lab and the CBO all found that the House tax bill would become more, not less, expensive.
'This bill is very clear: There are a certain number of tax cuts, there are a certain amount of spending cuts, and they don't offset each other,' said Martha Gimbel, executive director and co-founder of the Budget Lab at Yale. 'No amount of assumptions about the amount of growth we'll get will overcome the reality on the ground.'
The implications of these decisions will be felt long after Trump leaves office. Larger deficits will probably constrain the government's ability to respond to future emergencies and place pressure on core federal programs like Social Security and Medicare. With baby boomers retiring and health costs rising, the fiscal space consumed by these tax cuts could crowd out other policy options for years. Under the legislation, the interest payments on the debt will rise to $2 trillion per year, according to the nonpartisan Committee for a Responsible Federal Budget.
Furman, who served as chair of the Council of Economic Advisers under President Barack Obama, pointed out that the Trump tax bill could also make it harder for lawmakers to rein in the debt. In the aftermaths of the Bush tax cuts and those from Trump's first terms, Democrats largely sought to roll back breaks for the wealthy and reallocate some of the savings to deficit reduction or new programs. By contrast, Democrats will want to respond to this new legislation by restoring Medicaid funding, clean energy incentives and other policies repealed by Trump's bill. Those efforts will cost more than the legislation's cut for the rich and corporations, Furman said.
Trump's tax bill not only extends existing policies with bipartisan support – a higher Child Tax Credit; a larger standard deduction – but it includes new populist giveaways, including a provision to end taxes on tips and a $6,000 tax deduction for millions of seniors. If those measures are extended, as seems likely, the nation's fiscal imbalance will only grow beyond the bill itself.
'The next Democratic administration will want to make this in some ways fiscally better, but in more ways want to make it fiscally worse,' Furman said. 'It is both worse than current policy and will prove hard to undo.'