Who Really Gains from the Big Beautiful Bill?

News18

17-07-2025

The bill may well be remembered not for its symbolism, but for the long-term structural imbalances it entrenched, in debt, in distribution, and in institutional accountability
'The burden of government is not measured by how much it taxes, but by how much it spends." As Milton Friedman wrote in Free to Choose (1980), this principle illustrates the foundational economic concept that public expenditure, whether financed by taxes or debt, diverts scarce resources from the private sector. Four decades later, President Donald Trump's newly enacted 'One Big Beautiful Bill" stands as a direct challenge to that maxim. The legislation is expansive in rhetoric and even more so in fiscal consequence. It combines permanent tax cuts with historic spending increases and deep cuts to welfare, all at an estimated cost of $3.3 trillion over the next decade.
At nearly 900 pages, the legislation is not only one of the most extensive tax-and-spend packages in recent American history, but it also represents a significant structural shift in federal fiscal architecture. The Congressional Budget Office (CBO) estimates that the bill will increase the federal budget deficit by 1.3 percentage points of GDP annually over the next ten years. If temporary provisions are extended, as political economy suggests they often are, the Penn Wharton Budget Model projects the total deficit impact could rise to $5.5 trillion by 2034, raising the debt-to-GDP ratio to 127 percent. This would exceed the peak debt level recorded in the aftermath of World War II.
The core of the bill centres on the permanent extension of the 2017 Tax Cuts and Jobs Act. While proponents argue this will preserve current tax rates for middle-income households, the distributional benefits remain highly skewed. According to estimates from the Tax Policy Centre, the top 0.1 percent of earners will experience an average annual after-tax gain of $290,000. By contrast, households earning below $18,000 per annum will see their after-tax income decline by approximately $165, once changes to Medicaid and food assistance are included.
The tax provisions are supplemented by a range of new deductions, including a $25,000 deduction for tip income, a $12,500 deduction for overtime pay, and a $10,000 deduction for interest on car loans for domestically manufactured vehicles. These provisions are, however, temporary and will expire after the 2028 tax year. More importantly, these deductions are income-capped and structured in such a way that the majority of benefits accrue to middle- and upper-middle-income earners. Households earning more than $150,000 annually will see these benefits phased out entirely.
On the expenditure side, the legislation makes structural changes to the American welfare state. Medicaid will see the introduction of stringent work requirements, increased eligibility checks, and mandatory cost-sharing for recipients. Enrollees with incomes between 100 and 138 percent of the federal poverty line (approximately $33,000 for a family of four) could face out-of-pocket healthcare costs of up to $1,650 per year. These changes, according to the CBO, will result in 11.8 million individuals losing Medicaid coverage by 2034. An additional 4.2 million are projected to lose coverage due to the rollback of Affordable Care Act subsidies.
The bill also restructures the Supplemental Nutrition Assistance Program (SNAP). States will now be required to contribute between 5 percent and 15 percent of benefit costs if their administrative error rates exceed 6 percent. Simultaneously, new federal work requirements will apply to able-bodied adults without dependents and to parents of children aged 14 and above. These measures are expected to remove 270,000 vulnerable individuals from SNAP rolls over the next three years, according to the Centre on Budget and Policy Priorities.
In the domain of energy policy, the legislation repeals key tax credits introduced under the Inflation Reduction Act (IRA) for wind, solar, and battery storage projects. While these credits had catalyzed a surge in renewable investment, their removal is expected to reverse that trajectory. Princeton University's ZERO Lab estimates that clean energy projects initiated after 2026 will face capital cost increases of up to 50 percent. A 2024 Energy Innovation analysis projects that the average electricity bill in Texas will rise by $777 annually by 2035, with similar increases expected in other high-demand states such as California and Michigan. The repeal occurs at a time when national electricity demand is projected to increase by 15 to 20 percent over the next decade, driven by the expansion of artificial intelligence infrastructure and electrified transport.
On education, the bill eliminates all existing income-driven student loan repayment plans, replacing them with a fixed 'Repayment Assistance Plan" (RAP). Under the new scheme, a typical borrower with a college degree will pay approximately $2,900 more annually compared to the Biden-era SAVE plan. Graduate and professional students will face borrowing caps of $100,000 and $200,000 respectively, along with exclusion from previously available forgiveness programmes.
Moreover, the bill expands school voucher programmes by providing a 100 percent federal tax credit for donations to private school scholarship funds. The Joint Committee on Taxation estimates that this provision could cost up to $51 billion annually. In contrast, federal allocations for the Individuals with Disabilities Education Act stand at only $14 billion, and Title I funding for low-income schools at $18 billion. The disproportionate allocation of resources is expected to exacerbate funding challenges for rural and public schools, which serve more than 80 percent of all US students.
The bill also includes a significant expansion of federal enforcement capacity. The budget for Immigration and Customs Enforcement (ICE) is increased from $8 billion to $30 billion annually. This is the largest single increase in federal law enforcement funding in modern US history. In parallel, the Office of Management and Budget receives a $100 million fund to 'identify efficiency gains" across the executive branch. Critics have described this as a discretionary slush fund that allows executive overreach without Congressional appropriation oversight.
Collectively, the One Big Beautiful Bill constitutes a comprehensive recalibration of American fiscal priorities. It reduces the redistributive role of the state while increasing the fiscal burden on future generations. It amplifies tax expenditures for the wealthy while shrinking welfare entitlements for the poor. And it does so at a moment of already-elevated debt levels, persistently high interest rates, and increased macroeconomic uncertainty.
President Trump has claimed that this bill will launch the American economy 'like a rocket ship." Yet historical experience and mainstream macroeconomic modelling suggest otherwise. According to Goldman Sachs, continued fiscal expansion at this scale may require an eventual fiscal adjustment equivalent to 5.5 per cent of GDP, exceeding the austerity levels implemented in the eurozone post-2010. If such an adjustment proves politically infeasible, the US may resort to financial repression, inflationary finance, or other distortions to stabilise its debt trajectory.
Milton Friedman warned that fiscal illusions have a way of catching up with economic reality. The Big Beautiful Bill may well be remembered not for its symbolism, but for the long-term structural imbalances it entrenched, in debt, in distribution, and in institutional accountability. The burden of government, as Friedman cautioned, lies not in what it collects, but in what it commits. By that measure, the burden just got heavier.
Aditya Sinha (X: @adityasinha004) writes on macroeconomic and geopolitical issues. Views expressed in the above piece are personal and solely those of the author. They do not necessarily reflect News18's views.
tags :
donald trump United states us economy
Location :
United States of America (USA)
First Published:
July 05, 2025, 15:54 IST
News opinion Opinion | Who Really Gains from the Big Beautiful Bill?