On May 22, 2025, the U.S. House of Representatives narrowly approved the "One Big Beautiful Bill Act" (OBBBA) with a 215–214 vote. This comprehensive legislation, championed by President Donald Trump, aims to extend and expand the 2017 tax cuts, significantly reducing taxes for individuals and high-income earners. To offset the cost, the bill proposes substantial cuts to social programs, including nearly $800 billion from Medicaid and additional reductions in food stamps and clean energy tax credits. The Congressional Budget Office projects that the bill will increase the federal debt by over $3.3 trillion in the next decade, raising the debt-to-GDP ratio to 125%.

The OBBBA is a budget reconciliation bill introduced in the 119th Congress. The House passed the bill on May 22, 2025, with a 215–214–1 vote. Notably, fiscal conservative Republicans Thomas Massie and Warren Davidson voted against the bill, while Freedom Caucus Chair Andy Harris voted present.

Key Provisions of the OBBBA

Tax Reforms:

• Extension of 2017 Tax Cuts: The bill extends the tax cuts implemented in the Tax Cuts and Jobs Act of 2017.
• New Tax Deductions: Introduces deductions for tips and overtime, raises the state and local tax deduction (SALT) cap to $30,000, and creates "money accounts for growth and investment" (MAGA) savings accounts for parents, providing $1,000 per child.
• Tax on Remittances: Imposes a 5% tax on remittances.

Spending Cuts:

• Medicaid: Imposes work requirements for adults under 65, potentially removing 5 million people from coverage.
• Supplemental Nutrition Assistance Program (SNAP): Raises the work age requirement from 54 to 65 and limits eligibility waivers, risking benefits for approximately 6 million adults.
• Clean Energy Tax Credits: Rolls back tax credits from the 2022 Inflation Reduction Act, advancing the expiration of incentives for wind, solar, and battery storage projects to 2028.

Defense and Border Security:

• Defense Spending: Allocates an additional $150 billion, focusing on uncrewed drones and other military enhancements.
• Border Security: Allocates $70 billion, including $46.5 billion for border barriers and funds for Customs and Border Protection improvements.

Economic and Financial Implications

The OBBBA is projected to add over $3 trillion to the national debt over the next decade, increasing the debt-to-GDP ratio from 98% to 125%. Moody's downgraded America's credit rating from AAA, forecasting a rising deficit nearing 9% by 2035. Interest payments on the debt reached $880 billion last year, surpassing spending on Medicare and defense, and are expected to rise further.

In response to the bill's passage, the bond market has exhibited volatility. Yields on long-term U.S. Treasury bonds, such as the 10-year and 30-year notes, have risen sharply due to concerns about the nation's growing debt and fiscal sustainability. This increase in yields has led to higher borrowing costs, affecting mortgage rates and consumer loans. Financial analysts warn that if borrowing costs continue to rise, it could slow economic activity and increase the risk of a recession.

Social and Societal Implications

The proposed cuts to Medicaid and SNAP could have profound effects on vulnerable populations. The introduction of work requirements for Medicaid may lead to millions losing coverage, disproportionately affecting low-income individuals and families. Similarly, changes to SNAP could result in food insecurity for millions of adults.

The rollback of clean energy tax credits threatens the burgeoning clean energy sector, potentially leading to job losses and hindering progress toward sustainable energy solutions. Analysts warn that these changes could raise household energy costs by 7% and cause widespread job losses and factory closures.

Political Dynamics and Reactions

The passage of the OBBBA has exposed divisions within the Republican Party. While the bill aligns with President Trump's domestic agenda, it has faced opposition from both fiscal conservatives concerned about the increasing national debt and moderates worried about cuts to social programs. House Republicans passed a sweeping 1,100-page tax-cut bill that aligns with President Donald Trump's domestic agenda, despite potentially severe political consequences. The bill extends Trump’s 2017 tax cuts but also includes significant cuts to Medicaid, the Affordable Care Act subsidies, and possibly Medicare. These cuts could strip health coverage from millions, particularly in battleground states like Wisconsin, North Carolina, and Michigan, while disproportionately benefiting wealthy Americans. Republicans, though unhappy, largely voted in favor under pressure from Trump, who warned dissenters of MAGA-backed primary challengers. Only two GOP House members voted against the bill, evidencing party allegiance.

Comparative Analysis

The current situation draws parallels to the 2022 UK government crisis, where unfunded tax cuts triggered a bond market sell-off, highlighting the influence of bond investors—often referred to as "bond-market vigilantes"—in shaping fiscal policy.

Conclusion

The passage of the One Big Beautiful Bill Act represents a significant shift in U.S. fiscal policy, with far-reaching economic, social, and political implications. As the bill moves to the Senate, it is crucial to monitor its potential impacts on various sectors and the broader economy.