IMF Criticizes U.S. 'One Big Beautiful Bill Act' for Exacerbating Fiscal Deficits

On July 3, 2025, the International Monetary Fund (IMF) publicly criticized the United States' proposed tax and spending legislation, known as the "One Big Beautiful Bill Act" (OBBBA), stating that it contradicts the IMF's recommendations for reducing fiscal deficits over the medium term.

The OBBBA, recently passed by the U.S. House of Representatives, aims to extend the 2017 tax cuts and introduce new tax breaks. The IMF contends that these measures will exacerbate the U.S. fiscal deficit at a time when fiscal consolidation is necessary to ensure public debt sustainability. U.S. Treasury Secretary Scott Bessent disputes this assessment, arguing that the bill will stimulate economic growth and, consequently, boost revenues.

The OBBBA, a 940-page legislation, was approved by the U.S. House of Representatives on July 3, 2025, with a narrow 218-214 vote. The bill extends tax cuts from the 2017 Tax Cuts and Jobs Act, introduces new military spending and immigration enforcement funding, and rolls back clean energy tax credits established during the Biden administration. To finance these measures, the bill proposes significant cuts to social programs, including Medicaid and the Supplemental Nutrition Assistance Program (SNAP). Additionally, it includes a record $5 trillion increase in the debt ceiling, which economists warn could escalate the national debt by over $3 trillion.

The IMF has consistently advocated for the United States to reduce its fiscal deficit to ensure public debt sustainability. IMF spokesperson Julie Kozack emphasized the need for the U.S. to start a fiscal consolidation process to put public debt-to-GDP on a decisive downward path. The IMF has recommended that the U.S. consider raising taxes, including on middle-income earners, to close fiscal deficits. The OBBBA's provisions, which extend and introduce new tax cuts, are viewed by the IMF as counterproductive to these recommendations.

U.S. Treasury Secretary Scott Bessent has expressed disagreement with the IMF's assessment. He argues that the OBBBA will stimulate economic growth, which in turn will boost revenues and offset the fiscal deficit. Bessent has criticized the IMF for straying from its core economic stability mission and believes that the bill's provisions will have a positive impact on the U.S. economy.

The Congressional Budget Office (CBO) estimates that the OBBBA would add $2.4 trillion to the national debt by 2034 and result in approximately 10.9 million Americans losing health insurance coverage. Some experts argue that the bill would create the largest upward transfer of wealth from the poor to the rich in American history. A Pew Research poll indicates that 49% of Americans oppose the bill, 29% are in favor, and 21% are unsure.

The bill has sparked intense debate in Congress and among the public. House Minority Leader Hakeem Jeffries criticized the bill for favoring the wealthy while making deep cuts to social programs. Despite internal GOP resistance and opposition from figures like Elon Musk, most Republicans backed the bill. The Senate had passed it earlier with Vice President JD Vance casting the deciding vote. President Trump is expected to sign it into law by July 4 and plans a celebratory rally in Iowa, setting the stage for contentious 2026 midterm elections.

The OBBBA extends tax cuts from the 2017 Tax Cuts and Jobs Act, which were set to expire at the end of 2025. The 2017 tax cuts were a significant legislative achievement during President Trump's first term, aimed at stimulating economic growth through tax reductions. The current bill not only extends these cuts but also introduces new provisions, making it one of the most comprehensive tax and spending bills in recent history.

The IMF's criticism of the OBBBA highlights a significant divergence between international fiscal recommendations and domestic policy decisions. As the bill moves towards becoming law, its economic and social implications will likely continue to be a focal point of debate among policymakers, economists, and the public.