The White House Watch newsletter offers insights into the implications of a potential second term for Donald Trump on Washington, business, and global affairs.
Donald Trump is nearing the accomplishment of having his prominent tax and spending legislation approved in the lower chamber of the U.S. Congress. This extensive bill aims to reduce U.S. taxes and increase federal debt, forming the core of the president’s second-term agenda. It has sparked intense debate among Republicans in the House of Representatives, with divisions arising over spending on health and social care programs and concerns about the nation’s growing debt. The president has consistently urged lawmakers to pass the bill, recently cautioning against “grandstanding” within the Republican Party.
The extensive legislation, referred to as the “One, Big Beautiful Bill Act” by Trump, seeks to extend many of the 2017 tax cuts implemented during his first term, set to expire at year-end. Key components include individual income tax cuts, an increase in the child tax credit, and the elimination of taxes on tips and overtime pay—all central campaign promises. The bill also proposes raising estate and gift tax exemptions, offering numerous business tax breaks, and allocating over $50 billion to enhance border security, including continuing the construction of a wall along the Mexican border.
To lower the bill’s costs, Republicans suggest cutting nearly $800 billion from Medicaid and additional significant reductions from the food stamp program and clean energy tax credits. It also proposes raising taxes on investment income from universities and private foundations, estimating a revenue increase of over $22 billion, based on the analysis from the Joint Committee on Taxation.
If the bill passes the House, it would move to the Republican-majority Senate, requiring the support of at least 50 of the 53 Republican senators for Trump to sign it into law. Any amendments by the Senate would require another vote in the House. Given expected opposition from Democrats, the bill’s outcome in the Senate relies on whether Republican majority leader John Thune can broker a compromise between moderate senators and those opposing government spending.
Analyses from unbiased entities, such as the Committee for a Responsible Budget and the University of Pennsylvania’s Wharton School, predict that the bill will increase U.S. debt by $3.3 trillion over the next decade, raising the debt-to-GDP ratio significantly.
Trump’s team argues that the legislation, along with policies like lower taxes and deregulation, will reduce the U.S. fiscal deficit, claiming it will boost economic growth, job creation, and investment. However, some experts warn that the measures could adversely affect the economy, potentially impacting the U.S. credit standing.
For Trump, passing the legislation is pivotal to his second-term agenda, marking a significant political triumph and potentially enhancing his approval ratings. A failure to pass the bill could have resulted in widespread tax increases next year, impacting households and businesses during the midterm election year. However, there is a risk that the legislation could have negative repercussions, similar to the Democratic critique of his 2017 tax cuts which contributed to their regaining control of the House in the 2018 midterms.