Does the House of Representatives also agree to President Trump’s huge tax and expenditure package? What is in the law, what consequences it would have for the US economy – and how experts assess it.
It is likely to be one of the most comprehensive legislative proposals for taxes and expenses in the history of the United States: the “One Big Beautiful Bill Act” (“Great, beautiful law”). The Senate has already passed the controversial project, the House of Representatives is currently debating it – its vote is still pending. Until Friday, US President Donald Trump wants to have the law on his table.
What is in the law?
The legislative package provides for new billions of billions for the military and the securing of the borders. At its core, however, it is about a permanent extension of tax cuts for companies and private individuals from Trump’s first term, which expire at the end of the year. In addition, there are further relief such as deleting taxes on tips or overtime. Changes to many corporate and international tax regulations are also part of the law.
What does the government promise to the US citizens?
Trump promised the Americans a “record tax reduction”. In order to clarify this, the White House on its website offers a computer with which US citizens can determine their estimated tax savings individually.
The law is intended to create more jobs in the United States and boost investments in the infrastructure. Other goals include securing innovations and lower energy costs. “With this law, we ensure that our country and the American people become safer, stronger and wealthier,” said the Republican majority leader in the Senate, John Thune.
How should the law be financed?
The tax relief should be financed by cuts in health and social programs. Saving should be saved, for example, at “Medicaid”, health insurance for the elderly and low -income people, and the “Affordable Care Act” (Obamacare).
There are also cuts in food aids, food at schools or grants for supermarket visits from families with low incomes. In addition, Trump also wants to withdraw the incentives for the climate protection of the previous government of Joe Biden. Subsidies for wind turbines and solar systems as well as the state subsidy for buyers of electric cars are to be deleted.
What are the consequences of the package for US citizens?
“According to estimates by the Congress’s budget office, more than 12 million Americans could lose their health insurance through the cuts by the mid-2030s,” said Tom Bauermann and Thomas Theobald from the Institute for Macroeconomics and Economic Research (IMK) of the Hans Böckler Foundation Evidence Network.de. This estimate speaks “a clear language who will win and lose in the budget law”.
Trump has such an impact. Instead, irregular immigrants are affected. But Republicans also fear negative consequences for the health system. In the future, the US states should receive fewer taxes from the providers of medical services.
This could lead to problems with the financing of hospitals in the country. “I will not agree to any final law that will delete vital sources of financing that our hospitals are dependent on,” said Republican MP David Valadao.
What are the consequences of the law for the household?
The US state budget currently has an annual minus of almost two trillion dollars. This is the highest ever in peace and outdoors and outside of a recession. This should expand with the law: The household experts of the congress estimate that the debt mountain should grow by $ 3.3 trillion through the project within ten years – this would be well over ten percent of the United States gross domestic product (GDP).
“Even if such measures could be promoting growth at short notice, they have a long -term risk of reaching a tilting point for the US debt relief,” says the KfW support bank. Other experts also expect further increasing debt. Because the savings from the cuts are unlikely to compensate for the reductions from the tax reductions of the draft law.
What is the law criticized?
The opposition Democrats accuse Trump and the Republican government “Tax Gifts for Billionaires”. Disadvantaged US citizens would suffer from the plans. They refer to a study by the independent thought factory “Urban-Brookings Tax Policy Center” (TPC). According to this, taxes would drop by around $ 2,900 in 2026. However, almost 60 percent of the advantages went to people with an income of around $ 217,000 or more per year.
In return, however, the poorest ten percent of American households will have to do without just under $ 1,600 a year, explain Bauermann and Theobald from the IMK. Almost exclusively the upper ten percent of income would benefit from the current law package.
There is also resistance in their own warehouse: In the House of Representatives, the so -called “Freedom Caucus” calls for deeper expenses. “This is not a financial policy responsibility. That is not what we agreed on,” said the group of conservative hardliners. Trump’s former consultants, the Tech billionaire and Tesla boss Elon Musk, also accused the president of “America drove into bankrupt”.
Is there really a threat of bankruptcy?
“No, at least that is not to be expected directly. The US government can still borrow almost unlimited money on the capital market. That is the ‘exorbitant privilege’ of the most important economy and military superpower US Evidence Network.de.
The US Congress could raise the debt limit again. “Nevertheless, there is a justified concern that the US government’s creditworthiness could suffer,” continued the expert. However, she sees the cause more in the extreme political polarization.
Can the project boost the US economy?
According to Daniels, there has so far been little signs that larger industrial policy initiatives promote growth in the United States. But that would be important for more and better jobs and income. Instead, the ever new and higher tariffs had an impact on many products.
“Taken together with the radical restriction of migration announced by Trump, this could significantly increase inflation,” said the scientist. One has to expect that households with small income that hardly receive any advantages from the tax reform, hold back consumption expenses and retain smaller companies.
The experts from the IMK see it similarly: “In particular, customs policy has an increase in inflation in the current year. We therefore assume a significant weakening of purchasing power.” The tax package can hardly be viewed in isolation from other US administration economic policy measures and is likely to have a slightly positive effect on GDP. “However, this effect can quickly be counteracted due to weaker consumption at the lower income.”
What are the effects on the bond and stock market?
“On the stock markets, the tax reform that has been decided should increase price rising as in the past,” expected Daniels. This is also due to the fact that the uncertainty over the debt limit would be eliminated, my observer.
Nevertheless, the financial markets are growing due to the increasing public debt from the United States – especially on the much larger bond market. “The recent developments at the bond market indicate a shift in the focus of tariffs towards fiscal policy,” says Bleina Uruci, US chief economist at T. Rowe Price. The returns of US state bonds should therefore continue to increase. That would make it more expensive for the United States to get money on the capital market.
