The 'Big Beautiful Bill' Will Require Even More Borrowing Than Previously Thought
After accounting for the dynamic effects of the Trump-backed tax bill, the CBO concludes it will add $2.8 trillion to the deficit over 10 years.
For months, Republicans have argued that there's a glaring flaw in various budgetary projections showing that deficits will significantly increase if Congress passes a major tax cut and spending package.
The problem, as they see it, is that initial budget projections of major legislation—like those crafted by the Congressional Budget Office (CBO)—fail to take into account potential economic consequences. When the CBO said that the bill would add $2.4 trillion to the deficit over 10 years, the White House and top Republicans in Congress pushed back by suggesting that booming economic growth would shrink that figure.
"The problem is they do not use what we call dynamic scoring," Speaker of the House Mike Johnson (R–La.) told Fox News on May 29. "What that means in layman's terms is they don't give us any credit for the extraordinary economic growth that will be spurred along by this bill."
It was always difficult to take that argument seriously. Now, it can be put to bed for good.
A new CBO analysis released Tuesday found that the One Big Beautiful Bill Act will add even more to the deficit once the dynamic effects of the package are taken into account. Now, the CBO says the budgetary hit will be $2.8 trillion over 10 years, which adds about $400 billion to the total the government will have to borrow if the bill passes.
In short, the bill does not pay for itself. The economic growth generated by lower taxes is canceled out (and then some) by the cost of even higher borrowing.
The new CBO report says the economic boom from extending the 2017 tax cuts will be minimal—as most economists not employed by the White House have been anticipating. Unlike the 2017 tax bill, which lowered taxes for nearly all Americans and cut the corporate tax rate, this year's bill is merely preventing taxes from rising back to their pre-2017 levels. That's important, but the new tax cuts in the package are relatively limited—mostly novelty items like President Donald Trump's promise not to tax tipped income—and shouldn't be expected to generate a big economic boom.
When the economic effects are taken into account, the CBO expects the tax bill to boost federal revenue by $85 billion over 10 years.
On the other hand, the bill will require huge amounts of new borrowing when the federal government is already running annual budget deficits of nearly $2 trillion. All that borrowing will likely push interest rates higher, making it more expensive to make payments on the large (and growing) national debt. The economic effects of all that would add an estimated $441 billion to the deficit over the same 10 years, the CBO says.
"In other words, any deficit reduction from higher growth is more than offset by rising interest costs on an already massive debt," Paul Winfree, former White House budget adviser during the first Trump administration, wrote on X in response to the new CBO analysis. "Whether or not you accept CBO's growth assumptions (I believe they're much too modest), this is the trap we're in. The debt is too high. We have to cut spending. We can't simply grow our way out of this, and we certainly can't inflate our way out without imposing a massive tax on the American people."
The new CBO analysis is in line with projections from the Penn Wharton Budget Model and the Yale Budget Lab, both of which found that the bill would add more to the deficit once the economic effects are included.
Other independent assessments of the bill have disagreed, but only slightly. Projections by the conservative American Enterprise Institute and liberal Tax Policy Center both expect the economic effects of the bill to be net-positive. But neither expects the economic growth to come close to covering the budgetary cost of the bill. Indeed, there is not a single projection that says the bill will pay for itself. Not even close.
One final caveat worth mentioning: These scores are all based on the version of the tax bill that passed the House last month. The Senate is poised to make changes to the package. One of those potential changes is a permanent extension of a tax break for businesses that spend money on new equipment and research and development, which would likely boost growth in the long run.
Still, there's a long way to go before we should take seriously anyone who says this bill will pay for itself. As has always been the case, Congress should offset the extension of the tax cuts with spending cuts to avoid adding to the deficit.
