A new economic analysis warns that the “One Big Beautiful Bill Act,” signed into law on July 4, 2025, could add between $3.7 trillion and $5.1 trillion to federal deficits over the next decade and leave most American households worse off in the long run.
Debt Risks Build Over Time
The study, published on Monday by the Brookings Institution, finds the impact grows sharply over time. By 2054, U.S. debt could rise by 28 percentage points relative to GDP or 45 points if temporary provisions are extended.
Higher debt levels could push interest rates up, increasing borrowing costs across the economy. The same fiscal resources could have fully addressed Social Security’s long-term funding gap, which is projected to hit a shortfall within the next decade, according to Brookings.
Short-Term Boost, Long-Term Drag
In the near term, the law may support growth by increasing after-tax income and reducing taxes on businesses. But over time, rising deficits are expected to reduce national savings, limiting investment or increasing reliance on foreign borrowing.
“Growth effects are modest, while deficits remain large,” economists who conducted the study wrote.
Winners And Losers
Tax cuts and business incentives largely benefit high-income households, while spending reductions affect lower-income groups, including cuts tied to healthcare and food assistance programs.
When factoring in deficit financing, most households, especially lower-income groups, are expected to be worse off overall.
Earlier, economist Justin Wolfers described the policy mix as one of the largest redistributions from lower- to higher-income Americans.
Policy Debate Intensifies
Meanwhile, Treasury Secretary Scott Bessent has defended the bill, arguing it will drive a “non-inflationary boom” through increased investment.
The Congressional Budget Office had previously estimated the Act would increase resources for households in the top income decile by 4% by 2027, while reducing them by 2% for those at the bottom.
The debate comes as the Federal Reserve has held interest rates steady through early 2026, with no cuts so far this year, underscoring uncertainty around growth and inflation as fiscal policy expands.
While markets have remained stable, the study warns that sustained deficits could eventually weigh on growth if borrowing costs rise further.
Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by a Benzinga editor.
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