Behind President Donald Trump’s plan for a “big, beautiful bill” lie some ugly budget math and time-honored congressional ploys to try to hide the size of increasingly daunting federal deficits.
The president is catching criticism from within his own party, as some congressional Republicans balk at the massive tax-cut and spending bill that the party is aiming to pass this summer. Investors are also watching. On Friday, Moody’s Ratings downgraded the $36 trillion U.S. public debt a notch, saying that “current fiscal proposals” were continuing more than a decade of high U.S. deficits and increasing debt.
As a candidate, Mr. Trump promised to cut spending, and in some areas, he has. But those cuts have been on the margins. He’s avoided taking unpopular steps to slow the growth of the biggest items in the budget, Social Security and Medicare, and pursued voter-friendly but costly tax cuts instead. The result: He and his Republican allies are preparing to pass a budget bill that balloons the deficit and jacks up federal debt, as had also occurred when Democrat Joe Biden was in the White House.
Why We Wrote This
President Donald Trump promised to extend – and expand – tax cuts while also cutting federal spending. So far, the math looks like a recipe for federal deficits to keep rising rather than shrinking. In turn, that is increasing concerns about America’s long-term fiscal path.
“Ultimately, the bill’s going to increase the deficit; there’s no way around it,” says Yuval Levin, director of social, cultural, and constitutional studies at the American Enterprise Institute, a right-leaning think tank. “There’s every reason to expect that they’ll increase the deficit by $4 [trillion] to $6 trillion over 10 years, and that is on the scale of what they were angry at [Mr.] Biden over.”
Credit-rating downgrade
The Moody’s downgrade could serve as a warning shot. It means that none of the major credit-rating agencies now believes that U.S. Treasury bonds are as safe long-term as the sovereign debt issued by nations such as Singapore, Switzerland, and Germany. In Congress, a few Republican budget hawks have spoken out about the massive spending.
The bill “does not do what we say it does with respect to deficits,” Rep. Chip Roy of Texas said Friday, before voting against the Republican leadership’s bill in the House Budget Committee. “And I’m not going to sit here and say that everything is hunky-dory.”
But in the end, the committee allowed the bill to move a key step closer to the House floor Sunday. Political calculation almost always trumps budget math.
At the same time, economists say no nation gets away with unsustainable fiscal math forever. Moody’s bluntly described trends of growing “interest payments on debt, rising entitlement spending, and relatively low revenue generation.” Its statement Friday said, “Interest payments are likely to absorb around 30% of [federal] revenue by 2035, up from about 18% in 2024 and 9% in 2021.”
While the administration is cutting parts of the federal government, from education to foreign aid, the savings have proved much smaller than advertised. In December, President-elect Trump promised to “cut Hundreds of Billions of Dollars in spending next year.” Elon Musk, the former spearhead for the president’s Department of Government Efficiency, last fall predicted “at least $2 trillion” in spending cuts. To date, DOGE is reporting $170 billion in savings, and even that figure is overblown because of the way the department is counting, budget analysts say. Various analyses peg real savings at less than half that amount – or roughly 1% of what the government spends in a year.
And President Trump is working with Congress to expand spending for defense and border security.
On the other side of the ledger, Mr. Trump has raised federal revenues through his tariffs. But these are also shrinking. He has backed down from his most aggressive tariffs against China. And even less revenue may come in as he begins to strike deals with other nations.
Tax cuts and a rising deficit
Although modest, the savings from cutting spending and raising revenues could have gone toward reducing the deficit. Instead, the administration and the GOP-controlled Congress are pushing to extend President Trump’s tax cuts from his first term, which were set to expire. And they want more cuts: eliminating taxes on workers’ overtime and tips (unless they make a lot of money). And older people would get a higher standard deduction on their taxes.
Thus, the deficit is set to increase under this administration, despite a statement Monday by White House press secretary Karoline Leavitt that “This bill does not add to the deficit.”
The budget math is “very ugly,” says Howard Gleckman, a senior fellow at the Tax Policy Center in Washington. “They’re already using accounting gimmicks to make this look less costly than it is.”
Creative accounting has long been used by Republicans and Democrats to give themselves more room to spend or to cut taxes. In the current bill, the House leadership wants to calculate the 10-year impact of its tax cuts starting this year rather than in 2026, Mr. Gleckman says. That way, it will look less expensive because the spending under what’s left of 2025 will be far less costly than the spending in 2035.
Another gimmick involves an effort to curb Medicaid spending. The government could save an estimated $625 billion by forcing most able-bodied recipients under age 65 to work. But it could also push many people off the Medicaid rolls – an unpopular move. The bill envisions imposing this change largely in 2029, when Mr. Trump’s term will have ended.
The GOP-controlled Senate, which hasn’t started its budget work yet, could add its own dubious math, analysts say. Last month, it passed a budget resolution that includes something called a “current policy baseline.” It allows senators to ignore the costs of extending the tax cuts, even though many provisions are set to expire at the end of this year. That unusual accounting would allow Republicans to claim they were raising deficits by a maximum of $1.5 trillion over a decade. The actual figure would be about $3.3 trillion to $5 trillion or more, according to estimates by the Bipartisan Policy Center and the Committee for a Responsible Federal Budget.
And because President Trump has ruled out adjusting Social Security and Medicare, it’s looking very hard for the current Congress to really tackle deficits.
“It certainly seems like we have to wait for another administration” to make progress on curbing deficits, says Mr. Levin of the American Enterprise Institute. “The only way is to reduce the rate of growth of the old-age entitlements. And Republicans are not really any more interested in that than Democrats.”
