Compromise increased the deficit. And Republicans back a new hospital fund. Look out!
Expect Another $4 Trillion in Debt
The Committee for a Responsible Budget (CFRB) reports Senate Reconciliation Bill Could Add Over $4 Trillion to Debt
As it currently stands, the Senate reconciliation bill is likely to add $3.5 to $4.2 trillion to the debt through Fiscal Year (FY) 2034, based on our estimates. The debt impact could rise as high as $4.5 trillion if various rumored adjustments are made. That’s $500 billion to $1.5 trillion more in borrowing than under the House-passed bill and will mean the Senate is likely out of compliance with the House reconciliation instructions.
Although many parts of the Senate bill are in flux, a Joint Committee on Taxation (JCT) score of the tax portion of the bill, the official estimate of the House bill, and reports from committees themselves allow us to construct a preliminary estimate of the bill both as it stands and assuming the removal of provisions that the Senate Parliamentarian advised violate the Byrd rule.
Based on these sources, we estimate the pre-Byrd rule Senate version of the One Big Beautiful Bill Act (OBBBA) would increase primary deficits by $2.9 trillion through FY 2034 and, after accounting for interest, increase total borrowing by $3.5 trillion. Removing provisions that have been flagged for noncompliance with the Senate’s Byrd rule, we estimate the bill would increase primary deficits by $3.5 trillion, boosting total borrowing by $4.2 trillion. With various rumored adjustments – especially to the SALT cap and Section 899 tax – borrowing could rise to $4.5 trillion.
Estimated Fiscal Impact OBBA
Noncompliant with House Instructions
The primary spending and revenue changes mean the Senate bill would not be compliant with the House reconciliation instructions, which allow $4.0 trillion of tax cuts to accompany at least $1.2 trillion of net ($1.5 trillion of gross) spending cuts, $4.5 trillion of tax cuts to accompany at least $1.7 trillion of net ($2.0 trillion of gross) spending cuts, or a sliding scale combination of tax and spending cuts sufficient to keep net primary borrowing below $2.8 trillion.
Senate Bill Would Push Debt Higher
Expect Things to Get Worse
The actual deficit impact could be far higher than under the bill as currently written. Senate Finance Committee Chairman Mike Crapo (R-ID) has already said he is dropping a $52 billion tax provision known as “Section 899”, which would have allowed the United States to apply “retaliatory taxes” when foreign countries tax American companies. Press reports suggest that senators are also currently negotiating a plan to increase the SALT cap and establish a new rural hospital fund, which could add $250 billion or more to the total cost. Costs could rise by hundreds of billions more on a dynamic basis, as higher debt pushes up interest rates.
Finally, the Senate bill includes a number of temporary provisions, including a massive temporary expansion of the Radiation Exposure Compensation Act (RECA), along with numerous temporary tax cuts and spending increases. Making these provisions permanent could add up to $1 trillion to the total cost of the Senate bill.
Retaliatory Tax Is Dead
On June 26, the Wall Street Journal reported Bessent Says Proposed ‘Revenge Tax’ No Longer Needed
The agreement among the Group of Seven largest economies means the “revenge tax” being contemplated in Republicans’ tax-and-spending bill should be removed from the legislation, Bessent said. The provision would have imposed additional taxes as high as 20% against companies from countries that imposed what the U.S. deemed as discriminatory taxes.
The potential tax, which would have become Section 899 of the tax code, had roiled markets and frustrated foreign-owned companies, who had argued that it would depress investment in the U.S. Removal, however, could punch a hole in the GOP tax bill; the House version was slated to raise $116 billion through 2034 and a gentler Senate version would have raised $52 billion.
In a joint statement late Thursday, the top tax writers in Congress said they would remove the language from the tax bill, which the House passed last month and could become law as soon as next week. House Ways and Means Committee Chairman Jason Smith (R., Mo.) and Senate Finance Committee Chairman Mike Crapo (R., Idaho) said they remain ready to act if other countries abandon or slow-walk the deal.
Nothing is Temporary
I find that amusing because no deal is signed, so it’s a unilateral concession by the administration.
The Senate weakened the House measure and now Bessent wants to scrap it all. The cost over the House version is $116 billion.
Senate Finance Committee Chairman Mike Crapo is “ready to act”.
What a hoot. Exactly how are you going to act is the bill is passed in the timeframe Trump demands? It would then take a filibuster-proof majority to react.
And temporary provisions? Please spare me the sap. The original TCJA was “temporary”, expiring next year.
Nothing in Congress is ever temporary.
New Rural Hospital Fund
Please note the debate to establish a new rural hospital fund. The CFRB says it could add $250 billion or more to the total cost.
How did this boondoggle happen?
The Hill explains Senate Republicans battle over rural hospital relief fund to offset Medicaid cuts
Senate Republicans including Sen. Susan Collins (Maine) say a new proposal to create a $15 billion relief fund for rural hospitals is not adequate to make up for tens of billions of dollars in federal Medicaid funding cuts included in the Senate megabill to enact President Trump’s agenda.
Collins told reporters Wednesday that the $15 billion relief fund floated by the Senate Finance Committee is likely not the final offer from Senate Republican leaders to address the concerns of several senators who worry the bill’s cap on health care provider taxes could put scores of rural hospitals out of business around the country.
“The Finance Committee has not made a final decision. It is accurate that I believe we need [a] $100 billion provider-relief fund. I don’t think that solves the entire problem. The Senate cuts in Medicaid are far deeper than the House cuts, and I think that’s problematic as well,” she said.
Sen. Lisa Murkowski (R-Alaska) is also skeptical that $15 billion would be enough to offset the Senate bill’s impact on small rural hospitals, according to a Senate GOP source familiar with the internal debate.
New Government Program
To offset Medicaid cuts that may not even happen, Republicans are talking about a “new” benefit.
The words “new government program” should strike fear into everyone’s heart.
The opening gambit is a mere $15 billion. But two Senators say no. Whatever the final number is, quadruple it.
Democrats will want to expand that, and will the next time they are in office. And you already see complicit Republicans.
This is what’s become of the Republican party. MAGA cheers.
What About Recession?
Good question. Budgets go out the window the moment there is an economic slowdown.
On June 20, 2025 I commented Did the Fed Just Predict a Recession for Later this Year?
The Fed does not “predict”, but its GDP projections say “yes”.
Expect a recession and more fiscal stimulus to counteract. I expect no less than a $2 trillion hit to the economy. Deficits will blow out.
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The BEA revised GDP lower by 0.3 percentage points. The details are worse.
What we need are a couple of failed Treasury auctions to bring the delusional DC spendthrifts back to some semblance of reality.
Every reputable economist comments on the only possible 3 ways forward, and more spending with more inflation is the least painful.
The other 2 are severely raising taxes, or canceling the debt, and both of those will destroy the economy.
The one way to even attempt to right the sinking ship is the way that almost no politician favors:
You’re a nutcase.
Cut military spending? More like double it.
Raise corporate tax? Yeah that’s a job creator.
You have drunk waaaay too much Kool Aid.
Unless your statements were made in sarcasm, YOU are the one who is the nutcase.
The citizens gave Trump a second chance but he is blowing it.
He’s not blowing anything. There’s about to be a massive economic melt up, all we need now is lower interest rates.
You. I like you. You’re crazy as a sackful of weasels.
Yes, with Trump nirvana is always just around the corner. What is needed is prudent fiscal policy not cheaper borrowing rates which encourage bad business ideas. I say put cup interest rates and put the economy on a decent footing before fooling around with cheaper money.
The difference between democrats and republicans is the dems would add 4T each year, 4T in 10 years looks downright responsible…. I think the republicans see balancing the budget will lead to their demise and when the dems come back in, they will unleash the printing press. There is an argument for growing out of debt. I think 450B per year is about 1.4% of GDP so that should be offset by growth.
Please note, I am not a Trump worshiper.
I am pretty sure the $4 trillion in four years is on top of the $2 trillion per year that we have now. That is a game that the DC politicians have been playing as far back as I can remember. Another game is to propose a $10 billion increase, cut it back to $6 billion and call it a $4 billion cut. What is proposed may be an heading in the wrong direction at a slower pace, but it is not a fix. We now have compounding working geometrically against the American taxpayer and it will not be repaired until the spend is less than revenue.
4T each year is a given, regardless of who it is in charge. The two parties largely have the same policies except for a few bells here and a few whistles there.
Trump added 8 trillion to the national debt in his last 4 years as president….not exactly a milestone achievement. I was one of the lucky ones who saw a real tax cut, but my children will have to work extra hard to pay for it, because the massive economic expansion Trump promised didn’t materialise. This time around it won’t materialise either…our corrupt House, Senate and White House will over spend, and growth will be much less that forecast. It happens every f**king time.
As a country, we have been down this road a couple times in the last century. First is the severe recession after WW1 and the Spanish Flu pandemic that ended with federal spending cuts from $18,493 million in 1919 to $6,358 million in 1920 to usher in the roaring 20’s. Also, in 1919 the deficit was $13,363 million and in 1920 the surplus was $291 million with annual surpluses through 1930. Another ongoing example is Argentina where drastic government spending cuts are leading to an astounding economic rebound.
The second American example is the great depression where significant government deficits were the rule from 1931 through 1947There was no recovery with deficit spending. These two examples would suggest the OBBBA is guaranteed to fail. Data for the above is taken from the following link:
https://stats.areppim.com/stats/stats_usxbudget_history.htm
The second point from our own history is this deficit and debt problem will not be solved by increasing taxes. The chart in the link ( Federal Receipts as Percent of Gross Domestic Product (FYFRGDA188S) | FRED | St. Louis Fed ) shows that federal receipts normally run around 17% to 17.5% never exceeding 20% of GDP no matter the tax policy. Changing tax policy will tweak the problem, but it will only be a rounding error given our massive problem. The only way to fix our problem is to drastically cut spending below revenue.
In summary, I find it interesting but not surprising that as a country we did well running fiscal surpluses during the 1920.s and miserably during the deficit years of the depression. Correlation is not causation, but it is a good place to start looking.
No president, no government want recession on their watch. They don’t mind to spend till they see the road block. Then they will change the course.
They are blind….the road block is there and they cannot see it.
Dropping the SLR is no panacea. It means the banks can monetize a lot more debt. The banks don’t intermediate debt, they create new DDs.
– Compromise increased the deficit. And Republicans back a new hospital fund. Look out!
> Making up for USAID type $$ in one shot? Chasing a “Run Away” Agenda? Does this ever pay Politicians what Doctors get paid? In This Case, do Republican Politicians get an extra Bump? Trying to find a logical reason WHY?
– The Committee for a Responsible Budget (CFRB). > Has obviously Failed Us!!!
– The debt impact could rise as high as $4.5 trillion if various rumored adjustments are made. That’s up to $1.5 trillion mote
> Padding things has gotten very expensive. Adjustments are the poor planning, and/or greedy peoples “Devil”
– With various rumored adjustments – especially to the SALT cap and Section 899 tax – borrowing could rise to $4.5 trillion.
> Nobody actually thought SALT was going anywhere did they? Truly? It’s a playground for Adults. Cities will crumble without the payback if you will…
– Please note the debate to establish a new rural hospital fund. The CFRB says it could add $250 billion or more to the total cost. > when “Over” Budget before you start, it’s best to Triple the estimate and add double for future changes, to keep it going… Let’s be real!
– How did this boondoggle happen? The words “new government program” should strike fear into everyone’s heart… > Well all but the Government, Government Workers, Those doing Business with the Government, Those Dependent on the Government ETC…
hmmm, I was told the Republicans were conservatives. Maybe it’s con-servatives.
It’s not only the amount they want to spend it’s that what they want to spend it on produces nothing (except death and destruction) and doesn’t benefit the average tax payer.
86/47
They’re fascists now. Been a long, strange trip from the party that freed the slaves.
OH.. so this bill will add 4Trillion to the debt over 10 yrs.. If only that was true !!!
.. Fake Headline, Misleading, Lie.. choose your word…
It will add 4Trillion on top of the already planned for increase in debt which is probably 20Trillion over the next 10 yrs…
They talk about increasing deficits like they are guaranteed to be able to borrow the funds in the first place. You have to be insane, delusional or outright stupid to lend money to the US to further destroy the world & themselves. They shouldn’t be discussing deficits, they should be discussing where the hell are they gonna borrow $2 trillion plus annually. What a bunch of losers, the treasury market is on the verge of total collapse.
The Fed will buy them if nobody else does.
Balance sheet expansion already in the works for the banks.
https://www.bing.com/search?q=balance+sheet+capacity+dropping+SLR&toWww=1&redig=F06D66484BFC4CDD8250AF77DF8575EF
China is reducing its holding of treasury from 1300 billion to 700. Japan is top holder and losing the value of its holding significantly as interest rate is rising. How long Japan is going to hold and it will be ugly when the time comes.
I can’t believe this is a surprise to anyone paying attention. Spending more and more tax dollars is an addictive drug for the dc stooges.
The underlying problem is obvious.
It’s the Fed and its fraudulent (unconstitutional) money system.
They’ve given the politicians enough rope to hang themselves (as well as the rest of us).
Vote them out. From both parties. These incumbents (especially those who have been around for 20 plus years have done this over and over again. Vote them out.
The rubes, suckers and idiots were told by the orange Messiah he going to save them from debt, deficits, inflation, and endless wars.
How are you suckers and losers feeling now? Don’t worry MAGA, when the social security and medicare checks stop, you’ll only have yourselves to blame. :p
But hey, being a bigot is great again so you have that! Winning /s
Got exit strategy? Got PUTS?
The orange messiah is neither the House nor the Senate.
If he signs the abomination then you can (and will) complain.
He has been taking credit fot the BBB.
86/47
Regarding Medicare, the people are only the conduit by which government money is transported to the healthcare, medical device and (especially) pharmaceutical industries. Most of that expense is during the last few months of life – which is barely worth living. If Medicare ceased to exist, it would hurt a few patients a lot and a lot of people very little. Healthcare and pharmaceutical would be dealt a well-deserved mortal wound.
On many things, I’m conservative, but Single Payer would be fine with me. Providers would be haircutted. We can’t provide cutting-edge care for everyone. Diet and lifestyle are the most impactful things over the long term anyway.
Carney is an academic savant. Under his tenure GBP/USD deflated from 1.7 in 2014
to 1.1 in 2016 and to 1.0 in 2022. It’s 1.3 after ten years.
In Oct 2008 the Fed raided other people bank accounts, for an IOU, and distributed the money to the poor and the middle class. The Fed became more powerful than ever. It had money to control the 10Y and the long duration for the first time. The ECB did the same. Gravity with Germany and Japan prevents higher rates, even during inflation.. If the Fed cuts rates, below the inflation rate, in 10 years : $45T debt x (-)2% x 10Y ==> (-) $9T. Did reps, who are fighting for the flyover hospitals, get it: yes. Will the gov cut debt in real terms : yes. Will real unions wages rise in real terms : yes ! Foreign investors poured in to our industries to protect their assets. There is a switch from parking in gov bills to industries.
Carney : we need inflation.
There is not a shortage of capital in the US. It’s parked in government bills gathering rents and not invested in production of stuff.
There is no shortage of capital in the US. The fact it’s parked in government bills tells you this.
What there is, is a shortage of productive investments so capital is being parked in bonds/treasuries.
There are plenty promising innovative co, but their prices are too high. Investors are betting on correction. We don’t know when and where the markets lows will be. They will pour in after a low and the test. but there still can be a lower low followed by another lower low.
And the stock market.
86/47
Unfortunately if it comes out of government debt it will go into real estate which is also rent-seeking and not productive. We need to have it invested into making things.
That ship sailed years ago.
Not really but we need more.
It looks like the only difference between the current party in power and the other party is between “bad” and “worse”. The only virtue I see in the other party is their professed antagonism towards the rich. If we are going to take a prosperity hit (, which arguably we deserve,) we might as well drag the rich and wealthy down with us. (They more than us need a modesty check.)
To get an early look at “going down”, take a look at Great Britain, where taxation may be too far over the top of the Laffer curve. See the end of prosperity and freedom predicted when the people discover they can loot the public purse.
Congress Passes Blank Bill For Trump To Write Whatever Law He WantsNew Legislation Frees Up President To Do Pretty Much Anything, Really
https://theonion.com/congress-passes-blank-bill-for-trump-to-write-whatever-law-he-wants/
lol. That’s only slightly different from what congress has done over the last 60 or so years: hand over their power to the executive so they can shirk responsibility.
Playing chicken with the bond market. If at some point the bluff is finally called, the debt and its costs soar like a hockey stick trajectory upward. Then a lot of other things come unhinged.
They’re putting a lot of hope in the theory that the U.S. is the “cleanest dirty shirt” among nations. It works until it doesn’t.
As you predicted, but it doesn’t make me less disgusted.
Cueing Lisa Simpson, “I warned ya, and yet my punishment is no less severe”.
They are a disliked body because they are unwilling to do the needful. The day will approach slowly and then bang all at once where they won’t be able to do anything to avoid the financial calamity, and they’ll play the victim card.
They are a vile lot of rot.
But my punishment will be no less severe.
The Uniparty is corrupt. Right out in the open. They are about taking money from people who earned it (but don’t get to spend it) and transferring it to other politically connected people, as part of their own advancement. They are agents of legal theft.
This $4+ Trillion doesn’t even account for other programs pushing up the National Debt, such as interest payments if and when interest rates resume their rise. Sorry, but there is no escape velocity from debt, only parabolic rise and then collapse, especially with our current demographics. The only question is if it will be in a couple years or a dozen. Unpayable debts are either remitted in worthless currency or defaulted. Our children are so screwed.
My money is by 2030. 5 more years of colossal annual budget deficits seems like a good bet. In 5 years, we could be at the doorstep of $50T. With a little luck, maybe $40T will cause some sort of treasury hiccup that will get the Uniparty’s attention just enough to start correcting course. But that’s probably wishful thinking.
A smaller gov, tariffs, higher payroll and realized gains taxes fill gov coffer. If the fed will cut rates, when the Dow allows it, along with inflation, cutting debt will be faster. The extra funds will fill the gov saving account. Reps pets projects, to prevent Muslim Bros takeover, will slow it down.
EVEN IF they pushed through a Rural Hosp bill, there are NO doctors willing to work in rural locations. We live in two of them in the USA and both have HIGH turn-over Problems with primary Docs.
RFK Jr switched the healthcare sector to Preventive Medicine. It might stop pharma, unnecessary medical procedures and addicting our children to poisonous food from early age, in schools. The healthcare industry rob the gov via the impaired people and the elderly.
I agree, having seen awful examples. But a lot of good stuff probably gets thrown out with the bathwater, meaning people’s lives.
Rural areas getting doctors and nurses to work there is a big problem in Europe too.
But I was told “everyone is leaving cities” so why is that happening? You mean doctors only want to work with high volume of patients and profits? Oy vey!
But there are plenty of veterinary clinics. They accept cash, but not health insurance. Be sure to identify as a large dog, goat, or calf
That would require wokeness and that’s not allowed anymore. You can’t even claim to be transdog or transcalf anymore.
Living in a rural area comes with upsides and downsides. One of the downsides is fewer hospitals, smaller hospitals and fewer doctors. Them’s the breaks. We can’t afford to subsidize people in rural areas any more than we already do – which is a lot. We also can’t afford over a trillion dollars for “defense”. That should be cut in half.
Trump officials delayed farm trade report over deficit forecastAdministration officials blocked publication of written analysis that normally accompanies the report because they disliked what it said about the deficit.
https://www.politico.com/news/2025/06/04/trump-officials-farm-product-trade-deficit-forecast-00382549
So here we are, the party that talks about government spending, trade, and debt, hiding that their own policies are creating a worse situation.
They won’t be able to hide the inflation. The ruse is coming to an end to a big box store near you soon.
https://www.cnbc.com/2025/06/27/deep-inside-economy-more-sticker-prices-start-to-go-up-due-to-tariffs.html
And all of this is brought to you & sponsored by none other than Jerome Powell, Scott Bessent, DJT & the Congressional Uniparty.
The soon to be eliminated reserve requirements will open the flood gates to $3.3T in bank deposits, most of which will find their way into US treasuries. How long these reserves will last is hard to guess, but I would suspect that there’s going to be further divergence between the short & long ends of the yield curve.
The good news is that interest expense will continue to decline for a while. Let’s see how fast we can get sprint the $1.365T FY ’25 deficit past $2T & the overall debt to $40T.
My guess would be we’re about to set a World Record.
Uniparty is the key. The debt has followed a parabolic arc for decades. It doesn’t matter which Party is in. It’s just that it’s now in the terminal near vertical phase. The American Private and Public sectors are addicted to debt. Otherwise Americans would get their own financial houses in order and throw out the big spenders in Congress.
Divided government is best. Less is accomplished. Less is more.
There will come a time (unpredictable) when it will be impossible for the government (federal) to collect enough in taxes to pay all of its expenses, including interest on the national debt. The Gov’t can of course borrow an indefinite amount through the Fed. (concealed green backing) given a few changes in existing law. But that would lead to hyper inflation – i.e., a collapse in the credit of the Gov’t.
So the easy way, is the way the French did it in 1960. Simply say that beginning Jan 1 (or any other date), new dollars will be issued, and that each new dollar is worth 100 old dollars. Then follow that up with a largely state controlled economy.
In 1960, the French economist / mathematician Jacques Rueff, during Charles de Gaulle’s presidency, converted the old franc, to a nouveau franc, equal to 100 of the old franc. However, even with this substitution, inflation continued to erode the currency’s value, though at lower rates of change, in comparison to other countries. And this new franc equaled 20 cents to a U.S. dollar. The old rate was 5.00 to a dollar.
In 1960, the French franc, which was one of the weakest currencies, overnight, became one of the strongest. Correcting policies included plans to 1) balance the budget, 2) stabilize the currency, and 3) eliminate currency controls.
The gold content of the franc increased 100%, & 1) foreign exchange rates, and 2) France’s internal prices, reflected the conversion overnight. Internally, prices dropped about 90 per cent, and the foreign exchange value rose from about 0.238 cents per franc, to about 20.389 cents per franc.
Domestically, France was on a managed paper standard; externally, on a modified gold bullion standard. With the new policies, France’s economy strengthened, and the franc became fully convertible @ approximately its gold par, into gold for foreign exchange and into foreign currencies.
Good rundown but prices did not drop 90% because the new prices reflected the old prices only divided by 100.
Wow Mish, you’re actually making sense in this post. As Lyn Alden says, “nothing stops this train.”
I am a big fan of Lyn Alden
Me, TOO!
And, I am a fan of your Work, Mish. Thanks for all that you do. No, I do not always agree with you but I am not tuning out of articles that disagree with my world views. I TRY to be balanced.
I just listened to Lyn’s recent video….great analysis, easy to understand.
Lyn doesn’t know a bank from a nonbank.
Another home run ripped out of the park by Mish.
It is impossible to be too cynical when Congress is involved. They always make things worse, do the worst thing possible, etc. The longer this drama goes on the more they will add to the deficit.
Best we can hope for is that the entire thing dies. Rand Paul, Sen. Johnson, Susan Collins, and Murkowski should kill it.
That’s why they should have passed the first bill Trump put before them.
Like everything else in life, it NEVER EVER gets any cheaper if you wait.
TT the House bill would not have survived the parliamentarian either.