A new report from the Congressional Budget Office (CBO) reveals that President Donald Trump’s tax and spending legislation, signed into law on July 4, will increase federal deficits by $3.4 trillion through 2034. The updated projection includes last-minute amendments Republicans made to secure passage of the controversial bill.
The legislation, which extends individual tax rates set to expire this year and introduces temporary deductions for tips, overtime, and car loan interest, provided the vehicles are built in the U.S., has become a flashpoint in the government’s broader economic and political debate.
Alongside its sweeping tax changes, the law trims future government spending on Medicaid and food assistance and accelerates the phase-out of several clean energy tax incentives. The CBO also found that over 10 million people will be left uninsured by 2034 under the new law, slightly better than the earlier projection of 11.8 million losing coverage.
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Despite the intense legislative battle that led to its passage, the political fight is far from over. Republicans are touting the measure as a win for middle-class taxpayers, even as a recent AP-NORC poll shows two-thirds of U.S. adults believe the benefits will mostly go to the wealthy.
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Democrats, meanwhile, seized on the CBO’s findings to bolster their criticisms.
“Today’s report reminds us of something: facts are stubborn and the facts are clear,” said Senate Democratic leader Chuck Schumer. “The big, ugly betrayal is a loser for the country and will be a loser for the Republicans.”
To prevent a sharp tax increase next year, Republicans say the law was necessary. Trump and GOP lawmakers argue that faster economic growth will offset the projected deficits as increased tax revenues flow into federal coffers. However, nonpartisan analysts remain skeptical.
Maya MacGuineas, president of the Committee for a Responsible Federal Budget, acknowledged that the economy may receive a temporary boost, but warned of long-term consequences.
“There will be a shorter-term ‘sugar high’ as stimulus makes its way through the economy,” MacGuineas said. “And not one serious estimate claims this bill will improve our fiscal situation. Rather, positive growth effects are likely to be swamped by the effects of higher debt and interest rates.”
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The CBO notes that over $1 trillion in savings comes from the law’s healthcare provisions, including new work requirements for certain Medicaid recipients in states that expanded the program under the Affordable Care Act. In a last-ditch effort to win support from skeptical lawmakers, Republicans added a $50 billion fund for rural hospitals as part of the final negotiations.
