Mr. Trump's Big Beautiful Bill

The United States Congress has passed a major bill setting out many of the objectives of the Trump economic program. This article will discuss some of the major aspects of this bill and their significance for the world economy and the United States.

Deficit

The BBB sets out changes in taxes and expenditures that imply there will be a $3.4 trillion deficit accumulated over the next 10 years. The annual level of the deficit for the coming financial year is 8% of GDP. This is a very high deficit level, over twice that of Bangladesh. The very action of the United States running a deficit of this magnitude is a clear sign of irresponsible government. Virtually all economists believe that a deficit of this magnitude is totally inappropriate for the UnitedStates.

The White House defends by arguing that these estimates are not true. Their argument is that lower taxes from the BBB will increase economic growth and result in greater tax collections, sufficient to lower the deficit. This argument has been tried by many Republican presidents and always proved to be wrong. There may be some increase in the growth rate of the economy, but nowhere near enough to generate tax collections sufficient to reduce the deficit.

The generally accepted principles of macroeconomics assert that an economy moves in cycles, GDP rising faster sometimes and other times slower than the long term trend. Good economic policy is to reduce taxes when the economy is below capacity so as to generate additional demand and bring the economy back up to its full capacity.

When the economy is running at a level above its capacity this situation will create inflation. To control this one lowers government deficits to keep aggregate demand at an appropriate level. When an economy is run in an irresponsible manner, as is now the case with the United States, with the economy running close to full capacity while the deficit is increasing, it is almost certain to generate inflation.

Mr. Trump is setting the stage for such a result. This in itself is likely to result in completely discrediting Trump’s program during the second half of his four year term. Mr. Trump's first achievement then is to manage the American economy to do great harm to the welfare of the American people over the next three years. The Republican members of Congress who voted for this disaster were more or less aware of what they were doing, but lacked intellectual and political courage to stand up to President Trump.

Income Distribution

The BBB as passed by Congress causes the income distribution to shift in favour of the rich and against the economic welfare of the poor. The effective tax cuts (retaining rates that otherwise would increase) are far larger for the rich then for the poor. For a few days Trump fiddled with the idea of raising the tax rates for people whose income was millions of dollars, but he found no support for this from the Republican congressman, many of whom are wealthy individuals and greatly benefit from this tax change. Trump has been successful in making the rich richer and providing the poor with only nominal increases in their income.  

All of the major religions of the world suggests that it is the duty of the fortunate to help the unfortunate. This is taught in the Jewish Bible, the New Testament, and the Quran. Helping the unfortunate is a requirement to be a Muslim. Jesus said it is easier for a camel to go through the eye of a needle than for a rich person to go to heaven. The Republican political party is closely connected with the Evangelical Christian churches, but has just made a mockery of the teachings of Jesus Christ. They have no shame.

One must admit that within the tax bill there are some elements that help old people but the amounts are nominal. One must also admit the fact that the child credit tax which helps families with children by reducing their income tax has been increased. But these minor changes do not offset the basic outcome that rich people's income go up by a greater percentage than the poor. In effect the US government is borrowing money needed to replace lower taxes collected from the rich.

Medical Insurance

The American medical insurance system as it actually functions is incomprehensible and we do not make any attempt to explain it, even if we were able to do so. But there is one part of the method of paying for medical care that covers people with low income or physical disabilities whereby the American government pays the medical providers (doctors, hospitals, laboratories, nurses, etc) the costs of care. This is called Medicaid in the language of the American medical system.

The Republicans wish to reduce some expenditures of the government and focused on Medicaid by denying probable expenditures by about $1 trillion. The BBB makes it much more difficult for a poor person to qualify to receive such benefits. It is not that the BBB reduces existing expenditures that would otherwise be made, but rather that responsibility by the US government to provide the medical care is denied. A poor person who is not eligible for Medicaid must pay for it himself or simply forego medical care.

Most of the people in the United States are covered by some sort of insurance, some from government and some from private sources and their medical needs are covered by such programs; but if you are poor and you get sick, tough it out if you do not have the ability to pay yourself. (One can go to the emergency section of a hospital when you are sick and be treated regardless of your ability to pay; but this is different from regular medical care by a doctor who is familiar with your problems.) 

It is estimated that under the rules of the BBB approximately 15 million Americans will lose coverage. These are poor people and so will suffer from insufficient medical care. The Republicans justify this extraordinary action by claiming many people who take advantage of Medicaid are involved in fraud or misrepresentation. There is no evidence that this amounts to a significant amount of money; nor that are so many people involved.

The Republican Party promised during the election that they would not reduce Medicaid; but BBB does.  This may have a significant impact on the election in 2026.  However, many of the new restrictions do not take place until after the 2026 elections; it is an immoral scam, and the Republican members of Congress know what they have done. It is a stunning sin and is a sad symbol of the moral depravity that grips the American political system.

Food

There is another part of the BBB dealing with nutritional supplements for poor families that need assistance in buying food. This program has also been reduced by tricky administrative procedures that make it more difficult for the needy to successfully apply for assistance. This is the Republican Party’s idea -- we do not say “no,” but we make the paperwork so complicated that many persons are not able to complete it.

Altogether we have the BBB successfully reducing the economic and medical welfare of 12 to 15 million persons while increasing the income of persons who already make more than $500,000 per year. One wonders what kind of moral order that congressman and the president follow. It is beyond comprehension to any person who has a sense of right and wrong and who believe that it is the moral, God directed, duty of the better off to help the poor.

World Financial Stability

We turn next to the implications of the BBB for the stability of the world financial system. In addition to the uncertain consequences of the reciprocal tariff policies being established by the Trump administration, the BBB has some important implications for the world financial system.

As a consequence of the legislation the deficit of the United States government will increase. Government securities will be sold in order to cover the cost of the deficit; to achieve this will probably lead to an increase in the yield (the interest rate) that US government bonds pay.

There are two components of this sale: first the refinancing of those bonds which are coming due over the next year and second the financing of the deficit arising from the BBB. This leads to higher interest rates necessary to convince buyers to take up these bonds. Confidence of the international financial community in the US dollar is declining.

An index of the exchange rate of the dollar with several important currencies has declined by more than 10% since the beginning of 2025. With the passage of the BBB most analysts expect that the dollar will continue to weaken. This threatens the stability of the world financial system.

The fiscal path being followed by the United States creates doubts and uncertainties as to the responsibility of those governing the country; such doubts are emerging in the international banks, the IMF, the Bank for International Settlements, and the Federal Reserve.

Energy

We turn next to the consequences for the energy sector of the BBB. The world community has been in general agreement that it is necessary to reduce greenhouse gases emitted into the atmosphere to slow the heating of the earth. We remember that the consequences of such heating will be dire. The basic strategy is to increase the use of renewable energy while phasing out fossil fuels.

The BBB does the exact opposite. It removes all the incentives to develop and use renewable energies and encourages the increased use of fossil fuels. This shift in policy is deluded.

First, the fossil fuel companies are enchanted with these developments and will reward Trump and his family for the gift.

Second, the development of renewable energies and associated manufactured goods will shift largely to China. In this most important undertaking facing the world economy the United States has refused to participate turning the future over to China. A remarkable betrayal of the interests of the United States.

The BBB discourages the development of electric vehicles and encourages production of vehicles based on the use of the internal combustion engine or at best hybrids. Government support for development of solar and wind energy is ended.

It is unclear why Trump chose this path but the most likely reason is that he dislikes everything that President Biden did, and instinctively simply opposes them. In Trump's mind Biden lost the 2020 election but stole it from Trump. All this despite the courts' rejection of all claims that the election was fraudulent.

Many American enterprises had initiated investments based on the laws that had been enacted during the Biden administration. All of these laws that were meant to support the development of renewable energies were struck down in the BBB.

Deporting Residents of the USA

We turn to another important change in budget expenditures contained in the BBB. We have already noted the reduced expenditures that will take place for food supplements, Medicaid and for the renewable energy sector. One large increased expenditure category is to support a higher rate of deportation of persons illegally in the United States. Some of these illegal immigrants only became illegal when Trump reversed legal rulings made by Biden.

Much of the expenditure is to construct or to support private sector construction of huge holding facilities, effectively concentration camps, where people accused of immigration law violations can be housed pending trial and deportation when found to be in the United States illegally.

What can one say about this except to weep at the cruelty and violence with which the Trump administration is managing its campaign against persons in the United States often legally admitted and now by decree Trump has changed their status. Approximately $169 billion will be spent on this program of accelerating the deportation of migrants.

Military  

An amount of $158 billion will be added to the defense budget. A large part of this will be to increase the capacity of the United States shipbuilding companies to accelerate the rate at which naval vessels can be built and repaired. Another part of these funds will be used to commence the design and construction of Mr. Trump's Golden Dome. This project is meant to protect the United States from missile and drone attacks.

The truth about the Golden Dome is that it is a futile exercise to do something that the scientists have long shown impossible. Mr. Reagan also set out to construct a missile defense system, but the physics could not be made to work. Mr. Trump learning of the so-called Iron Dome in Israel, decided that he would have a Golden Dome to protect the United States. No serious work has been done to demonstrate the feasibility and effectiveness of such a system. Nevertheless, the United States will spend trillions of dollars over the next decade in a futile attempt to build such a defense.

Final Thoughts

The BBB passed by the American Congress and designed largely by Mr. Trump and his colleagues is a disaster for the future of the United States as it fails the younger American citizens by adding further debt for them to repay, while misrepresenting the impact on economic growth.

It fails the American people by cancelling medical care for 12 to 15 million persons.

It fails the American people by reducing the food supplies for poorer households.

It harms the American people by terminating government support for clean energy.

It shames the American people by creating concentration camps to house illegal immigrants. 

It harms the economic future of the United States by continuing large deficits that will disrupt the stability of the international financial system.