The Republican-led U.S. House of Representatives on Thursday narrowly passed a sweeping tax and spending bill, advancing much of President Donald Trump‘s policy agenda while adding trillions to the national debt.
The bill would fulfil many of Trump’s populist campaign pledges, delivering new tax breaks on tips and car loans and boosting spending on the military and border enforcement.
It will add about $3.8 trillion to the federal government’s $36.2 trillion in debt over the next decade, according to the nonpartisan Congressional Budget Office.
“This is arguably the most significant piece of Legislation that will ever be signed in the History of our Country!” Trump wrote on social media.
Narrowly Passed
The package passed in a 215-214 vote after a marathon push that kept lawmakers debating the bill through two successive nights.
All of the chamber’s Democrats and two Republicans voted against it, while a third Republican voted “present”, neither for nor against the bill. Another Republican missed the vote because he was asleep.
With a narrow 220-212 majority, House Speaker Mike Johnson could not afford to lose more than a handful of votes from his side, and he made several last-minute changes to satisfy various Republican factions.
“The House has passed generational, truly nation-shaping legislation,” Johnson said.
What Trump has dubbed a “big, beautiful bill” now heads to the Republican-controlled Senate, where it will likely be changed further during weeks of debate.
Tax Cuts, Energy Rollbacks
The 1,100-page bill would extend corporate and individual tax cuts passed in 2017 during Trump’s first term in office, cancel many green-energy incentives passed by Democratic former President Joe Biden and tighten eligibility for health and food programs for the poor.
It also would fund Trump’s crackdown on immigration, adding tens of thousands of border guards and creating the capacity to deport up to 1 million people each year. Regulations on firearm silencers would be loosened.
The bill passed despite growing concerns over the U.S. debt, which has reached 124% of GDP, prompting a downgrade of the United States’ top-notch credit rating by Moody’s last week.
The U.S. government has recorded budget deficits every year of this century, as Republican and Democratic administrations alike have failed to bring spending into alignment with revenue.
Interest payments accounted for 1 out of every 8 dollars spent by the U.S. government last year, more than the amount spent on the military, according to the CBO. That share is due to grow to 1 out of every 6 dollars over the next 10 years as an ageing population pushes up the government’s health and pension costs, even if Trump’s budget bill is not taken into account.
‘Setting A Course For The Iceberg’
Investors, unnerved by the country’s worsening fiscal position and Trump’s erratic tariff moves, have been selling off U.S. assets that make up the bedrock of the global financial system. The dollar has fallen more than 10% since January while yields on 30-year Treasury bonds, a proxy for long-term U.S. government borrowing costs, have reached their highest level since October 2023.
Two out of the three major U.S. stock indexes opened lower on Thursday, while the Nasdaq opened slightly higher. Solar energy stocks that benefit from green-energy subsidies targeted by the bill were especially hard hit.
“We’re not rearranging deck chairs on the Titanic tonight. We’re putting coal in the boiler and setting a course for the iceberg,” said Representative Thomas Massie of Kentucky, one of the two Republicans to vote against the bill.
The growing debt has paradoxically given urgency for Republicans to pass the bill, as it would raise the federal government’s debt ceiling by $4 trillion. That would avert the prospect of a default, which officials have warned could otherwise come sometime this summer.
Republicans have also argued that failure to pass the bill would mean an effective tax hike for many Americans, as Trump’s 2017 tax cuts are due to expire at the end of the year.
Hardliners on the party’s right flank had pushed for deeper spending cuts to lessen the budget impact, but they met resistance from centrists who worried that it would fall too heavily on the 71 million low-income Americans enrolled in the Medicaid health program.
Johnson made changes to address conservatives’ concerns, pulling forward new work requirements for Medicaid recipients to take effect at the end of 2026, two years earlier than before. That would kick several million people off the program, according to the CBO. The bill would also penalise states that expand Medicaid in the future.
Johnson also expanded a deduction for state and local tax payments, which was a priority for a handful of centrist Republicans who represent high-tax states like New York and California. The new limit of $40,000 would overwhelmingly benefit the wealthiest households, according to the nonpartisan Committee for a Responsible Federal Budget.
‘Trump Accounts’
Republicans also changed the name of the bill’s tax-free savings accounts for children to “Trump Accounts”.
Democrats blasted the bill as disproportionately benefiting the wealthy while cutting benefits for working Americans. The CBO found it would reduce income for the poorest 10% of U.S. households and boost income for the top 10%.
“This bill is a scam, a tax scam designed to steal from you, the American people, and give to Trump’s millionaire and billionaire friends,” Democratic Representative Jim McGovern said.
(With inputs from Reuters)
