WASHINGTON, July 3: President Donald the New Trump’s "Big Beautiful Bill”,
officially called the 'One Big Beautiful Bill Act', is not the regular annual
budget. Instead, it’s a massive tax and spending package proposed by Trump to
implement his economic plans and policies over a longer period.
But practically it also serves like the new Government's budget as there was
no new budget this year. Last year's budget was rolled over to prevent legislative
bottlenecks and associated problems like delays.
The Bill combines tax policy, spending priorities and social program changes.
And it is not a routine budget. It may qualify for a budget reconciliation Bill,
and more than that.
The Bill would extend Trump’s 2017 tax cuts, cut health and food safety net
programs, fund Trump’s immigration crackdown, and zero out many green-energy
incentives.
Has a new annual budget been passed?
No. The US Federal Government is operating under a full-year continuing resolution
passed in March 2025, which means the 2024 budget has been extended to cover
the entire 2025 fiscal year, with only limited changes.
In simple terms, the US Congress did not pass a brand new budget for FY 2025.
Instead, they agreed to carry forward (repeat) the previous year’s budget to
avoid a Government shutdown due to possible obstacles in passing a new budget
and also the time factor. That is, it happens when it is feared the lawmakers
can’t reach consensus on a full budget package. In a nutshell, the budget was
a rollover than a fresh start.
In effect, it is a budget reconciliation Bill
The Bill works like the new Govt's annual budget since last year's annual budget
was allowed to be reflown as annual budget for 2025 in March just after the
new President took over.
In other words, Trump’s Big Beautiful Bill functions as a policy overhaul that
fills the gap left by the lack of a fresh Federal budget for 2025 and lays out
the new Government's policies. Since Congress extended the previous year’s budget
through a continuing resolution, there hasn’t been any major shift in fiscal
direction. This Bill, then, becomes the vehicle for sweeping changes.
The Bill therefore addresses new tax policies and spending programs like tip
income tax cuts, child savings accounts and deportation funds.
For all practical purposes, the Bill is a mega amendment to a recycled budget,
more ideological and ambitious, that works like the new Government's annual
budget and more, setting out its policies and programs.
The Bill includes:
Tax Cuts:
- Extends Trump’s 2017 tax cuts permanently.
- Adds new breaks like no taxes on tips and overtime pay, and deductions
for car loan interest (only for American-made vehicles).
- Raises the child tax credit and offers special savings accounts for children
called “MAGA accounts”.
Spending Cuts:
- Major reductions in Medicaid (healthcare for low-income Americans) and SNAP
(food assistance); Adds work requirements for people receiving aid, including
older adults.
- Clean Energy Rollbacks: Cuts support for wind and solar projects, while
favoring nuclear and geothermal energy; Rollback of clean energy incentives,
ending EV tax credits and shuttering the Greenhouse Gas Reduction Fund
Spending:
- Immigration & Border Security: Funds mass deportations, expands ICE detention
centres, and adds billions for border wall upgrades.
- Defence & Infrastructure: Boosts military spending, including a new missile
defence system called the “Golden Dome”; Proposes an overhaul of air traffic
control systems.
Debt Ceiling:
- Raises the US borrowing limit by $5 trillion to avoid default and fund these
changes.
The tax breaks disproportionately benefit the wealthy while cutting services
that lower and middle-income Americans rely on.
Besides, almost 12 million people could lose health insurance as a result of
the Bill, according to the nonpartisan Congressional Budget Office estimates.
The legislation contains most of Trump’s top domestic priorities, from tax
cuts to immigration enforcement.
How much the Bill changes the budget
The annual budget is the US Government's official financial plan for the year.
It outlines how much money the Government expects to collect (revenue); where
it plans to spend that money (expenditures); how much it will borrow if spending
exceeds revenue (deficit).
The budget is prepared by the President’s Office of Management and Budget (OMB)
and submitted to Congress for approval.
The FY 2025 budget, a rollover of 2024 budget, has a total spending of $7.0
trillion (spending 100%); total revenue of $5.16 trillion; and a deficit of
$1.8 trillion (27% of spending).
Where the money comes from
In the running budget, the revenue sources are income tax $2.62 trillion (51%
of total revenue ); payroll taxes $1.76 trillion (34%); corporate taxes $524
billion (10%); tariffs & others $259 billion (5%)
Where the money goes
Social Security $1.57 trillion (Retirement & disability benefits); Medicare
$1.15 trillion (Health care for seniors); Medicaid $656 billion (Health care
for low-income individuals); Defence $859 billion (Military operations & equipment);
Interest on debt $952 billion (Payments on national debt); Discretionary spending
$989 billion (Education, transport, public health, etc.)
What changes
When the Bill becomes law, these 2025 budget projections will change. Total
Spending could rise due to defence & border spending (+$350b); Total Revenue
could fall due to tax cuts ($4.5t over 10 years); Deficit could widen or shrink
depending on growth and offsets.
US Federal debt and the source of credit
As of mid-2025, the total US Federal debt stands at approximately $37.1 trillion.
This includes: Debt held by the public: $28.8 trillion (Treasury securities
owned by individuals, institutions, foreign governments and the Federal Reserve);
Intragovernmental debt: $8.3 trillion (Money owed to Federal trust funds like
Social Security, Medicare and Federal retirement systems).
The Federal Government borrows money primarily through treasury securities,
bonds, notes and bills sold to investors, banks and foreign Governments. The
Fed buys Treasury securities to manage monetary policy. Surplus funds from Social
Security and Medicare trusts are invested in special Treasury bonds. The Government
also borrows from foreign Governments. Countries like China and Japan hold large
amounts of US debt. Institutional Investors like pension funds, insurance companies,
and mutual funds also buy US bonds.
The debt has been ballooning. The contributing factors are persistent budget
deficits, emergencies like covid, wars and financial crises, interest payments
(over $1 trillion per year just to service the debt), tax cuts and entitlement
growth, lower revenues, rising costs for programs like medicare and social security,
etc.
Similar reconciliation Bills passed in the past:
1996: Personal Responsibility and Work Opportunity Reconciliation Act
- Bill Clinton - added work requirements;
2001: Economic Growth and Tax Relief Reconciliation Act - George
W. Bush - Major tax cuts;
2010: Health Care and Education Reconciliation Act - Barack Obama
- Finalized parts of the Affordable Care Act;
2017: Tax Cuts and Jobs Act - Donald Trump - Large tax cuts,
passed via reconciliation
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