The One Big Beautiful Bill
RCM Managed Asset Portfolio
By Christopher Chiu, CFA
July 2025
The One Big Beautiful Bill
The One Big, Beautiful budget Bill (OBBB) has passed the House. As of July, it is being worked over in the Senate, as it has flaws and faces some challenges. It is not a balanced budget. In its current state it will contribute to the federal budget deficit. And while it has merits, the proposed budget is a continuation of many of the Biden spending policies, which increased discretionary spending and created the conditions for inflation that ran during 2021 and 2022.
You will hear from some conservatives that the continuing budget deficit is not being caused by a continuation of Democratic spending policies. You will hear from some liberals that the problem of the budget deficit is caused only by a continuation of the Republican tax cuts.
But in our current situation, no one can escape some blame. The budget deficit is caused by both a spending and a tax cut problem. Here is the breakdown as far as I can tell, of the spending between President Trump’s first-term budget (2017-2021), President Biden’s Fiscal Year 2025 budget, and the One Big Beautiful Bill (OBBB):
Category | Trump's First-Term Budget (2017-2021) | Biden's Budget (FY 2025) | Trump II OBBB (2025) |
Total Spending | $4.4 trillion (2020) | $6.2 trillion | $4.8 trillion |
Medicaid & SNAP | $671B (Medicaid, 2020), $85B (SNAP, 2020) | $1.8 trillion | $970B: Cuts $600B from Medicaid, $230B from SNAP |
Clean Energy | $44B (2020) | $900 billion | $651B: Cuts $249B in clean-energy tax credits |
Infrastructure | $200B (2018 proposal) | $1.2 trillion | No new infrastructure spending |
Defense | $721B (2020) | $850 billion | $1.0 trillion: Increases defense spending by $150B |
Tax Cuts | $2.5T in tax cuts (2017 Tax Cuts and Jobs Act) | No major tax cuts | Extends 2017 tax cuts, costing $3.7T |
Deficit Impact | Adds $2.4T to deficit over 10 years |
The Spending Problem Is Still There
In the currently proposed One Big Beautiful Bill there is an increase in spending that is a continuation of the COVID spending policies that began after Biden took office. If you for a moment ignore the Biden budget in the middle column and compare Trump I to Trump II, you will see on the first row there is clearly a spending increase from the first administration to the next, although one that comes down from Biden’s massive spending increase in the middle years. So there is a continuation of some of Biden’s spending policies that Republican House members have consented to. And that is at least part of the problem.
The Tax Cut Problem
The other problem with the bill is extending the tax cuts in full. You can have low taxes when you don’t have a spending problem, but when you have a spending problem and don’t entirely fix the spending problem, you need taxes to fix it. No one likes taxes, but extending the tax cuts ignores the deficit problems created by the continued spending. This results in an unsustainable problem: Currently a large portion of the budget is dedicated to simply paying the interest on borrowing. This is similar to someone who has growing credit card debt, makes the minimum monthly payments but is unable to cut into the debt because they are simply paying off the interest. For this reason, these debts have grown over time and need to be reduced. Even if you can make the claim that you were not the one who caused these problems, governing requires that you must fix problems that you inherited. One way to fix them is allowing the tax cuts to expire in part or in full. The tax revenue that would be collected would help close this budget deficit.
Attacking the Budget Deficit from Both Sides Has Been Done Before
If the budget deficit and our indebtedness create a danger, the fastest way to lessen this danger is to attack the problem from both sides. On the one hand, allow the tax cuts to expire or be diminished; on the other hand, take further steps to reduce the excess spending. This isn’t an impossible task. We have attacked a similar problem before from both sides and it wasn’t so long ago. When George Bush Sr. spoke the line, “Read my lips, no new taxes,” during the 1988 Republican National Convention and then had to renege on this campaign promise by raising taxes to close his budget deficit, this contributed to his loss to Bill Clinton four years later. But it was the right thing to do. It was also the first leg that led to fixing the deficit problems at that time.
The other leg was that Clinton was compelled by a majority-led House in 1994 to reduce spending. Newt Gingrich, the new Majority Leader, pulled a number of extreme political levers, including debt ceiling threats and two government shutdowns. Eventually Clinton consented to many of the Republican demands, which led to a compromise of spending cuts and balanced budgets from 1998-2001, four years after the budget battles began. This allowed interest rates to move lower, lessened the crowding out of private investment, and led to prosperity over the next decade.
