July Fourth is 23 days away. While many Americans may not yet have planned their Independence Day celebrations, White House officials and Republican leaders in the U.S. House and Senate have for months had this date etched in their minds.
That’s because GOP lawmakers promised to have the One Big Beautiful Bill Act (OBBBA), the budget reconciliation legislation that would advance President Donald Trump’s tax, spending, border security, and energy priorities, through the Senate by July Fourth. Although the House passed the bill before Memorial Day, committee leaders in the upper chamber of Congress still have not revealed what changes they’ll seek to make to their respective portions of the OBBBA — in fact, they will meet with their colleagues this afternoon to discuss those policies and a path forward for the bill.
There’s still plenty of news related to the OBBBA, including analysis of how it will affect the national debt and the U.S. economy over the next several years. Last week, the Congressional Budget Office (CBO) released its evaluation of the House-approved version of the OBBBA. What did that report say, where does the national debt stand, and how are Americans feeling about the OBBBA?
Let’s take a look.
What The CBO Said About The One Big Beautiful Bill Act
On June 5, the CBO, which is an entity within the nation’s legislative branch that aims to “provide objective, nonpartisan information to support the congressional budget process and to help the Congress make effective budget and economic policy,” released its analysis of the budget reconciliation bill.
In a letter to Senate Budget Committee Ranking Member Jeff Merkley (D-Ore.), CBO Director Phillip Swagel said the bill would have a profoundly negative impact on the nation’s fiscal health. Specifically, Swagel noted:
- The tax cuts and spending increases in the bill would raise annual federal deficits over the next 10 years by $2.4 trillion. The tax cuts contribute to most of this rise.
- Additional debt-service costs, the interest the Treasury would pay on the debt, would total $551 billion over the 10-year period. Increasing debt service costs would reduce the amount of money lawmakers would have to spend on priorities like national defense and government health and retirement programs, for example.
- U.S. debt would increase from CBO’s January 2025 baseline projection of 117.1 percent to 123.8 percent of gross domestic product (GDP) as a result of the tax and spending provisions of the bill. (More on the importance of this number in the next section.)
Its evaluation of the OBBBA was not the only important assessment the CBO dropped last week. In its monthly budget review for May 2025, the CBO said the federal government is not likely to breach its statutory debt limit until late summer, in August or September. That announcement is significant because, as readers may recall, the OBBBA includes an increase in the federal government’s borrowing authority. Without that hike, the U.S. government would default on its debt once the Treasury Department exhausts its extraordinary measures to avert a breach. Avoiding default was also one of the reasons Republicans chose July Fourth as their Senate must-pass-by date.
CBO prognosticators have not been the only ones to weigh in last week on the implications of the OBBBA. In May, a nonpartisan, nonprofit organization called the Committee for a Responsible Budget announced it had found the OBBBA would add roughly $3.3 trillion to the debt through Fiscal Year (FY) 2034 and would add more than $5.2 trillion of additional debt if policymakers ultimately extend temporary provisions.
Other analysts have said the OBBBA would give a small boost to the economy in the near term, but, eventually, the nation’s growing debt would diminish those gains. The Tax Policy Center explained that the congressional Joint Committee on Taxation has estimated GDP will be higher by 0.4 percent over 10 years under OBBBA and that investment will fall slightly. The nonpartisan nonprofit Tax Foundation and the Penn Wharton Budget Model found similar effects on GDP. Additionally, as Politico reported, the Yale Budget Lab estimated the OBBBA could result in slightly higher economic growth through 2027, but that the U.S. economy “would ultimately weaken in the face of larger deficits and higher interest rates.” The yield on 10-year Treasury notes, or the price used to price mortgages and other forms of consumer debt, would be 1.2 percentage points higher by 2054, according to Yale researchers.
That brings us to the question of why – and whether – the CBO’s assessment of the OBBBA matters.
Why The CBO’s Assessment Matters
As the Yale Budget Lab makes clear, the annual federal budget deficit and the cumulative national debt matter when it comes to the health of the U.S. economy. It also matters when it comes to the question of whether the United States could default on its obligations.
For example, the CBO said that, under the OBBBA, debt held by the public would increase to 123.8 percent of GDP over the next 10 years. As Investopedia has explained, the higher the debt-to-GDP ratio, the less likely it becomes that a country will pay back its debt. That fact raises the risk of default. A default, of course, could cause a financial panic in domestic and international markets.
Researchers at the University of Pennsylvania have advised that the “U.S. debt held by the public cannot exceed about 200 percent of GDP even under today’s generally favorable market conditions” without causing chaos. They also have said, “Under current policy, the United States has about 20 years for corrective action after which no amount of future tax increases or spending cuts could avoid the government defaulting on its debt whether explicitly or implicitly.” In sum, the researchers warned, “Unlike technical defaults where payments are merely delayed, this default would be much larger and would reverberate across the U.S. and world economies.”
Although even with the OBBBA, the U.S. government debt-to-GDP ratio would be nowhere near 200 percent, investors may already be getting worried.
In his weekly newsletter, political analyst Bruce Mehlman noted investors are pricing U.S. debt as riskier. Mehlman explained, “U.S. government credit default swap spreads — which reflect the cost of protecting a loan against default — are trading at levels similar to Greece and Italy.”
How Do Americans Feel About The OBBBA?
While Republicans have argued American voters support the OBBBA, public polling suggests they could be worried about the legislation’s effect on the federal deficit and the national debt.
This morning, AXIOS reported that the National Republican Senatorial Committee’s (NRSC) political team has shared with GOP senators the results of a survey that show House-approved OBBBA tax and spending policies are popular. Specifically:
- 81 percent support increasing the child tax credit to $2,500;
- 77 percent support ending taxes on tips;
- 74 percent support cutting taxes on overtime pay;
- 55 percent support hiring more immigration and border patrol agents;
- 53 percent support making all provisions of the Tax Cuts and Jobs Act permanent; and
- 52 support ending Medicaid benefits for unauthorized immigrants.
The NRSC is the Republican Party’s campaign arm for Senate candidates, so the survey may not be completely objective. Indeed, the Kaiser Family Foundation found that Medicaid cuts, more generally, are largely unpopular, even among Trump voters.
Additionally, a CBS News/YouGov poll released Monday found 47 percent of respondents believe the OBBBA will hurt middle-class individuals, while less than one-third, 31 percent, think it will benefit them. The survey also found that the majority of voters believe the bill will hurt people subsisting on lower incomes while helping wealthy individuals.
Respondents were not even convinced that the OBBBA would lower their own taxes. Less than one-quarter, 24 percent, said they expect their taxes to decline under the budget reconciliation bill, while 43 percent think the legislation will raise their taxes. One-third said the OBBBA would neither raise nor reduce their tax rates.
More than half of voters, 55 percent, also believe the OBBBA will increase the federal deficit. Only 18 percent said the legislation would reduce the federal deficit, while another 27 percent said it would have no effect either way.
As The Hill reported this week, no matter how Americans feel about the OBBBA, Senate Republicans are still “deeply divided” over how to proceed, given the enormous cost of the legislation and its potential effect on the national debt and the economy. They will continue to address those points of conflict over the next few days.
What does that mean for the July 4 deadline? It may be fluid.
Yesterday, Sen. John Curtis (R-Utah) called that date a “false deadline” for Republicans to pass the OBBBA. He argued it’s more important for the Senate to pass the “right” bill than to move quickly. While that may be true, the GOP cannot ignore the fact that the federal government is running up against its statutory borrowing limit. The CBO made it clear that something will have to be done this summer – and before Congress’s annual August recess – to avoid a U.S. default on its national debt.