The Congressional Budget Office (CBO) has released a report warning that the Republican-led megabill will increase the federal deficit by $4.1 trillion over the next decade due to higher borrowing costs. The bill, signed into law by President Donald Trump on July 4, lacks spending cuts or revenue increases to offset its costs, leading to higher interest rates. These elevated rates are expected to impact both the federal government and private borrowers, increasing interest payments on the national debt by $718 billion over a decade. The report suggests the cost could rise further if temporary tax cuts are made permanent, potentially pushing the total to $5 trillion.
Interest rates are projected to rise significantly over the next decade as a result of the GOP’s megabill, according to the CBO’s new analysis. The agency’s “dynamic” analysis of the massive domestic policy package estimated that the bill will raise the federal deficit by $4.1 trillion over a decade. This deficit increase is not balanced by additional spending cuts or new revenue, resulting in higher borrowing costs for the federal government. As a result, the interest payments on the nearly $37 trillion national debt are expected to increase by $718 billion over the next ten years. These higher borrowing costs are not only a burden on the federal government but also have significant implications for private citizens, particularly those seeking loans for major purchases such as cars and homes.
The CBO’s analysis also includes an assessment of the potential long-term costs associated with making the bill’s temporary tax cuts permanent. If Congress eventually extends these policies indefinitely, the Joint Committee on Taxation predicts the cost of the federal deficit would increase by an additional $800 billion over a decade. Combined with the initial $4.1 trillion deficit from the bill, these additional costs could push the total to $5 trillion in servicing the national debt. This underscores the growing financial burden of the Republican-led legislation, which has already drawn criticism from Democratic lawmakers like Oregon’s Sen. Jeff Merkley.
Congressional Republicans largely dismissed CBO’s deficit and interest rate warnings in the days leading up to the bill’s final approval and signing by Trump. They argued that the legislation would stimulate the economy more than forecasters have predicted, despite the warnings from nonpartisan analysts. Merkley, the top Democrat on the Senate Budget Committee, criticized the GOP for what he called an outright hypocrisy, noting that the party’s claims of fiscal responsibility are at odds with the bill’s long-term financial consequences. His statement highlights the growing political tensions over the economic implications of the legislation.
While the CBO’s analysis provides a comprehensive view of the financial impact of the megabill, it’s important to consider the broader implications of the report. The rising borrowing costs resulting from the bill could have far-reaching effects on the economy, influencing everything from consumer borrowing to business investment. Financial markets may respond to these warnings, potentially leading to increased volatility as investors reassess the risks associated with higher interest rates. Additionally, the report serves as a cautionary tale for lawmakers, emphasizing the need for careful fiscal planning when enacting major legislative changes.
The CBO’s final report also includes an outlook on the long-term sustainability of the U.S. federal debt. With the national debt nearing $37 trillion, the additional financial burden of the megabill highlights the pressing need for a comprehensive fiscal policy that balances growth with responsible borrowing. The report’s findings serve as a critical piece of evidence in the ongoing debate over the economic impact of partisan legislation, particularly in an environment where fiscal discipline is increasingly scrutinized.