Trump’s costly tax bill will turn investors away from America.
President Donald Trump’s tax and spending package, known as the One Big Beautiful Bill Act, is nothing to celebrate and will drive investors away from America if it passes.
The bill kicks millions of Americans off the Medicaid rolls, cuts food to the poor (at home and in schools), and features a laundry list of other carrots and sticks. This is all in service of renewing Trump’s 2017 tax giveaway to corporations and the wealthy, with a few crumbs to middle-class and lower-middle-class taxpayers. Why do the Republicans in Congress believe this bill is a political winner?
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The Republican playbook traditionally has hit three notes — cut taxes, eliminate regulations, and reform social programs and discretionary expenditures. Trump has added two more — tariffs and “DOGE”-dictated spending cuts — to create a five-headed threat to Americans’ living standards:
1. Eliminating environmental regulations and ignoring laws on clean air and water: Each of these five elements has a macroeconomic effect on the economy, and in the “big beautiful bill” some of these are visible. But the Trump administration has also eliminated entire government departments charged by law with ensuring compliance with legal limits on pollution. Deregulation is neutral to the economy’s growth (unless companies dump garbage in rivers or build new factories without waste disposal). Without a fair standard by which all competitors must abide, deregulation may cost jobs and economic growth. The ability to pollute without paying a price isn’t a normal incentive to build.
2. Making the Trump tax cuts permanent and cutting taxes on tips and Social Security: Permanent tax cuts will make balancing the U.S. budget nearly impossible. Tax cuts usually are net-positive, adding fuel to the economy, but if these cuts remain in place without changes, then it is economic-neutral. Allowing the cuts to expire could drag on both the economy and corporate bottom lines — so failure to pass the bill will be a negative. But government revenues will recover and the federal deficit will be reduced, giving the Federal Reserve more leeway to cut rates. This would be positive for economic growth and lead to lower interest rates for credit cards, home mortgages and other borrowing.
Read: America’s debt is at a breaking point — Trump’s tax bill might just push it over the edge
3. Attacks on entitlements and clean energy to pay for tax cuts: To pay for making Trump’s generous 2017 tax cuts permanent, the U.S. social safety net needs to be reformed — but not by driving working adults and many children from Medicaid eligibility. States set the rules, so any reform must come at the state level. If the GOP cuts people from the healthcare rolls by adding impossible reporting requirements, then many Americans will suffer. GOP attacks on government jobs, college grants, student aid and healthcare workers will impoverish Main Street America’s rural communities.
Eliminating subsidies for clean-energy production and electric vehicles is backward-looking. Green energy is the future. Coal is dead as a power source. Why hasn’t the GOP caught on to the truth?
4. Costly and limiting tariffs: Reducing America’s dependence on foreign sources (imports) will deliver a hit to the federal government’s revenues. If tariffs do not achieve the Trump administration’s goal, then shortages and higher prices will hit American consumers. Smaller companies in retail, services and manufacturing will close, costing jobs and economic growth. Foreign governments will retaliate, damaging American exporters, farmers and manufacturers. This is a negative no matter how you spin it.
5. ‘ DOGE’ reductions in government employment: Cutting hundreds of thousands of government jobs without good reasons is a double-negative for the economy.
Workers spend wages largely within their local communities. Elimination of new grants to schools and nonprofits, and the Trump-GOP attacks on academic research, forces these institutions to eliminate jobs and end research programs. Deep cuts at the National Institutes of Health will set back science. Attacks on Harvard University are purely part of Trump’s retribution agenda — canceling grants and stopping research into new cures and science will cost America scientific leadership in the world.
Reject the tax cuts, and Wall Street and Main Street win
Wall Street and Main Street will both benefit if the Trump tax bill doesn’t pass. Allowing the 2017 tax cuts to sunset will initially hurt some people in the lower middle class but will bring in needed revenues and force companies to pay more of their fair share. Corporations only pay taxes on profits, not sales. Most new investments are financed by bonds and borrowing, not out of profits, so a higher corporate tax will generally impact the economy less than any other new government revenue source.
Avoiding the deep cuts to the social safety net while reducing American red ink would show investors that the U.S. deserves their money, because Congress would be demonstrating it understands there are two parts to the budget equation: revenues and spending. Meanwhile, Main Street will benefit because the nation’s social safety net will be maintained.
Read: The tax bill doesn’t have many new wins for investors. How to make the best of it anyway.
There are few points in Trump’s plan for the economy that I agree with, but one is limiting government debt. The most important thing Congress can do in the next few weeks to protect the financial markets and maintain the U.S. dollar as a reserve currency is to raise the debt ceiling significantly or eliminate it. Failure to do so would erode the dollar as a store of value and a safe harbor, all to appease a few hardline extremists.
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That would be possibly the worst outcome from the current gridlock in Washington.
It is doubtful that most GOP members of Congress signed up for this, but they all will have to explain it to voters in November 2026.
David Blond is an economist specializing in global economic analysis. He was a senior economist at the Pentagon during the Carter and Reagan administrations. His is the author of “The Phoenix Storm,” a novel about the aftermath of a global financial market collapse.
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