Trump Tax Law to Add $3.4 Trillion to Federal Deficits by 2034

The Congressional Budget Office has confirmed that President Donald Trump’s tax and spending law will add $3.4 trillion to federal deficits through 2034. This projection takes into account the final adjustments made by Republicans before the legislation was passed. The increase in deficits is a result of the tax cuts and spending measures included in the law, which will have significant long-term fiscal implications.

The analysis also reveals that more than 10 million people will be uninsured under the law in 2034. This figure is an improvement from an earlier projection that estimated 11.8 million people would lose coverage over the decade. The release of this analysis marks the end of a contentious legislative battle but the beginning of a prolonged political struggle. The two major political parties are already clashing over the law’s impact on the economy, healthcare, and government programs.

Republicans have been promoting the bill as a tax cut for all Americans. However, a recent poll found that about two-thirds of U.S. adults expect the new tax law to primarily benefit the rich. Democrats, on the other hand, have been quick to highlight the CBO’s findings, with Senate Democratic leader Chuck Schumer stating that the law is a "big, ugly betrayal" that will be detrimental to the country and the Republican Party.

The bill, signed into law on July 4, extends current tax rates for individuals that were set to expire at the end of this year. It also temporarily creates new tax deductions for tips, overtime, and auto interest loans for new vehicles assembled in the U.S. Additionally, Republicans used the bill to cut future spending on Medicaid and food assistance, and to phase out certain clean energy tax credits more quickly.

Republicans argue that the bill was necessary to prevent most Americans from experiencing a significant tax increase next year. They also insist that economic growth will exceed the CBO’s projections for the next decade, erasing the projected deficits as more revenue comes into the Treasury than anticipated. However, nonpartisan fiscal watchdogs have highlighted the CBO’s latest projection, noting that any sustained economic changes are likely to be modestly beneficial or negative.

Maya MacGuineas, president of the Committee for a Responsible Federal Budget, stated that there will be a shorter-term “sugar high” as stimulus makes its way through the economy. However, she also noted that positive growth effects are likely to be swamped by the effects of higher debt and interest rates. The CBO report indicates that more than $1 trillion in deficit savings is generated through the health portions of the bill, which includes new work requirements for certain Medicaid beneficiaries in states that expanded the program through the Affordable Care Act.

Some late changes on Medicaid were made to the bill to win over holdouts. One of those changes added a $50 billion fund for rural hospitals. The analysis underscores the long-term fiscal implications of the law, highlighting the potential for increased national debt and reduced government revenue. The impact of the tax law on federal deficits is a critical issue for policymakers and the public, emphasizing the need for careful consideration of its long-term effects and the importance of fiscal responsibility and balanced budgetary policies.