The One Big Beautiful Bill Act (‘OBBB’) has been passed by the US Congress. This is a significant political victory for President Donald Trump, but it has exposed some fissures in his coalition along the way – including a public row with one-time White House fixture Elon Musk, who called the OBBB an ‘abomination’ that will result in ‘crushing’ debt.
House speaker Mike Johnson praised the bill on its passing, calling it ‘generational, nation-shaping legislation’. House Majority Leader Steve Scalise claimed it ‘spurs economic growth and new investments’. But Musk has been right to point out its risks, and independent analyses also cast doubt on Republicans’ rosy view of the bill’s effects. Musk’s focus on fiscal irresponsibility is warranted, but only illuminates part of the lasting damage the OBBB could cause to US economic foundations.
As passed, the bill delivers or extends expansive tax cuts, including partially fulfilling campaign promises on tip and overtime income. It also launches new child savings accounts, and bolsters immigration enforcement and military spending. Offsetting its price tag are unprecedented benefit cuts that will strip millions of health coverage and nutritional support. All told, the OBBB in its current form renders the poorest Americans worse off while funnelling the bulk of its benefits to the top quintile, and disproportionately to the richest.
Beyond this accounting, however, other facets of the bill deserve special scrutiny. In particular its fiscal cost, and the clean energy rollback it pursues, threaten lasting damage to US economic dynamism and competitiveness.
The debt ‘bomb’
The OBBB’s immense debt burden – $3.4 trillion over a decade – has elicited concern across the ideological spectrum, even as the White House argues it strengthens the nation’s fiscal trajectory.
Even before the OBBB, the US spent more on interest payments – over $1 trillion last year – than national defence. Adding lavishly to the national debt when interest rates are high and unemployment low is deeply irresponsible and could push the fiscal burden to alarming heights, increasing borrowing costs for consumers and businesses.
The OBBB is, in the words of Republican Congressman Thomas Massie (who bucked his party in voting against the bill) a ‘debt bomb ticking’. But many of his peers remain unconvinced, instead holding fast to expectations of an economic boom.
The crux of the fiscal debate is the recurring claim that tax cuts spur adequate economic activity to pay for themselves. OBBB’s proponents have embraced this notion, disproven time and again, even as reputable independent analyses find to the contrary. With the World Bank trimming the outlook for the US economy due to policy uncertainty and trade barriers, achieving the promised growth is increasingly improbable.
Investor unease
This fiscal expansion lands amid investor unease. Moody’s May downgrade of US debt and April’s bond market jitters add to other warning signs that investors are reconsidering the appeal and safety of dollar assets. Heightened fiscal pressures will leave the nation vulnerable to external shocks and hamstring its capacity to make transformational economic and security investments.
Max Yoeli breaks down the key issues in the Bill.
Despite fiscal unease, investors may find some solace in the removal of an obscure provision, Section 899, from the final bill in favour of a G7 compromise on corporate taxes. Section 899 had threatened to further alienate foreign investors by creating a retaliatory tax on individuals and entities from nations imposing ‘unfair’ digital services or profit-shift taxes – countries supplying more than 80 per cent of US foreign direct investment (FDI). Lawmakers removed the section.
Foreign investors’ expansive US holdings – roughly 20 per cent of equities, 30 per cent of Treasuries, 30 per cent of corporate credit, and significant FDI – catalyse US job creation, growth, and innovation. That the OBBB pulls back from this particular provision will help to preserve this advantage, even if the G7 solution ultimately weakens international tax cooperation.
Clean energy rollback
A final threat to US competitiveness is the OBBB’s rollback of clean energy incentives as US energy demand surges. While this section of the bill did soften somewhat before final passage, the provisions that survived will be damaging to the US energy landscape and the wind and solar industries.
Hobbling clean energy development will needlessly constrain supply and force suboptimal policy decisions, especially given the huge energy demands of AI and data centres. Indeed, Trump’s eagerness to strike deals during his May visit to the Gulf attests to energy’s strategic potency in the AI context.
Panned by its detractors as market-distorting giveaways, the Biden administration’s 2022 Inflation Reduction Act subsidies sparked a wave of energy investments, with the bulk of projects located in Republican-held districts.
But the OBBB threatens incentives for businesses and households alike, including those for EVs, which Musk reportedly fought to save. By repealing and restricting tax credits for clean electricity production and investment, the bill undermines renewable energy development and financing - even while adding a new subsidy for certain uses of coal.
The current administration has sidelined climate priorities. But ensuring energy security and domestic production remain paramount, especially as US oil and gas producers face challenging market dynamics. The administration acknowledges as much, in particular in its push to build nuclear energy, which has a crucial role to play. But even an aggressive buildout would take years to bring substantial new capacity online.
