President Donald Trump faces the challenge of convincing Republican senators, global investors, voters and even Elon Musk that he won’t bury the federal government in debt with his multitrillion-dollar tax breaks package.
The response so far from financial markets has been skeptical as Trump seems unable to trim deficits as promised.
“All of this rhetoric about cutting trillions of dollars of spending has come to nothing — and the tax bill codifies that,” said Michael Strain, director of economic policy studies at the American Enterprise Institute, a right-leaning think tank. “There is a level of concern about the competence of Congress and this administration and that makes adding a whole bunch of money to the deficit riskier.”
The White House has viciously lashed out at anyone who has voiced concern about the debt snowballing under Trump, even though it did exactly that in his first term after his 2017 tax cuts.
White House press secretary Karoline Leavitt opened her briefing Thursday by saying she wanted “to debunk some false claims” about his tax cuts.
Leavitt said the “blatantly wrong claim that the ‘One, Big, Beautiful Bill’ increases the deficit is based on the Congressional Budget Office and other scorekeepers who use shoddy assumptions and have historically been terrible at forecasting across Democrat and Republican administrations alike.”
House Speaker Mike Johnson piled onto Congress’ number crunchers on Sunday, telling NBC’s “Meet the Press,” “The CBO sometimes gets projections correct, but they’re always off, every single time, when they project economic growth. They always underestimate the growth that will be brought about by tax cuts and reduction in regulations.”
But Trump himself has suggested that the lack of sufficient spending cuts to offset his tax reductions came out of the need to hold the Republican congressional coalition together.
“We have to get a lot of votes,” Trump said last week. “We can’t be cutting.”
That has left the administration betting on the hope that economic growth can do the trick, a belief that few outside of Trump’s orbit think is viable.
Most economists consider the non-partisan CBO to be the foundational standard for assessing policies, though it does not produce cost estimates for actions taken by the executive branch such as Trump’s unilateral tariffs.
Tech billionaire Musk, who was until recently part of Trump’s inner sanctum as the leader of the Department of Government Efficiency, told CBS News: “I was disappointed to see the massive spending bill, frankly, which increases the budget deficit, not just decreases it, and undermines the work that the DOGE team is doing.”
Federal debt keeps rising
The tax and spending cuts that passed the House last month would add more than $5 trillion to the national debt in the coming decade if all of them are allowed to continue, according to the Committee for a Responsible Financial Budget, a fiscal watchdog group.
To make the bill’s price tag appear lower, various parts of the legislation are set to expire. This same tactic was used with Trump’s 2017 tax cuts and it set up this year’s dilemma, in which many of the tax cuts in that earlier package will sunset next year unless Congress renews them.
But the debt is a much bigger problem now than it was eight years ago. Investors are demanding the government pay a higher premium to keep borrowing as the total debt has crossed $36.1 trillion. The interest rate on a 10-year Treasury Note is around 4.5%, up dramatically from the roughly 2.5% rate being charged when the 2017 tax cuts became law.
The White House Council of Economic Advisers argues that its policies will unleash so much rapid growth that the annual budget deficits will shrink in size relative to the overall economy, putting the U.S. government on a fiscally sustainable path.
The council argues the economy would expand over the next four years at an annual average of about 3.2%, instead of the Congressional Budget Office’s expected 1.9%, and as many as 7.4 million jobs would be created or saved.
Council chair Stephen Miran told reporters that when the growth being forecast by the White House is coupled with expected revenues from tariffs, the expected budget deficits will fall. The tax cuts will increase the supply of money for investment, the supply of workers and the supply of domestically produced goods — all of which, by Miran’s logic, would cause faster growth without creating new inflationary pressures.
“I do want to assure everyone that the deficit is a very significant concern for this administration,” Miran said.
White House budget director Russell Vought told reporters the idea that the bill is “in any way harmful to debt and deficits is fundamentally untrue.”
Economists doubt Trump’s plan can spark enough growth to reduce deficits
Most outside economists expect additional debt would keep interest rates higher and slow overall economic growth as the cost of borrowing for homes, cars, businesses and even college educations would increase.
“This just adds to the problem future policymakers are going to face,” said Brendan Duke, a former Biden administration aide now at the Center on Budget and Policy Priorities, a liberal think tank. Duke said that with the tax cuts in the bill set to expire in 2028, lawmakers would be “dealing with Social Security, Medicare and expiring tax cuts at the same time.”
Kent Smetters, faculty director of the Penn Wharton Budget Model, said the growth projections from Trump’s economic team are “a work of fiction.” He said the bill would lead some workers to choose to work fewer hours in order to qualify for Medicaid.
“I don’t know of any serious forecaster that has meaningfully raised their growth forecast because of this legislation,” said Harvard University professor Jason Furman, who was the Council of Economic Advisers chair under the Obama administration. “These are mostly not growth- and competitiveness-oriented tax cuts. And, in fact, the higher long-term interest rates will go the other way and hurt growth.”
The White House’s inability so far to calm deficit concerns is stirring up political blowback for Trump as the tax and spending cuts approved by the House now move to the Senate. Republican Sens. Ron Johnson of Wisconsin and Rand Paul of Kentucky have both expressed concerns about the likely deficit increases, with Paul saying Sunday there are enough GOP senators to stall the bill until deficits are addressed.
“I think there are four of us at this point” who would oppose the legislation “if the bill, at least, is not modified in a good direction,” Paul said on CBS’ “Face the Nation.”
“The GOP will own the debt once they vote for this,” Paul said.
Four Republican holdouts would be enough to halt the bill in the Senate, where the party holds a three-seat majority.
Trump banking on tariff revenues to help
The White House is also banking that tariff revenues will help cover the additional deficits, even though recent court rulings cast doubt on the legitimacy of Trump declaring an economic emergency to impose sweeping taxes on imports.
When Trump announced his near-universal tariffs in April, he specifically said his policies would generate enough new revenues to start paying down the national debt. His comments dovetailed with remarks by aides, including Treasury Secretary Scott Bessent, that yearly budget deficits could be more than halved.
“It’s our turn to prosper and in so doing, use trillions and trillions of dollars to reduce our taxes and pay down our national debt, and it’ll all happen very quickly,” Trump said two months ago as he talked up his import taxes and encouraged lawmakers to pass the separate tax and spending cuts.
The Trump administration is correct that growth can help reduce deficit pressures, but it’s not enough on its own to accomplish the task, according to new research by economists Douglas Elmendorf, Glenn Hubbard and Zachary Liscow.
Ernie Tedeschi, director of economics at the Budget Lab at Yale University, said additional “growth doesn’t even get us close to where we need to be.”
The government would need $10 trillion of deficit reduction over the next 10 years just to stabilize the debt, Tedeschi said. And even though the White House says the tax cuts would add to growth, most of the cost goes to preserve existing tax breaks, so that’s unlikely to boost the economy meaningfully.
“It’s treading water,” Tedeschi said.
