Background on the Tax Plan and Key Players
The nonpartisan Congressional Budget Office (CBO) recently revised its estimate of how much Donald Trump’s tax-cutting and spending bill would increase the national debt. Originally projected to add $3.8 trillion over a decade, the CBO now estimates it would add $2.4 trillion to the current $36.2 trillion debt.
This update comes a day after Elon Musk, a key Trump ally, criticized the bill as an “abominable disgrace,” lending support to fiscal conservatives within the Republican party who have been pushing against the measure.
The tax-cutting bill, passed by the House of Representatives on May 22 without Democratic support, was expected to reduce federal government revenue by $3.67 trillion over a decade while cutting spending by $1.25 trillion, according to the CBO.
Impact on Healthcare Coverage
The CBO also predicts that the number of uninsured Americans would rise to 10.9 million by 2034 due to the bill’s policy changes, with 1.4 million of those being undocumented immigrants losing coverage from state-funded programs.
Economic Activity and Interest Rates
Meanwhile, the Federal Reserve (Fed) released its “Beige Book” on June 4, stating that US economic activity has slowed down. The report also noted that increased tariffs have driven up costs and prices since the Fed’s last interest rate decision.
“Overall, outlooks remain slightly pessimistic and uncertain, with no changes since the previous report,” according to the document based on surveys, interviews, and observations gathered from 12 regional Fed contacts until May 23.
“There were widespread reports from contacts expecting costs and prices to rise at a faster pace in the future,” the report added.
The Fed has maintained its policy interest rate within the current range of 4.25-4.50% since December and is expected to keep it there for a few more months as officials assess the impact of Trump’s policies on inflation and employment.
Although the effects have not been evident in regular monthly government reports, Fed officials say they are placing greater emphasis on timelier data, including daily business and household experiences captured in the “Beige Book,” which suggest a broad yet uneven impact from Trump’s tariffs.
