In the end it passed. But, as is the case with American politics these days, it was not without drama; Donald Trump’s signature tax-and-spending legislation, dubbed the “One Big Beautiful Bill” Act (“OBBA” in the parlance), overcame a record-breaking eight-and-a-half-hour filibuster attempt by Democratic house leader Hakeem Jefferies, who used his so called “magic minute” to delay the vote. It was in vain.
By late Thursday the house had approved the bill, and on Friday – Independence Day in America – Trump signed it into law. Now the country, and the global economy, awaits the fallout.
The bill marks the culmination of Trump’s first five months in power, and never has he looked so politically dominant. Regardless of whether one likes him or agrees with his policies, Trump has shown a ruthless efficiency in getting his agenda passed.
“There could be no better birthday present for America than the phenomenal victory we achieved just hours ago,” Trump declared last Thursday night at a celebratory rally in Des Moines, Iowa, where he achieved his first victories in the two elections he has won. Referencing the passage of OBBA, he assured the crowd that it will “make America great again”.
The moment caps a period of aggressive policymaking in which Trump has consolidated and centralised power. “I think I have more power now, actually I do,” he said to journalists shortly before flying to Iowa for the victory rally.
In the past month alone, Trump has escalated his immigration crackdown through his ICE security state within a state, ordered the military to the streets of Los Angeles, launched stealth bomber strikes on Iran’s nuclear facilities and strong-armed Nato allies into massive increases in defence spending. He also notched a critical win at the Supreme Court, which has curtailed the ability of federal judges to issue sweeping injunctions against his swathe of executive actions.
Meanwhile, strong economic data has muted the shrill criticism from Wall Street and business leaders. Job growth has remained steady, inflation subdued, and stock markets have rebounded from April’s collapse, with the S&P 500 and Nasdaq reaching new highs. The market is now forecasting two interest rate cuts in 2025. On Thursday, officials celebrated better-than-expected employment figures as proof that the administration’s fiscal and trade plans are working.
The passage of Trump’s “big, beautiful bill” marks not just a legislative victory for Trump but proof that he now commands almost complete control over an often-fractured GOP. Yet, at this moment of hubris, there can be no doubting the risks that lie ahead for Trump, the US economy, and particularly America’s most vulnerable citizens.
Mounting debt and cost of cuts
First – the effects of the bill on US public finances. Economist Kathryn Anne Edwards has warned that the bill could be an “economy killer”, with forecasts projecting it will add $3.3-trillion (R58-trillion) to the already burgeoning national debt over the next decade. Most of that increase stems from the permanent extension of the tax cuts introduced during Trump’s first term in the White House.
When confronted with these numbers, the White House offers little in the way of economic justification. As economist Adam Tooze has written, their answer is “Baathist-style denial”: growth will go up and deficits come down because Trump says so. The fact is that this budget is less about economics than politics. Trump’s campaign was funded by billionaires to whom he made one central promise; he will make sure their taxes do not go up. On this, he duly delivered.
The second key channel of harm comes from the bill’s sweeping cuts to healthcare and nutrition support for low- and middle-income Americans. Roughly 12 million Americans are expected to lose access to Medicaid, primarily due to new work requirements. An additional 17 million are projected to become uninsured as subsidies from the Affordable Health Care Act are gutted. At least two million will lose food stamps, while benefits for a further 40 million will be sharply reduced.
That such deep cuts to social welfare programs still result in a $3-trillion (R53-trillion) addition to the national debt is a stark indicator of the cost of the tax cuts being handed to the wealthy. This is a last gasp of looting what they can before the deficit spirals out of control. Consider that the average annual household food benefit is $4,000 (R71,000) and average spending per enrollee in Medicaid is around $7,600 (R135,500). In contrast, the top 10% of households – about 12.7-million of them – will receive an annual tax cut of $13,500 (R240,700).
Recession coming
But what is even more sobering is that these are almost best-case scenarios; none of these forecasts consider the increasingly likely reality that the US will enter a recession at some point over the next 18 to 24 months. In that case, the damage to public finances and low-income households will be far more severe. Some economists are already comparing OBBA’s timing and effects to the infamous Smoot-Hawley Tariff Act of the 1930s, which exacerbated the Great Depression and became emblematic of economic blunders.
The third major risk to the economy is trade. It is simply impossible to know what will actually transpire with Trump’s mooted tariffs, given that he changes his mind seemingly by the hour. Perhaps the only thing which is certain is that nothing which results from this “reciprocal tariffs” idea is going to work. They won’t close the US current account deficit, they won’t lead to a manufacturing revival, and they won’t replace revenue from slashed federal income tax.
But they will harm the economy, both through the endless uncertainty his dithering creates and by increasing the cost of doing business. Average US tariff rates are likely to jump dramatically from their current 12.6% over the next few months, which is already a sharp rise from the pre-Trump level of 1.7%, according to Bloomberg data. This will hurt profits and the US consumer. The dollar’s recent slide, attributed largely to tariff uncertainty, was the steepest for any first half of the year since the oil crisis year of 1973.
The rest of the world will also pay. Despite President Cyril Ramaphosa’s desperate attempts at bootlicking in the White House, flanked by golfers and a billionaire, South Africa is in the firing line. The opening salvo was Monday’s letter announcing 30% tariffs on South African imports. While it is impossible to know where this will end, given Trump’s propensity for art-of-the-deal-type gambits, these are pivotal weeks in the US president’s trade war.
More disciplined, strategic Trump
Trump has always relished playing the bully, but this time around he is more organised, better advised and dangerous than in his first term. Five months in, the masterplan is becoming clearer, and the damage it will wreak on the US economy, society and the world. Steve Bannon, the high priest of MAGA and a key Trump ally and advisor, recently told the Financial Times that Trump is “America’s third world-historic leader” after George Washington and Abraham Lincoln. “Trump’s not leaving,” he added, hinting at a third-term run. “He’s going to be in your head for a long time.”
On this one can only, with some trepidation, agree. DM