WASHINGTON (AP) — President Donald Trump is tasked with convincing Republican senators, global investors, voters, and even Elon Musk. A tax deduction package valued at just a few dollars.
Previous responses from financial markets have leaned towards skepticism as Trump appears unable to cut through the red as promised.
“The ongoing talk of slashing trillion-dollar expenditures and making the tax bill successful has surfaced,” stated Michael Strain, director of economic policy research at the conservative American Enterprise Institute. “There are concerns regarding Congress’s capability and this administration’s tendency to inflate deficits.”
The White House faced heavy backlash from those voicing apprehensions about escalating debt during Trump’s administration, especially following the 2017 tax cuts in his first term.
During a briefing on Thursday, White House spokesman Karoline Leavitt sought to “uncover inaccuracies” regarding his tax cuts.
Leavitt labeled the assertion that “one, big, beautiful bill” is based on Congressional Budget Office metrics and other evaluators who employ simplistic assumptions that have historically alarmed both Democrats and Republicans as outright misleading.
In this image, the video image with the final vote total, the House passed President Donald Trump's massive tax credits and program cuts after the end-of-war session held at the U.S. Capitol in Washington on Thursday, May 22, 2025 (House TV via the Associated Press)
House Speaker Mike Johnson emphasized various Congressional figures on Sunday while appearing on NBC’s “Meet the Press.”
Yet Trump himself indicated that the insufficient spending cuts to offset his tax reductions arose from the necessity to maintain Republican unity in Congress.
“We need to secure numerous votes,” Trump declared last week. “We can’t afford to cut.”
This leaves the administration banking on the hope that economic growth could bridge the gap—an assumption many outside Trump’s administration consider unrealistic.
While most economists regard nonpartisan CBO assessments as benchmarks for policy evaluation, they have overlooked cost estimates for actions initiated by government bodies, like Trump’s unilateral tariffs.
High-tech billionaire Musk, a recent lead in the government’s efficiency department, part of Trump’s inner circle, noted to CBS News:
Federal debt continues to escalate
Tax and spending cuts that passed through the House last month are projected to add over $5 trillion to the national debt in the coming decade, according to the Responsible Finance and Budget Committee, a fiscal watchdog entity.
Several sections of the law are set to expire to create a façade of a lower bill price. This same strategy was employed during Trump’s 2017 tax cuts, creating a dilemma for the current year. Under this approach, many tax cuts included in the previous package will phase out next year unless Congress intervenes.
Bigger debts now present a more significant issue than eight years ago. Investors are demanding higher premiums for continued borrowing, as total debt surpasses $36.1 trillion. The interest rate set by the Ministry of Finance in 2010 was approximately 4.5%, drastically up from roughly 2.5% when the 2017 tax cut legislation was enacted.
The White House Council of Economic Advisors argues that its initiatives will lead to an economic expansion significant enough to reduce the annual budget deficit relative to overall economic performance, confirming that the U.S. government will veer towards a financially sustainable trajectory.
The council asserts that the economy could grow at an average rate of about 3.2%, rather than the 1.9% predicted by the Congressional Budget Office, creating or saving up to 7.4 million jobs.
Council chair Stephen Milan informed reporters that combining the projected growth with expected tariff revenue will lead to a decrease in the anticipated budget deficit. Tax cuts are intended to bolster funding available for investment, workforce supply, and domestically produced goods. This, according to Milan’s rationale, will drive faster growth without creating inflationary pressures.
“I assure everyone, the deficit is a serious concern for this administration,” said Milan.
White House Budget Director Russell Vought reassured reporters, stating that the bill “is fundamentally inaccurate in suggesting it’s harmful to debt and deficits.”
Economists question the adequacy of Trump’s growth plans to diminish the deficit
Most external economists anticipate that accumulated debt will inhibit overall economic expansion as it drives up interest rates, increasing borrowing costs for education, cars, businesses, and even universities.
“This will only exacerbate issues faced by future policymakers,” remarked Brendan Duke, a former aide during the Biden administration, representing a liberal think tank focused on budget and policy priorities. Duke noted that tax cuts embedded within the bill, set to expire in 2028, could “affect Social Security, Medicare, and tax reductions simultaneously.”
Kent Smetters, a professor affiliated with Penn Wharton’s budget model, criticized the growth forecasts from Trump’s economic team as “fantasy.” He indicated the bill might lead workers to reduce their hours to meet Medicaid qualifications.
“These are individuals heading the Council of Economic Advisors from the Obama administration,” stated Harvard professor Jason Furman, “They are executing this. They are not primarily promoting growth-oriented and competitive tax cuts. In fact, elevated long-term interest rates will reverse and undermine growth.”
The previous White House deficits have triggered political backlash against Trump as the tax and spending cuts approved by the House transition to the Senate. Concerns about escalating deficits have already been voiced by Republican Senators Ron Johnson of Wisconsin and Rand Paul of Kentucky, with Paul expressing on Sunday that enough GOP senators could halt the bill unless the deficit issue is confronted.
“I suspect there will be four of us if the bill hasn’t improved,” Paul noted during CBS’s “Face the Nation.”
“The GOP will bear responsibility for the debt should they endorse this,” Paul stated.
A four-member Republican holdout could be sufficient to obstruct the Senate bill, where the party holds a three-seat majority.
Trump relies on tariff revenue for support
The White House projects that tariff revenues will aid in addressing additional deficits; however, recent court rulings cast doubt on Trump’s authority and claim of an economic emergency for imposing steep import taxes.
When Trump announced his near-universal tariffs in April, he explicitly stated his policies would generate sufficient new revenue to start reducing national debt. His statement was backed by aides, including Treasury Secretary Scott Bescent, who claimed the annual budget deficit could potentially be halved.
“We are positioned to thrive; thus, we will allocate trillions of dollars for tax cuts while tackling our national debt. Everything will transpire swiftly,” Trump commented regarding import taxes two months ago, urging lawmakers to advance further tax and spending reductions.
A recent analysis by economists Douglas Elmendorf, Glenn Hubbard, and Zachary Liskow concluded that while growth can alleviate deficit pressures, achieving that by itself is insufficient.
“Growth alone won’t get us where we need to be,” asserted Ernie Tedesci, director of economics at Yale’s Budget Institute.
The government must curtail the deficit by $10 trillion over the next decade to stabilize its debt, Tedesci stated. Despite the White House’s claims that tax cuts would promote growth, it remains improbable that the economy will see significant upticks, as many expenses will merely serve to sustain existing tax credits.
“It’s like treading water,” Tedesci remarked.
Source: apnews.com