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Taxation

Senate Passes "One Big Beautiful" Reconciliation Bill

Strategic Insights

— 1 min read

The Senate has passed a revised reconciliation bill, dubbed "One Big Beautiful," which will be sent to the president ahead of the July 4 deadline. The bill makes several adjustments to the version passed by the House in May, with Wells Fargo analysts noting that the overall economic implications remain largely unchanged. The Congressional Budget Office estimates the bill will increase the federal deficit by $3.4 trillion over the next decade, largely due to the extension of expiring provisions from the 2017 Tax Cuts and Jobs Act.

Key Takeaways:

  • The Senate bill will increase the federal deficit by $3.4 trillion over the next decade, primarily due to the extension of expiring provisions from the 2017 Tax Cuts and Jobs Act.
  • The extension of TCJA provisions primarily avoids fiscal tightening rather than creating new stimulus, according to Wells Fargo analysts.
  • Stripping out the TCJA extension, the analysts estimate the bill will boost the deficit by 0.8% in fiscal year 2026 and 0.4% in 2027, adding 30 to 50 basis points to real GDP growth in 2026 and slightly less in 2027.
  • The bill becomes fiscally contractionary as temporary tax cuts expire and spending reductions, particularly on Medicaid and green energy subsidies, take effect over the longer term.
  • Wells Fargo cautions that markets may doubt the full implementation of these future restraints, potentially pushing US deficits to 8%- to 9% of GDP within a decade.
  • The bill includes several provisions aimed at limiting Medicaid and green energy subsidies, which will take effect over the longer term.

Statistics:

  • $3.4 trillion: estimated increase in federal deficit over the next decade due to the extension of expiring provisions from the 2017 Tax Cuts and Jobs Act.
  • 0.8% (2026) and 0.4% (2027): potential increase in federal deficit due to the bill, stripping out the TCJA extension.
  • 30 to 50 basis points: potential addition to real GDP growth in 2026 due to the bill.
  • 8%- to 9%: projected US deficits as a percentage of GDP within a decade, according to Wells Fargo analysts.

Sources:

  • Wells Fargo analysts, "Senate Passes Reconciliation Bill with Little Change to Economic Outlook"
  • Congressional Budget Office, "CBO Estimate of the Senate Reconciliation Bill"
  • Tax Cuts and Jobs Act (TCJA), 2017

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