CBO says Trump's bill will add $2.4T to deficit, leave 11 million without health insurance

The Congressional Budget Office (CBO) estimates that the "One Big Beautiful Bill Act," a tax and immigration bill central to President Trump's agenda, could increase the deficit by $2.4 trillion over the next decade and leave an additional 10.9 million people uninsured by 2034. While the bill is projected to cut taxes by $3.7 trillion and spending by $1.2 trillion, concerns about the deficit and changes to Medicaid are creating headwinds in the Senate, with some Republicans expressing reservations despite the bill's narrow passage in the House. The White House has defended the bill, dismissing the CBO's analysis as biased, while House leadership criticizes the report for not accounting for potential economic growth; the Senate Finance Committee will meet with President Trump to discuss the bill.

Analysis

The nonpartisan Congressional Budget Office (CBO) projects President Trump's "One Big Beautiful Bill Act" could increase the federal deficit by $2.4 trillion over the next decade, primarily driven by $3.7 trillion in tax cuts partially offset by $1.2 trillion in spending reductions. The legislation is also estimated to result in 10.9 million more individuals becoming uninsured by 2034 due to alterations in healthcare provisions, notably affecting Medicaid. Despite its narrow passage in the House, the bill faces significant hurdles in the Senate, where several Republican members have voiced concerns regarding its fiscal impact and proposed Medicaid changes, contributing to an overall 'moderately negative' sentiment and 'uncertain' tone surrounding the legislation. The White House and some House Republican leaders have contested the CBO's initial findings, asserting the analysis is biased and prematurely dismisses potential economic growth, which the CBO intends to address in a subsequent macroeconomic assessment. The bill's progression is further complicated by emerging concerns even from staunch allies regarding specific provisions, such as AI regulations unknown to some representatives prior to their vote, highlighting the complex legislative path ahead and considerable uncertainty surrounding its enactment and final content, which carries a 'moderately high' market impact score of 0.7.

Key Decisions for Investors

• Investors should closely monitor legislative developments in the Senate, as the bill's passage, potential amendments, or failure will have substantial implications for fiscal policy and market sentiment, particularly given the projected $2.4 trillion deficit increase.
• Portfolio allocations in sectors such as healthcare, and industries sensitive to federal budget changes, should be reviewed, considering the CBO's projection of 10.9 million additional uninsured individuals and significant shifts in government spending and taxation.
• Given the bill's uncertain trajectory and substantial fiscal implications, investors should prepare for potential market volatility, especially in bond markets, and await the CBO's forthcoming macroeconomic analysis for a more complete picture of its potential economic effects before making significant adjustments.