By Richard Rubin

WASHINGTON -- President Trump's tax-and-spending megabill would increase budget deficits by $2.4 trillion over the next decade, compared with doing nothing, according to a Congressional Budget Office estimate released Wednesday.

The number underlines Republicans' challenge in selling the measure as fiscally sound. The GOP-controlled House passed the legislation last month, and the CBO score was released just as Republican senators are making demands with additional price tags that will test party leaders' ability to cobble together a version that can get to Trump's desk quickly.

Sen. Josh Hawley (R., Mo.) said the proposed Medicaid cuts go too far for his state and wants some funding restored, while Sen. Susan Collins (R., Maine) is concerned about the bill's impact on rural hospitals and low-income families. Sen. Thom Tillis (R., N.C.) wants slower phaseouts of clean-energy tax credits to avoid scuttling private-sector investments that responded to federal incentives. Sens. James Lankford (R., Okla.) and Steve Daines (R., Mont.) want to take some tax cuts that are temporary in the House bill and make them permanent to provide certainty for businesses.

Locking down the votes of those senators and others with similar requests will cost money one way or another, and could further inflame intraparty tension with fiscal hawks. To balance things out while keeping the deficit effect around $2.4 trillion, senators could find more offsetting spending cuts or dial back their tax relief.

Alternatively, they could accept larger budget deficits or claim that economic growth will fill any gap. Each of those options comes with risks, both in finding a majority for the bill in the Senate, where Republicans are in control 53-47, and in avoiding problems in the House, which passed its version 215-214 last month and must approve any changes.

Already, Sens. Rand Paul (R., Ky.) and Ron Johnson (R., Wis.) are saying that they oppose the bill because it doesn't contain enough spending cuts or do enough to address budget deficits, and others have made similar statements. Billionaire Elon Musk joined that chorus on Tuesday, calling the bill a "disgusting abomination."

"There's too much spending," said Sen. Ted Budd (R., N.C.). "I'd rather deal with it now as a relatively smaller problem than I would as a massive problem later, where no one is willing to purchase our debt."

Big cuts, but bigger deficits

The CBO said Wednesday that the House-passed bill has more than $1.2 trillion in net spending cuts over a decade, and administration officials are hailing changes to social-safety-net programs as a historic step toward fiscal responsibility. But the combination of new spending and tax cuts -- including extensions of Trump's first-term tax cuts before they expire Dec. 31 -- outstrips those spending cuts and revenue boosts. The $2.4 trillion in deficits would happen atop the $21 trillion in deficits that the country is already forecast to incur through 2034.

In some ways, the CBO estimate understates the potential deficit effects of the bill. It respects the expirations that Republicans wrote into the legislation, which would schedule national-security spending increases and some of Trump's tax cuts--such as no tax on tips--to lapse after a few years.

Russ Vought, director of the Office of Management and Budget, said on X that the bill actually would reduce budget deficits by $1.4 trillion. The CBO score, he noted, assumes that Trump's first-term tax cuts expire as scheduled. That's CBO's consistent practice in accordance with budget law; Vought said it isn't realistic.

But it was Republicans who scheduled those tax cuts to expire when they passed them in 2017, so they could use a procedural fast track and keep the headline cost under $1.5 trillion. And Vought's $1.4 trillion deficit-reduction claim assumes that no tax on tips and other temporary Trump policies don't get extended; such an extension would effectively cancel out any deficit reduction. In addition, the White House itself has used the assumption that the first-term tax cuts would expire -- when analyzing the economic effects of the bill and arguing that it would boost growth.

CBO is the official nonpartisan agency that works for Congress and estimates the costs and effects of most legislation; the Joint Committee on Taxation analyzes tax bills.

In a separate report, the CBO said that the tariffs in place as of May 13 would reduce budget deficits by $2.8 trillion over a decade if they remain, or more than the deficit increase from the bill. The CBO said the tariffs would slow economic growth.

Just three votes to spare

Senate Republican leaders have only three votes to spare in the chamber as they try to push the legislation to Trump's desk by July 4. They will try to find money to address the Hawley-Collins-Tillis concerns without losing too many votes on the party's right flank. They might also need to find more spending cuts to satisfy conservatives.

"We are going to get this done one way or the other," Senate Majority Leader John Thune (R., S.D.) said Tuesday. "There are a lot of moving parts."

GOP senators are committed to passing legislation that would avert the scheduled expiration of many of Trump's 2017 tax cuts, which are slated to lapse Dec. 31.

Republicans packaged those tax-cut extensions with new tax cuts, a debt-limit increase, spending boosts for border security and the military, and spending cuts to Medicaid and nutrition assistance. The idea was to create one giant piece of legislation -- the "big, beautiful bill" -- that rolled the party's priorities into one must-pass measure.

"The House has a good product," Lankford said. "But just like 215 House members all put their fingerprints on it, we've got to have 50-plus senators put their fingerprints on it."

Democrats oppose the bill's combination of tax cuts and spending reductions on health and food programs, and they seized on the CBO report.

"Republicans who claim to care about fiscal responsibility should be outraged," said Sen. Jeff Merkley (D., Ore.), the top Democrat on the Budget Committee.

Senate Finance Committee Chairman Mike Crapo (R., Idaho) said lawmakers have options. They could say that extensions of expiring tax cuts don't have a cost or assume that faster economic growth will cover the cost of some changes.

"Everything is a mix and the answer is a mix of all kinds of pro-growth policies, all kinds of other revenue sources, all kinds of other offsets and all kinds of scoring differentials," he said.

Hawley floated three possible ways to cover any shortfall: a higher top individual income-tax rate, higher taxes on fund managers' carried-interest income and caps on what the government pays for prescription drugs. Trump has supported all those ideas in some form, but they sharply divide Republicans.

Write to Richard Rubin at richard.rubin@wsj.com

(END) Dow Jones Newswires

June 04, 2025 14:58 ET (18:58 GMT)

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