Spending Cuts and the Federal Deficit

We recently took a look at the impact of the One Big Beautiful Bill Act (OBBBA) on spending cuts and the federal deficit. Download a high resolution PDF with key takeaways.

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Key Takeaways

• The One Big Beautiful Bill Act (OBBBA) was passed in Congress on July 3, 2025, and signed into law on July 4, 2025.
• Extending the Tax Cuts and Jobs Act forms a central part of the OBBBA, which also cuts taxes on tips and Social Security and makes cuts to Medicaid.
• The elimination of taxes on tipped income and overtime pay is estimated to benefit 2.5 – 5.2 million tipped workers, potentially increasing their collective income by $39 billion the next decade.
• Medicaid cuts are one of the largest offsets in the OBBBA, with estimates reducing costs of other OBBBA provisions by nearly $1 trillion. Experts expect that impacts of the cuts are not immediate and the most significant impacts will emerge around 2028.
• Other offsets to the bill include changes to student loan repayment rules and the phase-out of the Inflation Reduction Act tax credits.
• Despite the cuts, the Congressional Budget Office (CBO) estimates that the bill will add $3.3 trillion to the Federal Deficit over the next decade. OBBBA does raise the federal debt limit, which we hope gives the government time to work to stabilize the long-term debt situation.
• In the meantime, we believe investors should be prepared for a wide range of outcomes and consider new ways to diversify asset allocations and investment portfolios