The U.S. House of Representatives has passed a tax bill that is projected to increase the national debt. This occurs amidst concerns about the U.S. fiscal outlook, as reflected in recent volatility in U.S. Treasury yields and a downgrade of the U.S. credit rating by Moody's on May 16, 2025.
Moody's downgraded the U.S. government's long-term issuer rating to Aa1 from Aaa, citing rising government debt and interest payment ratios. The Congressional Budget Office estimates the tax-cut bill will add $3.8 trillion to the existing U.S. debt over the next decade. The US national debt currently stands at $36.2 trillion.
The bill, dubbed the "Big, Beautiful Bill", includes tax cuts and increased spending on military and border enforcement. It passed with a narrow 215-214 vote. The legislation now moves to the Senate for debate, where its future remains uncertain.
Economists and policy experts are raising concerns about the potential for the bill to further increase the national debt and worsen the fiscal outlook. Some Republicans also worry about the spending trajectory of the federal government.
The US government debt accounted for 124.0 % of the country's Nominal GDP in December 2024. The passage of the tax bill and the subsequent downgrade by Moody's highlight the growing concerns about the U.S. debt and its potential impact on the economy.
The US has the highest national debt in the world. The bill extends Trump's 2017 tax cuts and may add up to $5 trillion to the national debt.