Abomination

   By Guest Blogger Ryan Lewenza

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It’s rare these days that I agree with Elon Musk and many of his increasingly extreme views. But on his take of President Trump’s “One Big, Beautiful, Bill”, I couldn’t agree more when he recently tweeted, “I’m sorry, but I just can’t stand it anymore. This massive, outrageous, pork-filled Congressional spending bill is a disgusting abomination.” That’s a Steve Austin, WWE takedown if I’ve ever seen one, and somewhat surprising coming from Trump’s “first buddy”.

Today I’m going to review the key aspects of this huge new spending bill and why, like Musk, believe it’s an abomination.

For months the US congress has been working on passing Trump’s big spending bill. Last weekend they finally got it past the finish line, and Trump signed it into law on July 4th. At the signing ceremony Trump, always the salesman, said the bill “is the most important and beautiful piece of legislation in a generation.” I disagree and have some personal concerns with it, but, overall, I see it being positive for the US economy and markets. Let me explain.

The most consequential aspect of the bill was making the Trump 2017 tax cuts permanent and fulfilling Trump’s election promises of eliminating taxes on tips, overtime and on social security payments.

In Trump’s first term he passed a major tax cut, lowering the corporate tax rate from 35% to 21% and slashed personal tax rates. The bill, however, had an expiry date for the tax cuts, which was for the end of this year. So, if Trump and the Republicans wanted to avoid a large tax increase under their watch, they had to pass this bill.

My central issues with this bill are: 1) the tax cuts are not funded by enough spending cuts, which will add further to deficits and debt; and 2) the tax cuts disproportionately benefit higher income earners and corporations, while the spending cuts disproportionately hurt lower income earners. A reverse Robin Hood bill, if you will.

Indeed, according, to Yale Budget Lab analysis, the “‘One Big Beautiful Bill Act’ would reduce income by 2.9% (about $700) per year for the bottom 20% of households, and would raise income by 2.2% ($5,700) per year for the top 20%.”

On the debt, the Congressional Budget Office (CBO), a nonpartisan federal agency which estimates the cost of legislation, along with many other agencies like Moody’s, estimate that the bill will add roughly $3-4 trillion to the US national debt over the next 10 years, as spending outstrips tax revenues. This would add to the already high US government debt load of US$36 trillion.

US government debt sits at $36 trillion

Source: Bloomberg, Turner Investments

The Republicans dispute this stating that the bill will not add to the debt, but they are using an accounting gimmick to support this claim. They are saying that since the tax rates are “current policy” that the bill will not add to the deficit, but this misrepresentation fails to acknowledge that the tax cuts were set to expire by the end of this year, which would result in higher future government revenues and therefore lower future deficits.

They also state that the tax cuts will stimulate additional economic growth and therefore pay for itself. This is classic “trickle-down economics” and frankly, has never worked. In every major tax cut since Regan, Bush, and Trump’s first term, they sold it that the tax cuts would result in higher long-term growth, which would end up paying for the tax cuts, but this has never panned out.

Now, to pay for some of these tax cuts they are cutting back on Medicaid (health care for low-income earners) and SNAP (food stamps). They will now include work requirements where people will need to show and document that they worked 80 hours/month to receive Medicaid. It’s estimated this new work requirement will lead to 12 million people losing their Medicaid coverage in the coming years.

Also, it’s interesting to note that the tax cuts are immediate, while the new working requirements to receive Medicaid, don’t kick in until after the mid-term elections next year. Convenient timing wouldn’t you say!

A ‘non-progressive’ bill that wuld never fly here

Essentially, they are cutting taxes, which is estimated that 80% of the tax cuts go to high income earners and corporations and paying for the tax cuts by slashing $1 trillion from Medicaid. This is opposite of a progressive bill and would never fly here in Canada. As a “fiscal hawk” I also hate that it continues to add to the already bloated debt levels.

The US Republicans promote themselves on being good stewards of the economy and being fiscally prudent. This bill, and the inevitable increase in deficits and debt contradicts these claims, in my view.

Moving on to the broader economy and markets, the lower taxes could stimulate some economic growth over the next year and the lower corporate taxes are good for stocks as corporations will make higher profits. Corporate earnings are the main driver of long-term stock returns, so keeping those corporate tax rates low is clearly good for stock prices.

Overall, I don’t like that this bill adds to the already high US debt, and that some of the tax cuts are being financed by cutting health care for those most in need. But, with our focus as portfolio managers, overseeing many Canadian family’s investment and retirement accounts, we see these tax cuts benefitting the equity markets and investors.

Ryan Lewenza, CFA, CMT is a Partner and Portfolio Manager with Turner Investments, and a Senior Investment Advisor, Private Client Group, of Raymond James Ltd.

Source: https://www.greaterfool.ca/2025/07/12/abomination/