On July 4, 2025, President Donald J. Trump signed into law H.R. 1, the “One Big Beautiful Bill Act”, a $3.4 trillion tax and spending package passed through budget reconciliation—marking a significant recalibration of U.S. domestic policy. The bill’s enactment caps months of intraparty negotiation and reflects a fundamental reordering of federal priorities on taxation, entitlement spending, climate policy, and fiscal management.

The legislation’s path to becoming law was narrow and hard-fought. The House and Senate advanced H.R. 1 under the budget reconciliation process—a procedural tool created by the Congressional Budget Act of 1974 that enables certain tax, spending, and debt-limit legislation to bypass the Senate filibuster. Under reconciliation rules, only a simple majority is required in the Senate, and debate time is strictly limited. On June 30, the Senate approved the bill by a razor-thin 51–50 margin, with Vice President J.D. Vance breaking the tie after three Republican senators—Susan Collins (ME), Rand Paul (KY), and Thom Tillis (NC)—voted no. Their concerns ranged from fiscal prudence to programmatic objections over Medicaid changes. Just three days later, on July 3, the House passed the bill 218–214, overcoming internal Republican infighting that had threatened to derail the effort in its final hours. While hard-right conservatives had demanded even steeper spending cuts, and Republican moderates balked at the scale of reductions to safety-net programs, only two Republicans, Reps. Thomas Massie (KY) and Brian Fitzpatrick (PA), ultimately voted against the final version.

The bill was signed by the President at a July 4 White House ceremony, meeting a self-imposed legislative deadline.

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What’s in the $3.4 Trillion Package?

The reconciliation bill is both massive in size, sweeping in scope. The legislation includes wide-ranging revisions to federal tax policy, entitlement spending, environmental incentives, and the national debt limit. Here’s some of what the 1,000+ pages actually do:

Trillions in Tax Cuts 

At its core, the bill is a monumental tax overhaul. It extends and expands upon the 2017 Tax Cuts and Jobs Act:

• Extension of Individual and Pass-Through Tax Cuts: The 2017 Tax Cuts and Jobs Act (TCJA) provisions that were set to expire in 2025 have been extended indefinitely.
• Expanded Child Tax Credit: The legislation permanently increases the child tax credit and makes it partially refundable, with adjustments for inflation.
• Temporary Working-Class Tax Relief: New deductions are created for tip income, overtime wages, and retirement income for the elderly. These provisions sunset after four years.
• Business Incentives: Several business tax preferences—including full expensing for capital investments, expanded R&D credits, and enhanced interest deductibility—have been made permanent.

Collectively, these changes represent approximately $4.5 trillion in gross tax cuts over ten years, according to the Joint Committee on Taxation. 

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Reductions to Safety Net Programs

To partially mitigate the deficit and debt increase from the tax reductions, the bill enacts substantial reductions to several entitlement and federal assistance programs:

• Medicaid Cuts:
  • Work requirements for able-bodied adults without dependents under age 14
  • Reductions in the federal matching rate for state Medicaid programs
  • New cost-sharing obligations for ACA expansion beneficiaries
  • Caps on Medicaid per-enrollee spending in certain states
    These changes are projected by the Congressional Budget Office (CBO) to cut Medicaid spending by nearly $1 trillion over a ten-year horizon.
• Supplemental Nutrition Assistance Program (SNAP): Eligibility thresholds are tightened, and employment and training requirements are expanded.
• Federal Student Loans: Income-driven repayment programs are restricted, and loan forgiveness pathways are narrowed.

While these measures reduce federal outlays, they also shift significant fiscal and operational burdens onto states and beneficiaries. Democrats have framed these changes as devastating, with House Minority Leader Hakeem Jeffries warning, “This legislation will end Medicaid as we know it.”

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A Reversal on Clean Energy

In a blow to Biden-era climate policy, the reconciliation bill aggressively reverses most clean-energy tax policies enacted under the Inflation Reduction Act of 2022:

• Phase-out of Renewable Energy Credits: Solar, wind, and battery production credits are eliminated between 2025 and 2027.
• Termination of the EV Credit: The $7,500 consumer credit for electric vehicle purchases ends for transactions occurring after September 30, 2025.
• Fossil Fuel Incentives Reinstated: Several previously repealed oil and gas tax preferences are restored, including intangible drilling cost expensing and percentage depletion allowances.

The shift signals a return to fossil-fuel-based energy policy and may have both domestic and international implications, particularly regarding the United States’ emissions reduction commitments. 

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Immigration and Defense Spending

The bill increases funding for immigration enforcement and national defense:

• Immigration: Appropriations are increased for Border Patrol hiring, detention capacity, and technological surveillance. Funds are also earmarked for physical border infrastructure.
• Defense: Significant new investment is made in missile defense, particularly the President’s “Golden Dome” initiative, intended as a countermeasure to emerging hypersonic threats.

While these provisions were less controversial within the Republican caucus, they contribute materially to the overall fiscal footprint of the package.

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Debt Limit Increase

To facilitate the above expenditures and avoid an imminent payment default, the bill increases the statutory debt ceiling by $5 trillion. This removes the near-term risk of a Treasury cash shortfall but increases long-term fiscal exposure. The CBO estimates that the legislation will increase the federal deficit by $3.4 trillion over the next decade, even after accounting for entitlement reductions.

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