The Personal Side of The Big Beautiful Bill
The Big Beautiful Bill (BBB) has just passed the Senate, returned to the House, and is expected to reach the president's desk by the Fourth of July.
Today, I would like to provide an overview of the BBB's main economic provisions and then examine what personal finance principles can reveal about the bill's long-term implications.
Note: These are my thoughts so far. I will continue to study the Bill and share updates.
The Main Provisions
Benefits
Research and Development Tax Breaks: The bill includes tax incentives for R&D investments
Enhanced Child Tax Credit: Parents filing joint returns can claim $2,200 per child (up from $2,000), available to single parents earning up to $200,000 and married couples earning up to $400,000
Baby Bondsor Trump Accounts: A three-year pilot program providing every American baby born between 2025 and 2028 with a $1,000 government-funded investment account. Parents can contribute up to $5,000 annually, with the funds remaining locked until the child reaches the age of 18. This concept, originally referred to as "baby bonds," was pioneered by economists Sandy Darity and Darrick Hamilton (learn more here and here). Bernie Sanders included it in his presidential run. I actually think it's a solid idea that deserves bipartisan supportTax Relief for Workers: Eliminates federal income taxes on tips (up to $25,000) and allows overtime pay deductions (up to $12,500 for single workers)
Drawbacks
Immigration Costs: Increased fees for asylum applications, work authorization, humanitarian parole, and immigration court filings. This will increase the chances that individuals “fall out” of legal status.
Medicaid Work Requirements: Recipients ages 19-64 and parents of children 14+ must work, volunteer, study, or train at least 80 hours monthly
Student Loan Changes: Caps on graduate program borrowing, limits on Parent Plus loans, and elimination of the Graduate PLUS program
Expected Consequences
Healthcare Access: Medicaid cuts will likely lead to the closure of rural hospitals, resulting in healthcare deserts in underserved communities.
Food Security: SNAP reductions could make grocery stores in low-income and rural areas less profitable, potentially reducing access to food. Independent grocers warn that federal support cuts could harm local retailers that provide essential services and jobs in these communities.
State Budget Pressures: States will face difficult choices as federal support for Medicaid and food assistance shrinks. They may need to cut benefits, reduce eligibility, or reallocate funds from education and infrastructure.
Tax Distribution: While all households will see tax reductions, 60% of the benefits will flow to those earning $ 217,000 or more (the top 20%), who will receive an average cut of $12,500. The lowest-income households (earning ~$35,000) receive only $150 on average.
See footnote1
Fiscal Impact
The Congressional Budget Office projects the bill will increase the deficit by $3.3 trillion over the next decade. The legislation also raises the debt ceiling by $5 trillion, allowing the Treasury to borrow more for existing obligations. With the national debt already around $36 trillion, this package will not reduce our fiscal burden.
The Personal Finance Lesson
In personal finance, the path to wealth lies in managing debt, specifically debt service costs. People struggle when interest payments begin consuming resources that could otherwise fund new opportunities or basic necessities.
As U.S. debt continues ballooning, interest payments claim an ever-larger share of government revenues. The more we allocate to servicing debt, the less capacity we have for the government to act as an economic stabilizer or make strategic growth investments.
Each year brings us closer to that tipping point. This bill appears to accelerate that timeline.
Have a happy Fourth of July,
-Dr. A
Dr. Abdullah Al Bahrani is an economist who writes about economics and policy from a personal finance perspective. Subscribe for weekly analysis that cuts through the political noise to focus on what really matters for your wallet and your future.
Note to up-and-coming researchers- the above topics will make great research projects over the next 4-8 years. If you are considering starting a Ph.D., jot these down.
So much. Anyway, cuppla things: 1. $1000 for a baby is not much, and will not even move the needle on births in the US. Immigration is a MUCH better solution for the US lack of workers. That said, baby bonds are a good idea. 2. The problem with the work requirement for Medicaid is NOT the requirement to work! It is the paperwork needed to, as the Russians said about Soviet paperwork, "prove that you are not a camel."
The baby bonds are the most interesting part of this project, but it's hard to imagine what impact that would really have. Families that can afford to put an extra couple thousand away likely have the means to set those accounts up themselves.