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Parsing the One Big Beautiful Bill Act (OBBBA)
By: Richard J. O'Neill, CFA, CAIA', Meketa
Recently, Congress passed the One Big Beautiful Bill Act (OBBBA). At nearly 900 pages, the OBBBA is broad in scope. In the article some of the key changes related to: taxes, new spending, offsets, and debt ceiling adjustments are summarized.
Recently, Congress passed the One Big Beautiful Bill Act (OBBBA). At nearly 900 pages, the OBBBA is broad in scope. In the article some of the key changes related to: taxes, new spending, offsets, and debt ceiling adjustments are summarized.
Introduction
Recently, Congress passed the One Big Beautiful Bill Act (OBBBA). At nearly 900 pages, the OBBBA is broad in scope. The table below summarizes some of the key changes related to: taxes, new spending, offsets, and debt ceiling adjustments.
Estimates are preliminary.
Recently, Congress passed the One Big Beautiful Bill Act (OBBBA). At nearly 900 pages, the OBBBA is broad in scope. The table below summarizes some of the key changes related to: taxes, new spending, offsets, and debt ceiling adjustments.
Estimates are preliminary.
| Category | Estimates |
|---|---|
| Tax Policy ($5 T) |
Permanent extension of the Tax Cuts and Jobs Act (TCJA)1
State and Local Tax (SALT) caps raised
New deductions (tips, overtime pay, and auto loan interest)2
Expanded child tax credit/tax credit
|
| Spending (~$500 - $600 B) |
$170B to border security
$150-170B for defense
|
| Cuts (~$2.5 T)3 |
~$1.1T from Medicaid & Affordable Care Act
$540B rollbacks of IRA act & SNAP4
|
| Debt Ceiling ($5 T) |
Raised to $5 T
|
The OBBBA is expected to worsen the U.S. fiscal outlook. The Congressional Budget Office (CBO) estimates deficits will rise $3.4 trillion between 2025 and 2034, plus $700 billion in added interest expense, for a total $4.1 trillion impact.5 By 2027, annual deficits will be $600 billion higher than prior forecasts, about 2% of GDP. The bill adds an average of 1.1% of GDP per year to deficits.6
Debt-to-GDP, already projected to climb from ~100% to ~118% by 2033, now looks set to reach ~124% by 2034.7 This comes amid higher rates: the average Treasury rate rose from 1.6% in 2021 to 3.2% in 2025, lifting interest payments to over $1 trillion annually (3.6% of GDP, versus 1.6% in 2020).8 CBO projects costs could reach 4.1% of GDP by 2035.
Potential economic and policy impacts
In the short term, we could see a boost to growth as most of these new tax cuts take place next year. Higher tariffs will offset some of the cost of the bill but could mitigate some or all of the benefits for consumers and corporations. Also, potentially higher interest rates from the Fed taking a slower approach to cutting given higher growth/inflation could counter some of the short-term benefits of the bill. At the very least, the OBBBA provides somewhat of a cushion to the economy and reduces the chances of a recession.
The potential short-term boost to growth from the bill combined with tariffs could keep inflation elevated. Lower levels of immigration along with deportations could add to these pressures as a reduced labor force could lead to an imbalance between the supply and demand for labor, resulting in wage pressures.
Conclusion
The OBBBA delivers immediate economic stimulus through expansive tax cuts and targeted spending, while simultaneously amplifying long-term fiscal risks. Its provisions are likely to support near-term growth and corporate profitability, potentially cushioning the economy against recessionary pressures. However, the accompanying surge in deficits and debt—especially in a higher interest rate environment—raises serious concerns about inflation, monetary policy constraints, and the sustainability of federal finances.
One of the potential market effects of the OBBBA is a rise in US Treasury yields and increased bond issuance, as the government will need to issue trillions of dollars in additional securities over the next decade to fund the bill's tax cuts and spending measures. As bond issuance increases, long-term interest rates could rise more than short-term rates, leading to a steepening of the yield curve. This would likely increase borrowing costs across the economy and weigh on economic growth.
Important Information (Disclaimer)
THIS REPORT (“REPORT”) IS INTENDED SOLELY FOR THE RECIPIENT. INFORMATION, OPINIONS, OR RECOMMENDATIONS REFLECT OUR VIEWS AS OF THE DATE SHOWN AND ARE SUBJECT TO CHANGE. WE HAVE RELIED ON DATA FROM EXTERNAL SOURCES AND MAY HAVE USED ARTIFICIAL INTELLIGENCE (“AI”) TOOLS IN PREPARATION. WHILE CARE HAS BEEN TAKEN, WE CANNOT GUARANTEE THE ACCURACY, COMPLETENESS, OR RELIABILITY OF ANY INFORMATION, WHETHER FROM EXTERNAL PROVIDERS OR AI.
ALL INVESTMENTS INVOLVE RISK, AND THERE IS NO ASSURANCE THAT STRATEGIES DISCUSSED WILL SUCCEED. PAST PERFORMANCE IS NOT INDICATIVE OF FUTURE RESULTS. THE REPORT MAY INCLUDE FORWARD-LOOKING STATEMENTS BASED ON CURRENT ASSUMPTIONS, WHICH ARE SUBJECT TO CHANGE; ACTUAL OUTCOMES MAY DIFFER MATERIALLY. RECIPIENTS SHOULD CONSULT THEIR MEKETA ADVISOR OR ANOTHER PROFESSIONAL BEFORE MAKING FINANCIAL DECISIONS. WE DISCLAIM LIABILITY FOR ANY DAMAGES ARISING FROM USE OF THIS REPORT.
Endnotes:
Endnotes:
1US Congress.Gov, “Tax Cuts and Jobs Act” budget passed in 2017.
2Bipartisan Policy Center, “How Does the 2025 Tax Law Change the SALT Deduction,” June 9, 2025. Other provisions address lowering the cap over several years for high income households.
3Committee For A Responsible Federal Budget as of July 22, 2025. What's In the One Big Beautiful Bill Act?-2025-07-22
4Committee For A Responsible Federal Budget as of July 22, 2025. What's In the One Big Beautiful Bill Act?-2025-07-22
5Committee For A Responsible Federal Budget as of July 22, 2025 https://www.crfb.org/press-releases/final-obbba-score-confirms-long-road-fiscal-recovery
6Committee For A Responsible Federal Budget as of July 22, 2025. What's In the One Big Beautiful Bill Act?-2025-07-22
7Committee For A Responsible Federal Budget as of July 22, 2025
8CBO as of March 2025. https://www.cbo.gov/publication/61486
Bio: Richard J. O'Neill, CFA, CAIA
Mr. O'Neill joined Meketa in 2008 and has been in the financial services industry for over 20 years. He serves as consultant for various defined benefit, defined contribution, and health & welfare funds, with Taft-Hartley and corporate plan sponsors. His consulting work includes investment policy design, asset allocation modeling, public and private market investment manager due diligence and fund performance analysis, and asset class education.
Mr. O'Neill is the chair of Meketa's Global Macroeconomic Investment Committee and is one of the authors of the firm's monthly Economic and Market Update. He also contributes to the writing of other market and economic pieces and hosts the firm's quarterly webinar.
Mr. O'Neill received his undergraduate degree with honors from Boston College. He holds the Chartered Financial Analyst® designation and is a member of the CFA Institute and the CFA Society Boston. Mr. O'Neill also holds the Chartered Alternative Investment Analyst (CAIA) designation, and is a member of the CAIA Association®.
What Pension Members May Learn: This article is intended to help trustees understand the trade-offs in the OBBBA. Short-term growth support versus long-term fiscal strain, and what these dynamics may mean for markets, interest rates, and public fund investment decisions.
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