Bond yields spike because of concerns about deficit spending
of ConsumerAffairsMay 22, 2025
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The House passed President Trump’s “One Big Beautiful Bill” with a narrow 215-214 vote.
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The legislation includes permanent tax cuts, increased defense and border security funding, and stricter requirements for social programs.
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Critics highlight the projected $3.8 trillion addition to the national debt and potential adverse effects on low-income populations.
The U.S. House of Representatives has narrowly approved President Donald Trump’s comprehensive tax and spending package, known as the “One Big Beautiful Bill.” The measure passed with a 215-214 vote, reflecting deep partisan divisions and intense negotiations within the Republican Party.
Key Provisions of the Legislation:
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Tax reforms: The bill seeks to make permanent the tax cuts introduced in 2017 and introduces new exemptions for tips and overtime pay. It also increases the standard and child tax deductions temporarily and raises the cap on state and local tax (SALT) deductions.
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Defense and border security: Allocates nearly $150 billion to defense, including funding for a missile defense shield and naval expansion. Additionally, it provides $46.5 billion for border security measures, such as constructing barriers and enhancing surveillance.
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Social program adjustments: Implements stricter work requirements for food aid and Medicaid, potentially reducing coverage for millions. The bill also cuts Medicaid funding to Planned Parenthood and introduces $1,000 “Trump” savings accounts for children born between 2024 and 2028.
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Education and energy policies: Revamps student loan programs, imposes taxes on large university endowments, and facilitates increased fossil fuel extraction on public lands. It also eliminates clean energy tax credits established under previous administrations.
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Seniors: The bill provides a $4,000 deduction for people aged 65 and older, applicable to both standard and itemized deductions. The deduction is available to single filers with a modified adjusted gross income (MAGI) of $75,000 or less, and to married couples filing jointly with a MAGI of $150,000 or less.
Fiscal Implications and Criticisms
The Congressional Budget Office estimates that the legislation could add approximately $3.8 trillion to the national debt over the next decade. All House Democrats opposed the measure, citing concerns over fiscal responsibility and social equity. Two Republicans voted against it, saying it didn’t cut enough government spending.
The bond market, anticipating passage of the legislation, expressed its concern about rising budget deficits. There was what was described as weak demand for the Treasurys 20-year bond on Wednesday, pushing the yield to 5.15%. The yield on the 30-year bond rose to 5.09%.
The bill now advances to the Senate, where it is expected to undergo further scrutiny and potential modifications. The narrow passage in the House underscores the challenges ahead in achieving consensus on such a comprehensive legislative package.
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