Source: NYT, July 6, 2025.

The OBBB alters the path of deficits relative to current law by a substantial amount, but not too much relative to current policy. However, the composition of overall spending and taxes is altered considerably relative to both current law and current policy. Relative to current law:

Source: G. Elliott Morris.

So the tax cuts are expanded — as are expenditures for Homeland Security (think ICE), as expenditures for the social safety net are reduced. If you’ve never worried about losing your health care, this won’t mean much to you…but it will mean a lot to both lower income and working middle class households.

Hence, while on pure fiscal expenditure terms (one can think of transfers and taxes as inverses of each in a simple Keynesian aggregate demand context), one might think of OBBB as broadly neutral relative to current policy in the short term

Keep reading this article on Econbrowser Blog - James Hamilton & Menzie Chinn.