The One Big Beautiful Bill Act (OBBBA) is projected to significantly increase the U.S. federal deficit by more than $4 trillion over the next decade, while disproportionately affecting lower-income households by reducing their after-tax income.
The Yale Budget Lab estimates that the federal deficit will grow by over $4 trillion in the coming decade as a result of the One Big Beautiful Bill Act (OBBBA), according to Natasha Sarin, co-founder and president of The Budget Lab at Yale. Speaking at the American Community Media briefing, Sarin discussed the long-term economic impacts of this legislation on the national deficit and the broader economy.
The fiscal implications of the OBBBA are significant. Sarin, a professor at Yale Law School and the Yale School of Management, remarked that the bill functions as “Robinhood in reverse.” She explained that the federal deficit is expected to increase, leading to a debt-to-GDP ratio rising from its current level close to 100% to about 135% by the end of the decade. This would mean that the nation’s debts will substantially surpass its economic output.
Sarin noted that higher deficits will escalate the government’s borrowing costs, which will, in turn, affect households and businesses by increasing mortgage rates and the cost of various loans. This could result in higher expenses for car loans, student loans, and small business loans, contributing to a decreasing economic output over time.
Analyzing the winners and losers from the OBBBA, Sarin, along with her colleague Richard Prisinzano, Director of Policy Analysis at the Yale Budget Lab, questioned the distribution of trillions of dollars set to be spent under this legislation. Their findings indicate that households in the lowest 10% income bracket could lose approximately $700 annually in after-tax and transfer income over the decade spanning 2026 to 2034.
For the country’s wealthiest, the scenario is quite the opposite. The top 1% of earners could see an increase of about $30,000 per year in after-tax income. Those in the top 0.1% income bracket, earning more than $5.18 million, as per estimates from CBS MoneyWatch, could benefit by as much as $286,440 annually.
Sarin underscored that the bottom 40% of income earners would be worse off post-OBBBA, bearing the burden of cuts in programs like Medicaid and SNAP, which outweigh the benefits from any tax changes included in the bill.
The OBBBA entails significant changes in tariff policies, with effective tariff rates rising to about 18.7%, compared to approximately 2% at the beginning of the current administration. Sarin pointed out that lower-income households, which spend a larger portion of their income on essential goods, including food, energy, housing, and transportation, are particularly susceptible to the effects of higher tariffs.
The OBBBA incorporates a historic $900 billion cut to Medicaid, marking the largest reduction in the program’s history. Though framed primarily as a tax cut bill, the legislation represents the most profound change to the healthcare system since the Affordable Care Act (ACA), said Larry Levitt, Executive Vice President for Health Policy at the Kaiser Family Foundation.
Levitt stated that the Congressional Budget Office estimates this legislation will decrease federal health spending by more than a trillion dollars over the next decade and potentially increase the uninsured population by 11.8 million. These figures might decrease slightly due to last-minute bill changes. However, the magnitude of these healthcare system changes is considerable, with 4.8 million individuals expected to lose coverage primarily due to bureaucratic complexities and increased Medicaid renewal requirements.
The healthcare marketplace will also undergo significant transformation. New income verification procedures will complicate the process of obtaining coverage, and the discontinuation of automatic coverage renewal may result in many losing their insurance. Furthermore, many low-income, lawfully present immigrants will become ineligible for premium assistance under the ACA, as well as Medicaid and Medicare.
Levitt highlighted potential administrative efforts to penalize states like California for using state funds to provide healthcare to undocumented immigrants. Congress has waived notable amounts of Medicare and Medicaid funding, totaling about half a trillion dollars, but there is no certainty that such waivers will continue in the future.
The enhanced premium tax credits available under the ACA are set to expire at the year’s end. If not extended, these developments could cause out-of-pocket premiums for more than 20 million enrollees to surge by an average of more than 75%, potentially leaving millions uninsured by the beginning of 2026. Notably, many of the significant changes introduced by the OBBBA will unfold gradually, with notable effects emerging after the upcoming midterm elections and beyond.