The “Big Beautiful Bill” Explained

It’s not the lifeline it’s being sold as—it’s a liability. Here are some solutions that would better serve taxpayers, and the economy.

Photo by Çağlar Oskay on Unsplash

I’m not an economist. But I’ve built businesses, managed budgets, signed paychecks, and navigated growth through economic downturns. That kind of real-world experience gives me some insights as to why the “Big Beautiful Bill” isn’t that beautiful the way it is constructed today. And it isn’t a workable solution for keeping our economy strong.

When it comes to economics, there are some basic concepts that hold true, regardless of how complicated our financial systems and instruments are. Some people would call this leading with first principles.

We need the majority of our politicians to lead by putting the country first, their local constituents second, and their own self interests third. While we absolutely have some politicians who are leading this way, unfortunately this is not the majority.

It’s time for some common sense.

We’re headed for a fiscal reckoning with the debt-driven reconciliation bill. There are some complicated truths we need to deal with. We can’t let the existing tax cuts expire because that would create an economic downturn. However, we don’t need to increase tax cuts in a good economy to add to our runaway debt, because that will lead to a national debt crisis. It’s time to work towards reducing the debt in a meaningful way. The bond market is sending us a clear signal that this is needed, as you see the 10-year yield rates rise.

This reconciliation budget bill? It’s not the lifeline it’s being sold as—it’s a liability. Here are some solutions that would better serve taxpayers, and the economy.

Cutting Taxes Means We Have To Borrow Money

For the last 30 years, we have followed the belief that tax cuts lead to more revenue (by giving individual taxpayers more disposable income and big businesses more money to invest in growth), and will help pay down the budget. We have seen it grow topline, but the issue is that our spending has outpaced the revenue increases.

It’s clear based on the last 30 years that growing the economy isn’t enough to pay down our debt, because we don’t have the fiscal maturity and discipline to live within our means. Even though the U.S. has the largest economy in the world, we spend like a drunken sailor.

Meanwhile, the House-passed budget bill proposes $800 billion in additional tax cuts. The current bill is asking the American public to borrow money in order to fund the billions in tax cuts.

Pulling this lever means that in return we pay higher interest rates on the money we borrow as our debt goes higher and higher. How does that make sense? We are over leveraged. And this is projected to increase budget deficits by at least $3 trillion.

Imagine if you ran your house like that, it turns into an unmanageable situation where you are spending a high percentage of the money you make just to pay the interest on your loans, and thus cut back on the things your household needs, like food.

In 2017, the Trump tax cuts reduced corporate taxes from 35% to 21%. That was primarily for C-Corps, which traditionally are the large, multi-national companies that tend to reinvest in hiring and exploring new markets and services, which grows the top line (total revenue) and bottom line (profits after expenses). It made sense.

The reconciliation bill is proposing to add an additional $800 billion in tax cuts, but now most of those cuts are going to S-corps. An S-corp is a pass-through entity and really gets taxed as personal income for the business owner. These are companies like gas stations, local printing businesses, franchise owners, gig workers.

S-corp owners tend to have more of a local customer base, and don’t have the geographic reach that nationwide and global corporations have to expand their customer base. That means the money saved will generally stay in the business owner’s pocket and will not be used to stimulate growth at the same level that the 2017 tax cuts to C-corps provided.

Moreover, roughly 70% of the tax cut is going to people who make $500,000 or more. The reality is that it won’t drastically affect their lifestyle, but our fiscal irresponsibility will reduce our spending power and negate the value of this tax cut.

Bottomline, we are getting close to a tipping point which is why the bond market is reacting so unfavorably to this Congressional bill. If we don’t fix our financial situation, the U.S. solvency is at risk, the value of the dollar is at risk, and the tax cut will be meaningless.

Our Debt Is Growing Faster Than Our Economy

We are at a point where our interest payments are now our largest line-item budget—more than defense and more than healthcare.

Let’s break this down further: We borrow about $10 trillion of short-term, one-year debt and $20 trillion of long-term debt. We could see an increase in our interest rates because our lenders could become more concerned about our ability to pay the debt as it continues to rise. A mere 1% increase in interest rates would cost us over $300 billion in additional charges.

What this basically means is that as the U.S. debt is rising, demand to buy our debt is falling, which causes interest rates to increase. That will force us to live with higher interest rates for a long time. We would have to get used to inflation—meaning more expensive houses, cars, food, etc. Previously, sound fiscal policies and a stable political environment enabled us to enjoy such low interest rates.

Our debt situation is coming to roost if we don’t start the process of fiscal responsibility. It’s a debt spiral that could force austerity—which we should do now when we can choose what to cut rather than being forced to. The other option would be that the Fed ends up buying the debt, which will devalue the dollar and inflate our way out to be very expensive.

We’re at 100% debt-to-GDP—meaning our entire economic output equals our national debt. In business terms, that’s like making $1 million a year while you owe $1 million. You still need more money to cover your overhead expenses. No bank would give you good terms.

The best position to be in to borrow—whether it’s for a person, company, or government—is when you are in a position of power and not when your back is against the wall.

We cannot solve this issue by relying on simply growing ourselves out of the situation. Hope isn’t a strategy. Chamath Palihapitiya from the “All In” podcast tried to rationalize this and reframe the discussion. I have a lot of respect for him, but it seems like he is more focused on rationalizing or backing into reasoning rather than what he is known for, which is logically coming up with solutions that solve problems.

David Friedberg has been saying for a long time that we need to cut costs, increase taxes, and bring our spending down to 2019 levels to have any chance to get out of the debt spiral. Ray Dalio says the same: the way out is simple, not easy. It will call for three things to be done at the same time: cut spending, raise taxes where necessary, and restore fiscal sanity.

I agree with them both. It was fun getting to this moment, and now it's time to take the pain and pull all the levers to tackle the problem and rise to the occasion as we have so many times before as Americans. Take the medicine and fight back against the virus we are dealing with before it’s unstoppable.

We Have A Broken Law-Making Process

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In business when we’re building a plan for the company, we have meetings with the executive team, discuss a strategy, take days or weeks to digest the strategy, tweak it, get agreement, and execute against it. It’s a thoughtful process that allows you to take the best ideas, hash it out and hopefully come up with the best plan possible.

That is not how it seems to be working in Congress. They come up with a plan known as a bill. They write up 1,000+ pages for that bill with a ton of nuances and give Congress a few hours to read through the final version of the bill before voting on it. There is no time to discuss, negotiate, go through the finer details and come up with the best compromise. This is how pork (unnecessary spending) and bad policies with significant consequences get into a bill, and the people voting for it don’t realize what they have signed off on.

If you look at the “Big Beautiful Bill,” there are three provisions that have significant consequences to our future.

The first example, the House measure, known as Section 899, would allow the U.S. to add a new tax of up to 20% on foreigners with U.S. investments, including multinational companies operating in the U.S. as a sort of ‘revenge’ for taxing our investments in their own countries, but ultimately this only ends up hurting ourselves. What this means is that we can selectively decide who can invest in America, even those companies who already have done so, and tax them to invest in us.

At a time where we want to reduce the amount of debt we issue, getting investments by the private sector is critical to offset some of the debt-driven investments we normally make. This new measure is arbitrary and vague at best. Investors need stability and well-defined rules to invest, so this will absolutely reduce the amount of investment coming into this country.

Second, there is a provision in the bill that would drastically reduce the court's power to enforce court orders. Under the policy, U.S. courts can’t use Federal dollars to enforce a contempt order. So basically if an executive order is overturned, there is no penalty for the Executive branch to ignore the ruling. Congress is changing the powers of the courts and the balance of power defined in our constitution. This is very dangerous and should be debated before implemented. Republican Senator Chuck Grassely is trying to change this provision.

Third, there is a policy that removes the state's ability to protect itself or put any regulations on Artificial Intelligence. Rep. Marjorie Taylor Greene admitted she didn’t read through the full bill she voted for, and had she known about this AI provision, she would have not voted for this reconciliation bill. Let’s be honest, the Federal government doesn’t always get it right and the States need the power to adjust to their local needs. This reiterates the danger of forcing a vote and the unintended consequences of not letting member of Congress—who were elected to understand the policies they are passing—have time to thoroughly read through bills. This is critical to fix.

4 Ways To Improve Our Fiscal Health

In addition to avoiding more tax cuts, we also need to find innovative ways to cut back or generate more money for some of our country’s biggest expenses, which include social security, healthcare, and defense. I’m not advocating austerity. I’m advocating outcome-based spending.

The cost of extending the existing tax cuts will be about $4 trillion over the next 10 years. Average that out to roughly $400 billion per year. We won’t be able to cut our spending by $400 billion a year that quickly, but we can start the process to become smarter allocators of our budget. We can create a path towards a fiscally healthy country. So here are a four ideas that could help.

Update The Defense Budget To Reflect Modern Times

Right now we spend about $1 trillion in servicing our debt and $1 trillion in our defense budget. Let’s fund fixed-price, efficient tech-forward contracts, like the ones pioneered by Anduril (Palmer Luckey’s defense tech firm), instead of dragging out massive, wasteful military industrial pipelines. NASA has used fixed-price contracts with SpaceX and has shown it can create dramatic cost savings and faster outcomes.

If AI is truly a game changer as we are seeing in the Ukraine Russia war that is largely drone versus drone warfare, then our existing defense infrastructure doesn’t work.

Drones that cost roughly $300 are destroying hundreds of Russian tanks and fighter jets using cell phone technology. Even though the U.S. spends more on defense than China, Russia, Germany, India, U.K., Saudi Arabia, France, Ukraine and Japan combined, we are not set up to protect ourselves from $300 drone attacks. It shows you the battlefield has changed and our strategy and budgets need to change, too.

If we cancel the defense contracts that are continuing to purchase old technology and invest heavily in the defense innovation unit, sometimes known as Unit X, I have no doubt we can shave $200 billion to $300 billion in annual savings. This pays for half the tax cut, if Congress can stand up to the military industrial complex and change the way we operate and manage those government contracts.

Rework How Social Security Funds Are Invested

We’ve been talking about Social Security being insolvent in 10 years for…10 years. But here we are, still doing nothing except potentially cutting back these benefits for some people. To date, there has been no creativity on how to solve this issue.

The system was built when every generation was larger than the one before. That’s no longer true. Birth rates are down. Immigration is restricted. So let’s be realistic, if we aren’t increasing the population to pay for the existing people on Social Security, the only way to make it solvent is to invest the money better and let compound interest offset the demographic changes.

Right now social security dollars are invested in buying U.S. treasury bonds, which is very safe but doesn’t return much interest. The return on investment is dramatically smaller than the S&P index. If you look at individual’s 401K funds, they generally invest in index funds and have on the whole built a nice nest egg to supplement their retirement.

They say compound interest is the eighth wonder of the world, why not leverage it? Congress should pass an act to allow Social Security to invest in index funds too, and get covered downside risk reinsured against the market to offset short-term volatility. This approach would dramatically shore up the Social Security funds and, with all the funds flowing into index funds, the stock market would increase. This in turn would allow the Fed to quantitatively tighten and help our government get their balance sheet in order.

This simple shift could shore up the program, increase returns, and bring Social Security into the 21st century—without cutting benefits or raising retirement age.

Invest In What’s Next: Our Youth & AI

The whole budget process is based on the premise that the U.S. economic engine will continue to grow. For that to happen in our changing world, we must invest in our people to keep this premise true.

The U.S. started the Industrial Revolution and the Internet. AI is changing the economy at warp speed, much faster than the Internet revolutionized business.

The U.S. culture is to see a problem and, rather than complain about it, we individually take it on and solve it. That is the root of our economic engine. So if we want to increase our earning capacity and remain the economic power of the world, we must best position the future of our youth and our country. We should heavily invest in making our youth native AI users from early childhood, and for our existing workforce implement a national AI upskilling strategy. Doing so will help us to continue to lead globally.

The best thing about the U.S. experiment is that we invest in our people, and let them surprise us with innovation that leads the world into the future. We have never lost when we bet on our future generations.

Rather Than Cut Healthcare Services, Spend More Efficiently

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Healthcare is one of the largest line items in our budget, and one of the fastest growing costs outside of our debt payments. Healthcare is a complicated system that relies on polices based on both Federal and State laws. This means we must have system-level thinking in place when trying to solve the cost issues.

In 2023, the United States spent $4.9 trillion on healthcare, or $14,570 per person—that’s 17.6% of the nation's GDP. A significant portion of this spending was attributed to private health insurance ($1.464 trillion), Medicare ($1.029 billion), and Medicaid ($871.7 billion).

The truth is we have not properly negotiated costs as the largest customer in the world with healthcare providers, pharmaceutical companies, and medical device companies. It’s time we do. I imagine we should be able to cut costs on this process alone by 20% each year.

Even if the Federal government cuts healthcare coverage for people, many states have provisions where they will not reject uncovered people who show up at the hospital. So getting a flu shot, which normally costs $50 at a doctor’s visit or CVS, is now being done at a hospital for the cost of $5,000 to $10,000 per patient. We have to deal with the healthcare costs systemically and realize that failing to provide basic medical care to people is much less cost-effective because then we have to pay for more serious medical conditions that have developed from lack of care or cover costly ER visits.

Every year about $850 million in claims go unpaid. There is clearly an inefficiency that we are paying for healthcare services, and not getting serviced. The solution is not to reduce the number of people on healthcare, but to utilize it more efficiently such as by leveraging AI to audit and make sure there is less waste and fraud.

We should leverage AI companies like Naya to simplify our healthcare plans and come up with low-cost, cost-effective solutions to reduce our Medicare costs. And new market entries like Cost Plus Drugs by Mark Cuban to get prescription drug prices down.

There are too many middle-men and layers of inefficiencies in the healthcare process today. We also don’t ask pricing when going to the doctor’s office. It’s the only place where we don’t comparison shop on price and service. If we can utilize tech to help, we may be able to reduce costs and increase coverage rather than try and cut Medicaid benefits or make it more difficult to use. That doesn’t service anyone well.

For example, in March of this year my 91-year-old mother in law got a notice from Medicaid in the mail. She used to have virtual doctor visits because it is hard for her to leave the house at this age. But now, they’ve been cut and as of April telehealth isn’t an option —and she can’t drive. This means many older Americans won’t be able to get the medical care they need. Just plain cruel and the wrong approach to save costs.

Having read all of this, I am sure you are asking: Why are we cutting telehealth while overpaying for outdated defense contracts?

Let’s shift some of our existing spending instead and reinvest it in areas with exponential returns, such as AI or modernized healthcare. We can spend smarter, not necessarily more.

Congress Needs To Act Like Leaders, Not Political Lobbyist Mercenaries

There is simplicity in complexity if we allow ourselves to block out the noise and focus on solutions. So let’s find the simplicity. Hopefully, these ideas made sense on strategies that could help us solve our fiscal issues.

If we really want to make the bill big and beautiful, we should add some of the solutions stated here, and only include policies that pertain to the budget rather than sneaking in underhanded revisions.

The point is that we should pay down our debt and invest in American competitiveness rather than funding short-term tax cuts. If we do cut taxes, then we have to make up that revenue, which is possible. For example if you took the $160 billion amount that DOGE supposedly saved and cut another $200 billion from the defense budget and $200 billion more from discretionary funds such as inefficient healthcare spending, that’s $560 billion over the course of the year, which adds up to a lot of extra money over three to five years. This would get our debt down and allow us to reduce interest rates, because borrowers would trust us more if we demonstrated fiscal responsibility.

If this “Big Beautiful Bill” isn’t seen as fiscally responsible, the global market won’t buy our debt at low interest. That means we’ll have to pay more just to borrow, making everything we want to fund more expensive.

And make no mistake: global trust in the dollar is not guaranteed. It’s earned through smart leadership and long-term planning. Our elected officials need to flip the script: Country first. Constituents second. Themselves third.

That’s leadership. That’s patriotism. That’s common sense.