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THE BILL HAS ARRIVED AND THE FED WATCHES (FOR NOW)
For decades, U.S. fiscal policy has operated as if federal debt were a theoretical, distant, and manageable issue.
But today, with debt surpassing $36 trillion and an annual deficit of 6.4% of GDP in 2024, reality is knocking at the door—loudly.
Some believe the American fiscal system has reached a crossroads.
And the One Big Beautiful Bill may represent a new fiscal shock with major consequences for the future of the United States.
Congress has just passed the so-called One Big Beautiful Bill, strongly backed by President Trump.
The bill:
- Extends the 2017 tax cuts, set to expire at the end of this year
- Increases spending on defense and border security
- Cuts funding for Medicaid, education, and environmental programs
According to the Congressional Budget Office, the law will increase federal debt by at least $3.4 trillion by 2034, pushing the debt-to-GDP ratio to 125%.
Moody’s Strips the U.S. of Its Triple-A Rating: A Warning Sign
For the first time in history, all three major credit rating agencies have downgraded U.S. sovereign debt.
Moody’s lowered its rating from Aaa to Aa1, citing:
- Structural increase in debt
- Political inability to address the deficit
- Rising refinancing costs
Fed Chair Jerome Powell has maintained a cautious approach.
Despite pressure from the White House to cut rates, the Fed has decided to keep its benchmark rate between 4.25% and 4.5%, waiting to assess the impact of new fiscal and trade measures.
Powell stated: “As long as the economy remains strong, the most prudent course is to wait and observe.”
According to BlackRock, debt is now “the greatest risk to the United States’ special status in global financial markets.”
The Hoover Institution found that 75% of Americans are concerned about the debt, but only a minority understands the real impact of measures like tax cuts.
Both parties appear reluctant to pursue structural solutions.
As economist Rebecca Patterson wrote in The New York Times, lawmakers often resort to “accounting tricks,” such as limiting tax cuts to four years to reduce their apparent impact on the deficit.
Meanwhile, debt servicing costs have surpassed $1 trillion per year, more than the country’s defense budget.
Market confidence—which for decades allowed the U.S. to spend with seemingly no limits—is beginning to erode.
The Fed is watching, but it won’t be able to remain neutral for long.
And while politics remains focused on the short term, the bill—steep as it is—may ultimately fall to future generations.
