The budget law of US President Donald Trump received a minimal majority in the House of Representatives on Thursday. The plans are heavily criticized because low incomes will suffer and the already high national debt will increase further.
With 215 votes in favor and 214 votes against, the House gave the green light. The US Senate must also approve the plans. Trump himself calls the budget proposal a “big, beautiful bill”. According to him, it is the most important legislation in American history.
The law includes extra investments in defense, border security, and the deportation of foreigners. In addition, tips are now tax-free and there is a compensation for those who buy a car that is made in the United States.
There are also favorable regulations for families with children. Furthermore, tax cuts are extended for companies and individuals, which Trump introduced in his first term as president.
These are offset by cuts. For example, there will be stricter requirements for access to Medicaid, a healthcare program for poorer Americans, and that care will become more expensive for some. Furthermore, the proposal cuts the support that lower incomes receive when paying for groceries. Green investments are also becoming less attractive.
National Debt Increases by Trillions
The plans are receiving a lot of criticism. For example, all Democratic members of the House were against it. Two members of the Republican party, to which Trump belongs, also did not give their approval.
Calculations by the independent Congressional Budget Office (CBO) show that the poorest 10 percent will suffer and the richest 10 percent will benefit. An independent think tank, the Committee for a Responsible Federal Budget, also concluded that wealthy Americans benefit from the law.
Another point of criticism is that the plans do nothing about the towering national debt of the US. In fact, according to calculations by the CBO, that debt will increase by thousands of billions of dollars in the coming years.
That is why the budget law includes an increase in the debt ceiling. The US has a legal debt limit. If this is exceeded, and that threatens to happen this summer, the American government will have to cut spending significantly. That is why Trump was very keen to raise this ceiling.
Currently, the debt of the American state amounts to 36.2 trillion dollars (32 trillion euros). This means that the debt is more than the total size of the American economy. For comparison: in the Netherlands, the national debt is less than half of the economy.
Eighth of Budget Goes to Interest
The American debt burden is now so large that the government spends an eighth of its expenditure on paying interest. That could increase to a sixth in the coming years. That does not include repaying the debts.
The high debt in combination with Trump’s plans led credit rating agency Moody’s to lower the credit rating of the US last week. That caused the interest rate on American government bonds to rise further, forcing the American government to pay even more to borrow money.
The Senate must therefore approve Trump’s plans. The president’s party does have a small majority there, but there is grumbling among Republicans about the increase in national debt. The expectation is therefore that the Senate will not approve the plans without a struggle.