What the “Big Beautiful Bill” Means for U.S. Debt — and Your Wallet

1. Why This Matters to You

As of July 3, 2025, Congress is on the verge of passing the “Big Beautiful Bill” — legislation that permanently extends the 2017 tax cuts. Supporters say it will boost growth and support working families. Critics warn it will massively increase the national debt.

But beyond politics, there’s a simple truth: if the government takes in less money from taxes, it has to borrow more to pay its bills. That borrowing can ripple into your financial life — through higher mortgage rates, rising credit card interest, and inflation.

This blog breaks down how the government raises money, what happens when it borrows more, and why that directly affects things like interest rates, inflation, and the cost of everyday loans.

2. How the U.S. Government Actually Pays Its Bills

Like any household or business, the U.S. government has income and expenses. In fiscal year 2024, total revenue was about $4.9 trillion, while spending reached $6.4 trillion — creating a deficit of roughly $1.5 trillion.

Where the Money Comes From (Revenue)

• Individual income taxes: ~50% of all federal revenue
• Payroll taxes: ~30% (funds Social Security and Medicare)
• Corporate income taxes: ~7%
• Other sources: ~13% (excise taxes, tariffs, estate taxes, Federal Reserve earnings)

Where the Money Goes (Spending)

Federal spending falls into two broad categories:

• Mandatory spending (~63%): Programs required by law, including:
  • Social Security
  • Medicare and Medicaid
  • Federal retirement and disability programs
  • Interest on the national debt
• Discretionary spending (~27%): Approved annually by Congress, including:
  • Defense and military
  • Education, transportation, housing, scientific research, foreign aid
• Other obligations (~10%): Emergency funding, stimulus, disaster relief, etc.

To cover the annual deficit, the government borrows — by selling U.S. Treasury bonds to investors. These bonds must be repaid over time with interest, adding to the national debt.

3. What Happens When Tax Revenue Falls

The Big Beautiful Bill would make the 2017 tax cuts permanent. These were originally set to expire in 2025. Extending them is projected to reduce government revenue by $3.5 to $4.5 trillion over the next decade.

The 2017 Tax Cuts and Jobs Act (TCJA) lowered taxes for both individuals and corporations. It reduced most income tax rates, doubled the standard deduction, increased the child tax credit, and capped the state and local tax (SALT) deduction at $10,000. It also permanently cut the corporate tax rate from 35% to 21%.

These individual tax cuts were set to expire in 2025. The Big Beautiful Bill makes them permanent — and goes further. It raises the SALT deduction cap to $40,000 (with income limits and a 5-year sunset in the Senate version), adds new deductions for things like tips and overtime, and introduces spending cuts to programs like Medicaid and SNAP.

In the end, this means the U.S. will need to borrow more money — unless spending is dramatically cut.

4. How the U.S. Borrows Money: Treasury Bonds

When the U.S. needs cash, the Treasury issues bonds — IOUs that pay interest over time. Right now a 10-year Treasury bond gives 4.3% interest (you can buy them directly through the government or a broker like Fidelity). Buyers include:

• Large banks (like Chase and Citi)
• Pension funds (like the California State Teacher's Retirement System has over $300 billion it manages and they often buy bonds)
• Foreign governments (like Japan and China who are among the largest foreign holders of U.S. Treasury bonds)
• The Federal Reserve (who can create digital money to buy U.S. Treasury Bonds, collect interest on those bonds from the U.S. Treasury, and then return most of that interest back to the U.S. Treasury after cover its costs)

In return for their money today, investors get regular interest payments (every 6 months) and the promise to be repaid later. U.S. Treasury bonds are considered one of the safest investments in the world because they’re backed by the full faith and credit of the U.S. government. For reference the U.S pays investors about $475 billion every 6 months, so nearly one trillion dollars a year in interest payments, like you would pay credit card interest (though its much higher at 20% or more). 

5. What If No One Wants the Bonds?

If investors grow concerned about the U.S. economy or long-term debt, they may not want to buy Treasury bonds at current rates. To attract them, the government must offer higher yields — meaning it pays more interest.

This has a direct impact on you:

When the yield on a 10-year Treasury bond goes up, banks take notice. They ask themselves:

“Why would I offer a mortgage at 4% when I can earn 5.5% from a safe government bond?”

➡️ So they raise their own loan rates — on mortgages, car loans, business loans, and credit cards.

This is one of the main ways that federal borrowing increases the cost of borrowing for everyday Americans.

6. How the Federal Reserve Gets Involved

If demand for bonds is weak and yields rise too much, the Federal Reserve might step in and start buying those bonds itself.

The Fed does this by creating money digitally — essentially “printing” new money to inject into the economy. This process is called quantitative easing.

This isn't something the Fed does all the time — it's a tool they use when they need to keep borrowing costs down, especially during times of market stress or recession.

It helps lower long-term interest rates and support economic growth. But if overused, it can also contribute to inflation — meaning prices rise and the dollar buys less.

7. The Current Numbers: Debt, Interest, and Future Risks

• Total national debt: ~$36 trillion (including intragovernmental debt)
• Interest on the debt (2025): ~$950 billion/year
• Projected interest by 2026: Over $1 trillion/year
• Interest is now one of the top five federal expenses
• As interest grows, there’s less money for new spending — like infrastructure or education

These interest payments now rival or exceed the budgets for Medicare, defense, or education. As the debt grows and rates rise, the interest burden worsens — a compounding challenge for the federal budget.

8. What This Means for You

You may never buy a Treasury bond, but you’ll feel the effects if:

• Your mortgage rate jumps by 2%
• Your car loan payment increases by $50/month
• Your credit card APR climbs from 18% to 24%

That’s how federal borrowing filters into daily life. When bond yields go up, borrowing gets more expensive for everyone.

Quick Recap: What You Should Know

• The Big Beautiful Bill makes 2017 tax cuts permanent, reducing federal revenue.
• Less revenue means more borrowing — which happens by selling Treasury bonds.
• If bond buyers demand higher interest, the government (and everyone else) pays more to borrow.
• The Fed can step in to keep rates low, but that risks inflation.
• All of this affects your mortgage, car loan, credit card rates, and savings power.

9. Conclusion: A Big Beautiful Bill, A Bigger Debt?

The Big Beautiful Bill is more than a political statement — it’s a major shift in fiscal policy. By permanently extending the 2017 tax cuts, it reduces government income at a time when borrowing is already high and interest payments are ballooning.

The long-term effects? More borrowing, higher yields, rising loan costs, and potential inflation. These are not abstract concepts — they affect how much Americans pay to borrow, save, and invest.

You don’t need to be an economist to understand how federal borrowing affects your wallet. But being aware of how these pieces fit together can help you make smarter decisions about debt, savings, and future financial planning.