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The massive package of House Republicans passed in May is expected to increase U.S. debt by trillions.
The Responsible Federal Budget Committee estimates that the bill will add about $3.1 trillion to national debt with interest over a decade, adding to a total of $53 trillion. Penn Wharton’s budget model estimates a higher tally of $3.8 trillion, including profits and economic impacts.
Kentucky Rep. Thomas Massey, one of two Republicans who voted against the House action, called it a “debt bomb inscribed” and said it would “have a dramatic increase in the deficit in the short term.”
“Congress is funny mathematics – if you want fantasy mathematics, if you want it,” Massy said on the House floor on May 22.
A small number of Republican senators have also expressed concern about the possibility of adding bills to the US debt burden and other aspects of the law.
“Mathematics doesn’t really suit me,” R-Kentucky Sen. Rand Paul told CBS Sunday.
This is because the law represents the second largest spending behind Social Security, where interest payments on US debt outweigh national spending on defense. Federal debt as a percentage of gross domestic product, a measure of US economic output, is already at an all-time high.
The concept of rising national debt may seem unimportant to the average person, but economists say it can have a major impact on family finances.
“I don’t think most consumers have any thoughts about it,” said Tim Kinlan, senior economist at Wells Fargo Economics. “They think, ‘It really doesn’t affect me.’ But I think the truth is definitely the case. ”
Consumer loans are “more” more expensive
The US debt burden could cause consumers to “pay more” to fund homes, cars and other general purchases, according to Mark Zandy, Moody’s chief economist.
“It’s an important link to us as consumers, businessmen and investors. The outlook is that this increase in borrowing, debt load averages higher interest rates,” he said.
The House law cuts taxes by households by around $4 trillion, most of which arises for the wealthy. The bill offsets some of these tax cuts by significantly reducing spending on safety net programs such as Medicaid and food aid for low-income earners.
Some Republicans and White House officials have argued that President Trump’s tariff policies offset a large portion of the tax cuts.
But economists say tariffs are unreliable revenue generators – because future presidents can reverse them and the courts can remove them from the book.
How increased debt will affect Treasury revenues?
House Speaker Mike Johnson (R-Louisiana) speaks to the media after slightly passing the agenda for President Donald Trump, the transferring bill at the U.S. Capitol on May 22, 2025.
Kevin Dietsch | Getty Images News | Getty Images
Ultimately, high consumer interest rates are linked to US debt load and perceptions of the US Treasury’s impact on bonds.
Common forms of consumer borrowing, such as mortgages and car loans, are the yields of the US Treasury, particularly 10-year-old Ministry of Finance.
The yield (i.e. interest rate) on long-term financial obligations is primarily determined by market forces. They rise based on supply and demand from investors.
The United States relies on financial obligations to fund its operations. The government must borrow because it does not require sufficient annual tax revenue to pay the bills known as the annual “Finance Deficit.” It will benefit financial investors.
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If a Republican bill called “One Big Beautiful Bill Act” would increase U.S. debt and deficit by trillions, it could surprise investors and the Treasury Department’s demand, economists said.
Investors are likely to demand higher interest rates to compensate for the additional risk that the U.S. government will not be able to pay its debt obligations in a timely manner in the future, the economist said.
“We’re looking forward to seeing you in a new way,” said Philip Chao, Chief Investment Officer and Certified Financial Planner for Experienced Property, based in Cabin John, Maryland.
Moody’s cut the US sovereign credit rating in May, citing an increase in federal deficit burden, indicating greater credit risk for investors. Bonds have skyrocketed in the news.
How debt affects consumer borrowing
Zandi cited general rules of thumb to explain what a higher debt burden means for consumers. Financial yields for 10 years rise by approximately 0.02 percentage points for every 1 percentage increase in the debt-GDP ratio.
For example, if the ratio rises from 100% (now location) to 130%, Zandi said the 10-year financial yield would increase by around 0.6 percentage points. It boosts yields to over 5% Compared to the current level Of about 4.5%, he said.
“That’s a big deal,” Zandi said.
The fixed 30-year mortgage will rise from almost 7% to about 7.6%, with everything else increasing equally. He said it is likely that homeownership will be further “out of reach,” especially for many potential first-time buyers.
Kent Smetters, economist and faculty director for Penn Wharton’s budget model, said:
Bond investors are also hit
It’s not just consumer borrowers. Certain investors will also lose, experts said.
As the Treasury rises, current bondholder prices will fall. Their current Treasury debt is less valuable as they weigh their investment portfolios.
“If interest rates on the market rose, your bonds have depreciated,” Chao said. “Your net worth has decreased.”
The Long-Term Treasury market has become more volatile amidst investor uncertainty, leading some experts to recommend short-term debt.
Conversely, people who buy new bonds may be happy because they can earn a higher rate, he said.
“Pouring gasoline into the fire”
According to Quinlan of Wells Fargo, consumer funding costs have already doubled in recent years.
The average 10-year financial yield was around 2.1% from 2012 to 2022. It was about 4.1% from 2023 to the present, he said.
Of course, the US debt burden is just one of many things that affect Treasury investors and yields, Quinlan said. For example, Treasury investors questioned the safe state of US assets in April, sending sharply high yields as Trump rushed for an exit after he announced a country-specific tariff splate.
“However, over the past few years, we haven’t gone out to too many limbs to suggest that financial markets are increasingly concerned about debt levels,” Quinlan said.
Without action, the US debt burden would still rise, the economist said. Even if Republicans do not pass the law, the debt-GDP ratio would swell to 138%, Smetters said.
But Chao said the House law is to “pour petrol into the fire.”
“That adds to the problems we already have,” Chao said. “And this is why the bond market is not happy with it,” he added.
