On the 3rd (local time), the ‘One Big Beautiful Bill Act (OBBBA)’ containing the core national policy tasks of the second term of the Trump administration passed the House of Representatives. Now, only the signature of President Donald Trump remains.
The bill broadly addresses taxes and welfare. Once President Trump signs it, it is expected that nearly all Americans, including the elderly, students, and low-income individuals, will experience significant and minor changes in their lives.
Some experts stated that this is not merely an issue limited to the United States. If the world's largest economy initiates a major shift in fiscal and industrial policy, it is highly likely to have considerable repercussions for the global economy and Korea.
This law has announced massive ripple effects across American society, as indicated by its unique name.
The core of the law is a ‘big deal’ that exchanges tax cuts for reductions in welfare. It makes the tax cuts implemented during the first term of the Trump administration permanent. The funding comes from the social safety net budget.
Following the passage of the bill, individual taxpayers are set to enjoy substantial tax relief. According to CNBC, a typical four-person family can expect an additional tax reduction of $1,300 (around 1.78 million won) annually.
The Republican Party argues that this tax cut will stimulate corporate investments and drive economic growth.
The issue lies with the treasury. As tax revenues decrease, funding must be cut from other areas.
As a solution, the law has chosen to reduce welfare benefits, which are the last bastion for low-income individuals and the working class. This has led to persistent criticism that the OBBBA represents ‘tax cuts for the rich and tax increases for the working class.’
According to CNN, the U.S. public health insurance program Medicaid and the Supplemental Nutrition Assistance Program (SNAP) for low-income individuals have been the hardest hit.
Medicaid provides medical services to low-income individuals, the elderly, and the disabled. SNAP is the program that secures the dietary needs of low-income households, known as ‘food stamps.’ This bill stipulates that budgets in this area will be cut by hundreds of billions of dollars over the next decade.
CNN evaluated this as an attempt to fundamentally reshape the priorities of the federal government.
The shield protecting consumers' wallets has also become thinner. U.S. financial authorities established the Consumer Financial Protection Bureau (CFPB) after the 2008 global financial crisis to prevent indiscriminate sales of financial products and protect consumers.
This bill will cut the CFPB's budget by nearly half. The CFPB has played a role in curbing financial firms' incorrect practices, such as hidden fees and illegal collections. Budget cuts imply a weakening of oversight functions. Consumers are increasingly exposed to unfair financial contracts or fraud without their knowledge. There is a prevailing analysis that this signals a relaxation of financial regulations.
Environmental energy policies have also regressed. Federal tax credits for solar and wind power projects promoted by the Biden administration will be phased out. This is expected to bolster the fossil fuel industry.
AP predicts that “the cost of installing residential solar panels will soar, significantly slowing the pace of the transition to clean energy.”
Some experts anticipate that “energy prices may stabilize in the short term, but long-term failures to address climate change and fluctuations in fossil fuel prices will drive up energy expenses.”
The Washington Post evaluated that the structure of this bill resembles the economic policies of the Ronald Reagan administration in the 1980s, known as ‘Reaganomics.’
Ronald Reagan, the 40th President of the United States in the 1980s, implemented large-scale tax cuts and market liberalization measures. The Plaza Accord in 1985 led to a rise in the value of the yen, reviving the stagnated U.S. export sector.
While Reaganomics did lead to economic booms, it also left a deep shadow with massive budget deficits and deepening income inequality.
Economic analysis firm Moody's Analytics projected that “if the tax cut proposal is fully implemented, the budget deficit will increase by $3 trillion (about 4,100 trillion won) over the next decade.” This implies that the national debt of the U.S. will snowball.
Changes in U.S. policies immediately impact the global economy. The U.S. is the largest consumer market in the world. As soon as low-income individuals in the U.S. find their wallets lighter, their purchasing power will decline. Key Korean exports such as automobiles and home appliances may suffer a direct hit in exports to the U.S.
The retreat of green policies is also an act that runs counter to the global trend of carbon neutrality. This could create a leadership vacuum in the international community's response to climate change. It is also a factor that increases uncertainty for domestic corporations that are positioning green technologies as future commodities.
Additionally, if the issuance of U.S. government bonds is increased to fund these measures, the strengthening of the dollar will intensify and global financial market volatility is expected to increase.
The Brookings Institution, a global think tank, pointed out that “this bill could undermine international confidence in the U.S. fiscal health.”