The Trump administration’s “Robin Hood in reverse” legislation has officially been enacted.
On July 4， 2025， President Trump signed the “Big and Beautiful Act” into law. This landmark legislation， spearheaded by the Trump administration in 2025， not only continues the policy direction set in 2017—characterized by tax cuts， expenditure control， and support for traditional industries—but also significantly curtails and readjusts the “Green New Deal，” social welfare programs， and government spending initiated under the Biden administration.
The core provisions of the act include a $4 trillion tax cut over the next decade， at least $1.5 trillion in spending reductions， and a one-time increase of $5 trillion to the federal debt ceiling， a magnitude far exceeding previous adjustments.
This can be characterized as an “accelerated” fiscal and tax reform building upon existing policies.
While the passage of the bill may seem like a victory， the cost is substantial—the legislative journey has starkly revealed the deep political divisions within the United States.
Frankly， this bill essentially represents a redistribution of wealth， with the ultimate outcome being that the rich get richer and the poor get poorer.
Some commentary has pointedly described the act as “sending half of America to heaven and the other half to hell.”
Ultimately， this is more than just a piece of legislation; it is a direct clash between the core constituencies and interest groups of the Republican and Democratic parties， representing a robust confrontation over America’s future economic direction and social trajectory.
This brings us to three critical questions that require in-depth exploration:
Firstly， given such profound partisan divisions and significant internal resistance， why did Trump push this bill so forcefully? What are the underlying interests and governing logic driving this decision?
Secondly， is this act—which necessitates $4 trillion in tax cuts and $1.5 trillion in spending reductions over the next decade， while simultaneously raising the debt ceiling by $5 trillion—a cure or a poison? Can it truly address America’s pressing debt challenges?
Finally， and perhaps most anxiously for global markets， how will the nation ultimately manage its national debt， which already stands at a staggering $36 trillion and continues to climb?
A Major Shift in Interests
Rewind to July 1st. Following a debate and vote that lasted a full 27 hours， the tally remained a deadlock at 50 votes to 50.
At the crucial moment， Vice President Vance cast the tie-breaking vote， allowing the bill to narrowly pass with a 51-50 margin. Two days later， the bill returned to the House of Representatives， where it successfully passed again with a slim majority of 218 to 214.
The entire process was a struggle down to the very last vote. Democratic lawmakers unanimously opposed the bill， decrying it as “taking from the poor and giving to the rich.” Even within the Republican party， consensus was not absolute， with some fiscally conservative members expressing extreme unease regarding the projected surge in national debt， and resisting until the final moments.
Why did the Trump administration， despite such significant opposition， insist on pushing this bill forward? In our view， this is not surprising， as Trump aimed to fulfill his promise to his voters: “America First.”
The Republican policy toolkit is quite clear: tax cuts for corporations and individuals， deregulation， reductions in social welfare programs， robust support for manufacturing and traditional energy sectors， and increased defense spending.
The objective of this comprehensive package is to strengthen domestic industries and the nation’s hard power.
Each provision of the bill precisely addresses the demands of Republican constituents.
For instance， the substantial reduction in clean energy subsidies from the Biden era not only provides relief to the traditional energy sector but also directly benefits energy conglomerates. According to OpenSecrets， the oil and gas industry contributed hundreds of millions of dollars in political donations to the Republican party in 2024， accounting for 80% of the industry’s total political contributions. This policy also solidifies the Republican stronghold in “red states” where fossil fuel industries support numerous families; in Wyoming， for example， fossil fuels contribute over 30% of the state’s GDP.
Furthermore， the bill appropriates hundreds of billions of dollars for defense and border security， including funding for border wall construction—a signature campaign promise of President Trump.
Conversely， Democratic policy proposals lean in a completely different direction: higher taxes on the wealthy and large corporations， expansion of social welfare programs， promotion of a green energy revolution， and an emphasis on climate governance and environmental protection.
Their core voter base consists of urban residents， highly educated middle-class individuals， young people， and minority groups. These demographics generally favor government intervention to reduce income inequality and have higher expectations for public services like healthcare， education， and housing.
Therefore， the divergence between the two parties is fundamentally a direct contest of interests between their respective constituencies and influential groups. The “Big and Beautiful Act” has brought these conflicts into sharp relief: tax cuts versus tax hikes? Support for traditional energy or promotion of green energy? Reducing welfare benefits or expanding them? Each of these represents a direct collision of the core ideologies of the two parties.
Trump’s determination to push the bill was not only about fulfilling promises but also about seizing absolute initiative in this debate over policy direction for the Republican party and his administration’s agenda.
However， the issues are equally stark—this “treat the symptom， not the disease” approach， while pleasing core supporters in the short term， fails to address America’s fundamental challenges， such as wealth inequality， fiscal deficits， and social security shortfalls. Instead， it may exacerbate these issues， particularly concerning debt.
Exchanging the Future for the Present
If the “Big and Beautiful Act” can be considered a political gamble， then fiscally， it is akin to “drinking poison to quench thirst.” Far from offering any solutions to America’s most severe debt problems， the act will significantly worsen the nation’s debt crisis.
Let’s examine the key figures. The act plans to cut taxes by approximately $4 trillion over the next decade， while reducing expenditures by only about $1.5 trillion. This creates a deficit gap of $2.5 trillion， which will necessitate the issuance of more national debt to cover.
More critically， the act contains a highly contentious provision: a one-time increase of the federal debt ceiling from approximately $36 trillion to $41 trillion， a net increase of $5 trillion. According to the non-partisan Congressional Budget Office (CBO)， this provision alone is projected to add over $3.4 trillion in new debt for the United States over the next decade.
It is important to remember that the debt ceiling was intended to be a constraint on government spending by Congress. However， over the past few decades， it has increasingly become a political bargaining chip between the two parties， used to obstruct each other and gain leverage during debt limit negotiations.
In this instance， the Trump administration employed a clever “procedural maneuver，” linking the politically charged issue of raising the debt ceiling with the appealing prospect of significant tax cuts.
This approach is essentially “exchanging the future for the present，” leaving a greater debt burden for future administrations.
Raising the debt ceiling merely permits the government to borrow more in the short term， temporarily averting the systemic risk of default. However， it does not alter the fundamental fiscal structure of the U.S. government’s inability to live within its means. On the contrary， large-scale tax cuts further reduce government revenue， exacerbating the fiscal deficit.
This leads to a series of cascading effects:
(1) The Debt Snowball Continues to Grow: The additional $2.5 trillion deficit will directly inflate the total national debt. Market consensus estimates suggest that by the end of 2025， the ratio of U.S. government debt to GDP will remain around a high of 125%;
(2) Borrowing Costs Skyrocket: To finance the massive deficit， the U.S. Treasury must issue enormous amounts of national debt in the market. An surge in bond supply， coupled with dwindling global investor demand， will inevitably depress bond prices and drive up yields. This means the government’s future interest burden will increase， creating a vicious cycle of “borrowing new debt to pay off old interest”;
(3) Erosion of Dollar Credibility: Such disregard for fiscal discipline is essentially compromising the creditworthiness of the dollar as the global reserve currency. When markets doubt the sustainability of U.S. finances， international capital may reduce its allocation to U.S. debt and dollar-denominated assets， exerting long-term pressure on the dollar’s exchange rate.
In summary， the “Big and Beautiful Act” sacrifices long-term fiscal health for short-term political gains and economic stimulus. It bequeaths a larger debt mountain to future governments and taxpayers， pushing America a dangerous step closer to a fiscal precipice.
An Unsolvable Hand?
Given that the “Big and Beautiful Act” exacerbates the debt problem， how can the seemingly intractable issue of U.S. national debt ever be resolved? This is perhaps the most critical question in the current global macroeconomic landscape.
Theoretically， addressing sovereign debt issues typically involves three avenues: fiscal tightening (increasing revenue and decreasing expenditure)， economic growth (expanding the overall economic pie)， or debt default (a direct repudiation of obligations).
However， in the current context of the United States， all three paths appear to be effectively blocked.
Firstly， fiscal tightening is a “mission impossible” from a political standpoint. Cutting social security or Medicare benefits for the elderly would be political suicide， just as substantial reductions in military spending would face considerable opposition. The “Big and Beautiful Act” itself is a political performance where “spending cuts are fake， tax cuts are real.”
Secondly， relying on economic growth to dilute debt requires an economic growth rate consistently higher than the debt growth rate. With the current U.S. economic growth rate below 2% and the debt growth rate above 2%， achieving this for a large， mature economy is nearly impossible.
Finally， outright default is an unthinkable option. It would instantly trigger a global financial crisis and destroy the dollar’s hegemony. As long as the U.S. aspires to maintain its global position， it will not actively choose this path.
When all conventional avenues are exhausted， “unconventional” methods become the only possibilities. Among these， the most closely watched and potentially realizable is “inflationary debt reduction.”
Simply put， “inflationary debt reduction” involves the government intentionally maintaining a higher inflation rate through various policies， thereby diminishing the purchasing power of currency over time. This effectively dilutes the real value of the government’s outstanding debt， often unnoticed.
For instance， if inflation is running at 5% while the coupon rate on national debt is only 4%， the government may be nominally paying interest， but the real value of its debt is shrinking by 1% annually. This is a highly covert form of “default” that gradually transfers wealth from creditors (savers， pension funds， domestic and international investors) to the debtor (the U.S. government).
Since the government is unwilling to raise taxes and reluctant to genuinely cut spending， manufacturing inflation to “dilute” debt becomes the last resort to sustain fiscal operations and economic vitality.
This places the Federal Reserve in an extraordinarily delicate and crucial position.
Trump’s inclination towards lower interest rates is no secret; he has repeatedly threatened to dismiss Fed Chairman Powell publicly and on social media， arguing that he is too slow to cut rates. Setting aside the political noise， from a fundamental economic standpoint， persistently weak macroeconomic data provides ample justification for the Federal Reserve to consider interest rate cuts in the latter half of the year.
Once interest rates are cut， the effect is twofold: it can temporarily alleviate some of the interest payment burden on national debt and simultaneously boost inflation， which may align with the objective of “inflationary debt reduction.”
In essence， interest rate cuts are the most effective tool for achieving this goal， directly easing the real burden of debt by releasing liquidity.
Naturally， “inflationary debt reduction” is also a potent， yet potentially harmful， remedy. Prolonged reliance on inflation to resolve debt issues severely undermines the long-term credibility of the dollar， exacerbates social inequality， and fosters financial risks.
Therefore， the ultimate resolution for U.S. debt is likely to be not a clear-cut solution but rather a chaotic， painful， and protracted process. The United States will likely tolerate inflation levels higher than normal for a considerable period， utilizing “financial repression” to gradually “default” on a portion of the real value of its debt.
For investors， the “Big and Beautiful Act” signals a clear asset rebalancing: by sacrificing the long-term value of U.S. debt (through supply shocks) and the dollar (through credit erosion)， it offers some support for the rise of gold (as a hedge against inflation and risk).
