The Empty Toolbox

In July, after the One Big Beautiful Bill Act became law, Maya MacGuineas, president of the nonpartisan Committee for a Responsible Federal Budget, put out a statement that read, in part, "it's still hard to believe that policymakers just added $4 trillion to the debt." Eight months into the same fiscal year, the same government asked for a defense budget 42 percent bigger than last year's, while immigration enforcement funding climbed from $8.7 billion to roughly $27.7 billion a year, putting a single federal law enforcement agency ahead of the annual military budgets of most of the world's countries.

None of that came with a tax increase attached. All of it came from the same Congress, in the same year, that cut revenue by roughly $4.5 trillion.

The bill did not choose between tax cuts and spending increases. It chose both, and sent the difference to whoever holds Treasury bonds in 2035.

That is the actual answer to why there is so little room left to respond to the bond market squeeze described in the previous piece: not because the tools do not exist, but because the tools that do exist were spent, deliberately, on the opposite problem.

The Case for It

The stated argument, and it deserves a fair hearing before the numbers show up.

The honest version of the Republican case is not stupid, and treating it as though it were makes the rest of this piece easier to dismiss. Extending the 2017 tax cuts is not, in the bill's own accounting, a new tax cut, it is preventing a tax increase on rates that have been in effect for eight years. The dynamic modeling from the Tax Foundation, a group with real analytical chops even if its politics lean industry-friendly, finds the bill increases long-run GDP by 0.7 percent, and growth is real revenue too, eventually. The defense increase has a specific, nameable rationale: a missile defense system, a stockpile of munitions drawn down by two years of arming Ukraine, and a Pentagon that has spent years warning about a faster Chinese buildup. The immigration enforcement spending followed an election in which border enforcement was, whatever else it was, a mandate the winning side can point to.

Each of those arguments is coherent on its own terms. None of them, together, explains why the bill that funded all three of them also cut revenue at the same time, in the same document, with the CBO already telling them what it would do to the deficit before they voted.

What the Ledger Actually Says

Not a talking point. The Congressional Budget Office's own scorekeeping.

Here is the accounting, without spin, because the spin is the point. The enacted law reduces federal revenue by an estimated $4.5 trillion over ten years, mostly by making the 2017 cuts permanent and adding new ones on tips and overtime. It adds $325 billion in new spending, mostly on the military and immigration enforcement, the same two line items from the cold open. It cuts $1.4 trillion elsewhere, mostly from Medicaid, food assistance, and federal student loans, which is to say, mostly from people who were not going to notice a tax cut either way. Net it out and the primary deficit rises by $3.4 trillion through 2034, which becomes roughly $4.1 trillion once financing costs are added, and closer to $4.7 trillion once CBO's dynamic modeling accounts for the fact that more borrowing pushes up the interest rate the government itself has to pay.

That last part is not a side effect. CBO's director said so directly: the deficit increase itself would put upward pressure on inflation and interest rates, raising the government's own borrowing costs and adding further to the deficit. That is the same mechanism the previous piece walked through from the bond market's side. This is where it comes from. The Treasury is not fighting an abstract force called the bond vigilantes. It is fighting the arithmetic consequence of a bill its own party wrote eight months earlier.

The accounting trick worth naming specifically: Republicans scored the bill against a "current policy" baseline, which assumes the 2017 tax cuts were already permanent, so extending them registers as costing nothing. CBO's standard scorekeeping uses "current law," which assumes they expire on schedule, which is what the law on the books actually says. The gap between those two accounting choices is most of the argument over whether this bill cost $2.4 trillion or $4 trillion or $5 trillion depending which press release you read. Both numbers describe the same law. One of them was chosen because it produced a smaller headline.

A Party That Used to Do This Differently

Reagan raised taxes. Multiple times. This is not a hypothetical alternative history.

The frustrating part of writing this in 2026 is that the modern Republican position is not even historically Republican. Reagan cut taxes hard in 1981 and then, once the deficit he created got large enough to alarm his own Treasury, reversed himself repeatedly. The Tax Equity and Fiscal Responsibility Act of 1982 was, at the time, the largest peacetime tax increase in American history, and he raised payroll taxes again in 1983 to shore up Social Security. National debt still roughly tripled on his watch, because defense spending outran even those tax increases, but the instinct to correct course when the math got ugly was still there. Bush the elder broke his own "read my lips" pledge in 1990 for the same reason, and it cost him the nomination fight in 1992.

The closest the federal government has come to fiscal discipline in the last fifty years came from neither party governing alone. Clinton, working against a Gingrich-led Congress that imposed real spending caps, produced the only sustained budget surpluses since the 1960s. That is not a case for either party's virtue. It is a case that divided government, forcing actual negotiation, has done more for the deficit than either party's unified rule has managed since. Bush the younger cut taxes twice, fought two wars without paying for either, added an unfunded prescription drug benefit, and turned a surplus into a doubling of the debt. Trump's first term added just under $2 trillion through the 2017 cuts alone, in an economy that was not in recession and did not need the stimulus.

None of which lets the other party off the hook, and a piece that pretended otherwise would not be worth your time. Obama and Biden both ran large deficits too, some of it justified by a financial crisis and a pandemic that were not optional, some of it not. The honest claim is narrower than "Republicans bad, Democrats good," and it is more damning for being narrower: the two largest unpaid-for reconciliation bills of the last twenty-five years, in 2017 and again this year, both happened under unified Republican government (and both with Trump in the Oval Office), financed entirely by revenue cuts with no serious offset, at moments when the deficit was already the thing everyone claimed to be worried about. The brand promises restraint. The unified-government record, twice now, has produced the opposite.

The Honest Complication

The thing that makes this worse than a story about one bad bill.

Here is the part that should not get buried under the OBBBA numbers, because it is the more structural problem and it will still be true after this particular bill is forgotten. Discretionary fights over defense and ICE funding are real, and they photograph well, but they are not what actually drives the long-run debt trajectory. Social Security, Medicare, Medicaid, and interest on money already borrowed are the structural driver, and every dollar of that runs on autopilot, protected by law, untouched by annual appropriations fights. Interest alone now exceeds a trillion dollars a year, nearly tripled since fiscal year 2020, and it is the fastest-growing line in the entire budget precisely because nobody voted for it, it just compounds.

Neither party has been willing to touch that. Not this bill, not the last one, not under Obama, not under Biden. Every fight over the discretionary ten or fifteen percent of the budget, the part Congress actually votes on every year, is a fight over deck chairs relative to the mandatory eighty-five percent that nobody with a future in either party will propose reforming out loud. That does not excuse cutting revenue by $4.5 trillion while the mandatory side is already unaddressed. It explains why doing so is even more reckless than the headline number suggests: it is not spending restraint deferred to another day, it is spending restraint deferred on top of a structural problem nobody in either party has agreed to touch at all.

There is a version of this piece that ends with a list of fixes. Raise the top marginal rate. Touch the entitlement formulas. Pick a baseline and stick with it. All of those are real, and none of them are coming, and a piece that pretended otherwise would be lying to you about the actual state of American fiscal politics in 2026. The bond market described in the previous piece is not pricing in a temporary panic. It is pricing in a government that had a genuine chance, this year, to shore up its own credibility and chose, instead, to spend it. Why the popular, cheap fixes that do exist, the ones a supermajority of the country actually supports, keep dying in committee anyway, is a different and uglier story.

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