Big Deficits, Big Tax Cuts—But At What Cost? How The FY2025 Budget Impacts Everyday Americans

Congress is in a standoff over the federal budget, and the stakes are high. House and Senate Republicans have each passed different budget measures, both aiming to advance parts of President Donald Trump's economic agenda. But neither chamber is willing to budge, setting the stage for a drawn-out battle over government spending, tax cuts, and the deficit.

Before they can move forward with major legislation—potentially bypassing a Senate filibuster and Democratic opposition—both chambers must agree on a single budget resolution. And that's proving to be a tough challenge.

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The Budget Battle: Why It's Stuck

House Speaker Mike Johnson (R-LA) managed to push his chamber's version through with a razor-thin 217-215 vote. But Senate Majority Leader John Thune (R-SD) has already made it clear: the House's budget, in its current form, won't fly in the Senate, according to NBC News.

At the heart of the debate? A mix of major tax cuts, deep spending reductions, and a ballooning federal deficit. Johnson has defended the House version, calling it a difficult but necessary compromise for his slim Republican majority. Meanwhile, Democrats argue that the plan favors the wealthy by slashing social programs to fund tax breaks.

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Breaking Down the Numbers: Deficits, Cuts, and Tax Changes

So, what exactly is in the budget? According to the Penn Wharton Budget Model:

• $1.7 trillion in spending cuts over the next decade.
• $4.5 trillion in tax cuts, leading to a $2.8 trillion increase in the deficit through 2034.
• If the Trump-era tax cuts are made permanent, the deficit would rise even further—by $6 trillion over the next 10 years.

To comply with Senate rules, most of the tax cuts would have to expire by the end of 2033. Even with those expirations, the deficit is projected to grow by $4.9 trillion, even after accounting for modest economic growth. And if tax cuts are extended indefinitely, some analysts predict the economy could actually shrink slightly by the end of the decade.

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Who Benefits Most from the Tax Cuts?

A big question in this debate is who gains the most from these tax breaks. Based on the proposed plan:

• The bottom 80% of earners would get about 29% of the tax cut benefits in 2026.
• The top 10% of earners—who already pay around 70% of all federal taxes—would receive about 56% of the benefits.

This means that while high earners stand to gain significantly, lower-income Americans may not see the same level of financial relief. And if mandatory spending cuts hit programs like Medicaid and food assistance like SNAP, some households could actually end up worse off despite getting a tax cut.

What's Getting Cut?

To help offset the tax cuts, the House budget proposes deep spending reductions across several key areas:

• $880 billion by the Energy and Commerce Committee, which oversees Medicaid and federal health programs.
• $330 billion by the Education and Workforce Committee, affecting school funding and child nutrition programs.
• $230 billion by the Agriculture Committee, potentially impacting SNAP and farm subsidies.

At the same time, the plan increases spending by up to $300 billion in areas like defense, border security, and law enforcement, with most of this new funding concentrated in the first two years.

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What It Means for Everyday Americans

For the average American, the impact of this budget will depend on two key factors:

1. Will tax cuts provide meaningful financial relief? Lower taxes might put more money in your paycheck, but for lower-income households, reductions in government assistance could cancel out those gains.
2. What happens to key federal programs? With deficits expected to soar, cuts to Medicare, Medicaid, and Social Security could be on the horizon in future budgets.

While the tax cuts in this budget may offer some short-term relief, the long-term costs could reshape federal spending for years to come. And as the battle plays out in Congress, Americans will be watching closely to see whether the final deal works for them—or just for the wealthy.

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