Core Viewpoint - The "one big beautiful bill" passed in the House on May 22, with a potential Senate vote in June, aims to significantly increase the U.S. fiscal deficit over the next decade, addressing structural issues like income inequality and re-industrialization, while also facing global geopolitical competition [1] Group 1: Legislative Impact - The bill includes tax cuts, spending reductions, an increase in the debt ceiling, and policies related to defense and immigration [1] - A combined version of the bill is expected to be completed by July 4, aligning with Trump's expectations [1] Group 2: Fiscal Implications - The legislation is likely to lead to a substantial increase in the U.S. fiscal deficit over the next ten years [1] - The U.S. may not have the objective conditions to effectively reduce the deficit in the medium to long term due to structural issues [1] Group 3: Market Reactions - Following the increase in the debt ceiling, a wave of U.S. debt issuance is anticipated between July and September [1] - This situation may compel the U.S. to accelerate monetary and financial policy adjustments, such as initiating quantitative easing (QE) and expediting SLR exemptions to provide liquidity to the U.S. debt market [1]

Core Viewpoint - The "One Big Beautiful Bill" passed in the House is expected to significantly increase the U.S. fiscal deficit over the next decade, confirming previous analyses that the U.S. is unlikely to effectively reduce its deficit due to structural issues like income inequality and re-industrialization [1][3][6]. Summary by Sections Overview of the "One Big Beautiful Bill" - The bill includes tax cuts, spending reductions, an increase in the debt ceiling, and policies on defense and immigration [1][3]. Key Components of the Bill - **Tax Cuts**: The bill aims to permanently extend and expand the Tax Cuts and Jobs Act (TCJA), with an estimated static reduction in fiscal revenue of approximately $4.3 trillion over the next decade [3][5]. - **Spending Cuts**: It proposes significant cuts to social welfare programs, including about $1 trillion in Medicaid cuts and $230 billion in cuts to the Supplemental Nutrition Assistance Program (SNAP) [5][6]. - **Defense and Immigration Policies**: Increased spending on defense and border security is included, supporting Trump's initiatives [6]. - **Debt Ceiling Increase**: The bill proposes raising the debt ceiling by $4 trillion [6]. Fiscal Impact - The bill is projected to increase the static fiscal deficit by approximately $2.8 trillion from FY2025 to FY2034, with dynamic adjustments raising this figure to about $3.2 trillion [6][9]. - The Congressional Budget Office (CBO) anticipates a deficit increase of $3.7 trillion over the same period [6]. Short-term and Long-term Implications - In the short term, the bill may lead to a slight decrease in the deficit for FY2025, but overall, the deficit is expected to remain high, around $1.9 trillion, with a deficit rate of 6.4% [9]. - The long-term outlook suggests that the U.S. will continue to face challenges in reducing the deficit due to ongoing structural issues and the need for fiscal stimulus to address income inequality and infrastructure deficits [11][15]. Market and Policy Responses - The anticipated increase in debt issuance may lead to liquidity pressures in the market, potentially prompting the Federal Reserve to consider measures such as restarting quantitative easing (QE) [25][26]. - The bill's passage could also accelerate financial reforms aimed at stabilizing the market and increasing liquidity in the U.S. Treasury market [26].