An Update on CBO's Support of the Congress Throughout the Reconciliation Process

Today, the Congressional Budget Office published what is known as a dynamic estimate of the budgetary effects of H.R. 1, the One Big Beautiful Bill Act. Unlike a conventional cost estimate, the dynamic estimate reflects the budgetary effects of changes in the size of the economy and in other macroeconomic variables that would stem from enacting the legislation. As I explained back in April, House Rule XIII(8) requires us to provide dynamic estimates, to the extent practicable, for major legislation. Producing such estimates takes additional time, which is why the dynamic estimate for H.R. 1 is being released two weeks after we published the conventional cost estimate for the legislation.

The dynamic estimate for H.R. 1 builds on earlier information provided by the staff of the Joint Committee on Taxation (JCT) and CBO, namely:

In the conventional cost estimate for H.R. 1, we projected that the legislation would, on net, increase primary deficits over the 2025–2034 period by $2.4 trillion in relation to CBO's January 2025 baseline budget projections. (Primary deficits exclude net outlays for interest.) That net increase would result from a $3.7 trillion decrease in revenues and a $1.3 trillion decrease in outlays.

In the conventional estimate, the bill's tax provisions have the largest budgetary effects. The same is true in the dynamic estimate. Reflecting JCT's earlier estimates of the effects of those tax provisions as ordered reported by the Committee on Ways and Means, today's analysis shows the following results over the coming decade:

• Revenues would decrease.
• The rate of economic growth would increase.
• That stronger economic growth would generate additional tax receipts, partially offsetting the decrease in revenues.
• Noninterest spending would decrease.
• The net effect of the changes in revenues and noninterest spending would be to increase primary deficits.
• The larger deficits would boost interest rates.
• The higher interest rates would increase payments on preexisting debt, thus generating feedback to deficits and debt and, in turn, yielding yet higher interest rates.
• On net, the macroeconomic changes stemming from the legislation would increase deficits because the increases in interest costs would exceed the boost to revenues from stronger economic growth. (JCT's dynamic estimate of the bill's major tax provisions did not include any effects on interest costs, because it was limited to analyzing effects on taxes.)
• Overall, debt held by the public at the end of 2034 would increase by $3.3 trillion in relation to CBO's January 2025 budget baseline, up from 117 percent of gross domestic product to 124 percent.

CBO's estimates of the bill's effects on economic growth are consistent with other groups' estimates of those effects. For example, CBO and researchers at the Penn Wharton Budget Model estimate that H.R. 1 would increase inflation-adjusted economic output at the end of 2034 by the same amount.

The dynamic estimate for H.R. 1 reflects the provisions specified in the legislative text. The estimate thus reflects that certain tax provisions are temporary, including provisions that would boost economic growth. It does not reflect the effects of administrative actions, which are separate from the legislation.

In addition to supplying conventional and dynamic cost estimates for legislation, CBO routinely provides policymakers with information about the budgetary and economic effects of policy alternatives that they specify, such as extensions of temporary policies. In 2021, for example, we provided a conventional estimate of the budgetary effects of making policies in the Build Back Better Act permanent as specified by the Ranking Members of the House and Senate Budget Committees. And just last week, we published a conventional estimate of the budgetary effects of extending portions of H.R. 1 as specified by the Ranking Member of the Senate Budget Committee.

Later this year, we will update our January 2025 economic forecast to account for newly enacted legislation and changes in economic conditions, as well as new administrative actions and judicial decisions. The administrative actions that have increased tariffs, for example, will reduce economic growth and increase inflation compared with what would have occurred otherwise. At the same time, if the tariffs imposed as of May 13 of this year remained in place for the next decade, they would increase revenues by an amount that would roughly offset the effect of H.R. 1 on federal debt. Actions that have reduced the number of immigrants in the United States will reduce economic growth compared with what would have occurred otherwise, decreasing revenues and reducing spending by a lesser amount. And administrative actions such as changes in regulations that boost economic growth will generally reduce deficits. Increases in interest rates (compared with our previous projections of such rates) that have occurred in financial markets will increase net interest costs.

In the meantime, we remain focused on providing objective and timely information to the Congress as it considers the important legislation at hand. As always, we welcome feedback to make our work as useful as possible. Please send comments to communications@cbo.gov.

Phillip L. Swagel is CBO's Director.