Republicans in Congress are poised to send their Senate-version reconciliation bill, dubbed "One Big Beautiful," to the president ahead of their self-imposed July 4 deadline.
While the Senate made several adjustments to the version passed by the House in May, Wells Fargo analysts say the overall economic implications remain largely unchanged.
“Bigger budget deficits and faster economic growth over the next couple of years partially offset by higher tariffs, and a somewhat more ambiguous longer-term impact,” analysts wrote in a note Thursday.
The Congressional Budget Office estimates the Senate bill will increase the federal deficit by $3.4 trillion over the next decade, largely due to the extension of expiring provisions from the 2017 Tax Cuts and Jobs Act (TCJA). Wells Fargo noted that this extension primarily avoids fiscal tightening rather than creating new stimulus.
Stripping out the TCJA extension, the analysts estimate the bill will boost the deficit by 0.8% in fiscal year 2026 and 0.4% in 2027, adding 30 to 50 basis points to real GDP growth in 2026 and slightly less in 2027.
Over the longer term, the bill becomes fiscally contractionary as temporary tax cuts expire and spending reductions—particularly on Medicaid and green energy subsidies—take effect. However, Wells Fargo cautions that “given the recent track record of extending expiring tax cuts and punting on planned spending cuts,” markets may doubt the full implementation of these future restraints, potentially pushing US deficits to 8%- to 9% of GDP within a decade.