Europe's capital recoveries lagging behind
The One Big Beautiful Bill (OBBB), signed into law by President Trump on July 4, 2025, marks a significant shift in the U.S. tax system. This extensive legislation, adopted by the U.S. Congress on an unspecified date, includes a wide range of tax reforms designed to benefit various economic sectors and individuals.
## Economic Impact
The OBBB introduces substantial tax cuts for middle- and working-class Americans, potentially boosting consumer spending and economic growth. Families earning less than $50,000 per year are expected to see significant benefits[1]. Businesses, too, will benefit from increased deductions on interest expenses and the removal of depreciation, amortization, and depletion, which could enhance profitability[2].
The bill also aims to stimulate economic growth through the expansion of domestic oil and gas production, the modernization of the air traffic control system, and increased military spending, all of which are expected to support job creation and economic stimulus[3].
## Stock Market Impact
The tax reforms and increased business incentives could boost business confidence, potentially leading to higher investment and stock market growth[2]. As consumer disposable income increases due to tax cuts, there could be a rise in consumer spending, which might positively affect retail and consumer goods stocks[4]. However, the exact impact on stock markets will depend on how these changes are perceived by investors and how they influence corporate earnings and economic indicators.
## Budget Deficit Impact
The OBBB's significant tax cuts could lead to a reduction in government tax revenue, potentially widening the budget deficit unless offset by increased economic growth or spending reductions[4]. To mitigate this, the bill includes $1.5 trillion in spending cuts aimed at reducing the deficit[4].
Despite these efforts, the budget deficit, already above 6% of GDP, is expected to widen further from 2026[5]. Notably, the OBBB makes permanent the tax cuts applied since 2017[6].
The recent measures, including the three-month trade war truce announced by President Trump on April 9, are intended to support consumption and the profits of American companies, and are likely related to the OBBB[7]. However, the impact on the budget deficit is a concern, and the measures are aimed at overshadowing this impact[8]. The healthcare sector, for instance, is expected to see cost reductions with the OBBB's implementation, as it exempts tips[9].
The precise effects of the OBBB on the U.S. economy, stock markets, and budget deficit remain to be seen. As the legislation unfolds, it will be crucial to monitor its impact and assess its overall success in achieving its intended goals.
- The OBBB's tax cuts for businesses, including increased deductions on interest expenses and the removal of depreciation, amortization, and depletion, may stimulate investing in potential profit-enhancing opportunities.
- In the realm of politics and general news, the OBBB's tax reforms and increased business incentives are objects of debate due to their potential impact on the budget deficit, economic growth, and stock market performance.
- Amidst the general-news coverage of the OBBB's economic impact, economists and finance experts are closely monitoring the bill's effects on the budget deficit, as the significant tax cuts could potentially widen the deficit unless offset by increased economic growth or spending reductions.
