A major tax and spending bill just became law, and the numbers are hard to ignore. The Congressional Budget Office estimates it will add $3.3 trillion to the national debt, with $4.5 trillion in tax cuts packed into the deal. That includes a three-year ban on federal taxes for tips and overtime pay, alongside billions for border security and new defense spending.

To balance some of that out, the bill includes work requirements and benefit reductions for many Medicaid and food aid recipients, and rolls back tax credits for clean energy, including incentives for buying electric vehicles. The result is a policy shift that combines targeted tax relief with meaningful cuts to safety net programs and climate subsidies.

One of the most impactful pieces for markets is the decision to raise the debt ceiling by $5 trillion. That likely puts the next debt standoff on hold until sometime in 2027, keeping it out of the political spotlight for now. But it also means more borrowing ahead, and potentially more supply pressure in the bond market over the coming years.

📌 What to watch:

  • How tax relief on labor income (like tips and overtime) affects household spending
  • Whether aid reductions begin to weigh on low-end consumption or retail trends
  • Market response to the rollback of clean energy incentives, especially in EV and utility stocks
  • Bond market reaction to higher expected Treasury issuance following the $5T debt ceiling lift
  • Broader macro implications of a growing deficit during a slower-growth phase of the cycle


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