The Council of Economic Advisers’ new analysis of the One Big Beautiful Bill reads more like campaign literature than serious economic forecasting. The headline claims of booming GDP growth, surging wages, and miraculous deficit reduction are based on assumptions so rosy they make the 2017 dynamic-scoring debates look conservative. The CEA asserts that the bill will reduce deficits by $4.9 trillion over a decade and bend the debt curve downward. But independent experts have pointed out that the actual fiscal impact is likely to increase primary deficits by between $2.2 and $3.5 trillion. That is a swing of up to $9 trillion.
There are serious problems with the analysis. It includes double-counting tariff revenue and interest effects, it mixes budget windows, and it conflates level increases with changes in the growth rate. It projects that deficit as a share of GDP in FY2025 will be smaller than in FY2024, even though the deficit as a share of GDP for the first 2/3 of FY2025 is over 13 percent higher than in FY2024. According to the Committee for a Responsible Federal Budget, the calculation errors alone could amount to $3 trillion. This is extraordinary.
Even worse, the CEA analysis relies heavily on policies that do not even currently exist, such as hypothetical discretionary spending cuts and deregulatory actions that haven’t happened yet (and sadly will take time to be adopted even if they are ever to be approved). It then assigns them massive economic effects. For example, the CEA claims that deregulation will raise annual economic growth by 0.29 percent, based on a one-time cost estimate of Biden-era regulations. But as Marc Goldwein points out, that estimate might support a one-time increase in the level of GDP, not a sustained increase in the annual growth rate.
Then there is the misuse of tariff revenue. Tariffs are volatile, unpredictable, and subject to political manipulation. Relying on them for a decade’s worth of stable deficit reduction is like planning your retirement around today’s lottery winnings. Some of the tariffs in the analysis have even been ruled illegal or are pending in court, meaning the projected revenue might never materialize.
Former Obama CEA Chairman Jason Furman highlighted just how implausible the projections are. “Scratching my head,” he wrote, “at the CEA estimate that their economic plan will lower debt/GDP by at least 3pp in FY 2025. There are only 3 months left in FY 2025. And tariff revenue < 0.5% of GDP. So would need more than 10% annualized GDP growth in Q3 to hit this target.” In other words, the CEA’s math requires a miracle.
The broader issue is that the CEA is counting every hypothetical benefit while ignoring the real-world costs, such as the higher spending and interest payments that faster growth would trigger. This is not serious economic analysis. It is cherry-picking politics dressed up as modeling.
Here’s the bottom line: The CEA wants you to believe that this bill will produce enormous growth, before the end of the year, no less. But for all the growth aspects in the bill, we can find ten or more provisions that will constitute a drag on growth. Take the most pro-growth provisions in the bill. The 100% bonus depreciation & R&D expensing provisions will add about 0.7% to the growth effect. Changes to EBIT, GILTI, and BEAT add another 0.3%—so combined this is 1% extra growth. Good. However, as Jack has shown, the $40k SALT cap reduces growth by 1%, altogether canceling out all of those pro-growth provisions. So, how on earth can CEA say with a straight face that this bill is pro-growth when it is packed full of anti-growth items that cancel everything good in the bill?
My sad conclusion, even if we ignore the calculation errors in the analysis, is that this isn’t a serious analysis. It is riddled with magical economic growth thinking that makes you wonder whether it was vetted.