The American Capitol in Washington, DC
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The “big and beautiful bill” of American president Donald Trump – or officially, the Big Beautiful Bill Act – is controversial legislation, but some banks are favorable, saying that it is in the arm that the economy needs.
He was advanced during a close vote of 51-49 in the United States Senate on Saturday evening, bringing together the large expenditure measure of the president’s office.
The bill, which is characterized by tax reforms and targeted incentives and should be added to the federal deficit, has triggered warnings from credit agencies and criticism.
But some banks say they think the bill could stimulate the American economy.
‘Undoubtedly good’
In a letter published on Sunday, the American Bankers Association said that it “strongly supported” many provisions in the bill for “the essential tax relief they offer.
“I think that the OBBB would be almost undoubtedly good for the American economy in the next two years compared to nothing to pass,” said David Seif, chief economist of Nomura for the developed markets, since taxes will increase considerably next year after the expiration of many provisions under the Trump 2017 tax bill.
The law on tax reductions and jobs, adopted in 2017, includes lower income tax rates, higher children’s tax credits and generous deductions for businesses. Without action of the congress, many provisions under the law should expire by the end of 2025 – a quarter of work said that household consumption and business investment could reduce. The short-term appeal of the great magnificent bill lies in its ability to avoid a strong budgetary contraction in 2026, they said.
“The most important thing that OBBB does for the next few years is to renew most of those who expire tax provisions, preventing a major and sudden tax contraction from performing,” Seif at CNBC told. “OBBB provisions allowing faster commercial expenditure on capital investments can increase investments over the next two years, although probably to the detriment of investments in recent years,” he added.
The Citi strategists, too, said in a note published last Wednesday that the adoption of the bill will be an economic tail wind. “In the short term, commercial transactions (United Kingdom, China, possibly Japan, India, Europe, etc.) and the adoption of the major bill (net stimulating) in July should improve the feeling of growth,” they wrote.
Citi also expects the federal reserve to serve its monetary policy, strengthening the feeling of growth and said: “We do not see any bond vigilant in 2025/2026, because the BBB Delta is largely funded by tariff income.”
Disadvantages
Others, however, reported serious drawbacks.
The loading of debt is a central concern for many criticisms. The non -partisan budget office provides that the big and beautiful bill will add at least 3 dollars of the federal deficit in the next decade.
Although Morgan Stanley noted at the beginning of June that the pro-communities tax provisions of the bill could benefit businesses and individuals, as well as key equity sectors such as communication services, industrialists and energy, he said that he could raise concerns about budget sustainability.
Similarly, Erica York, vice-president of the federal tax policy of the Federal Tax Fiscal Policy Center, said: “He is fiscally irresponsible, considerably increasing budget deficits and debt, even if we take growth”.
York has said that many tax reductions are complicated and poorly designed, giving tax reductions to certain types of workers and leaving others.
In addition to this, due to the bill, which includes many tailor-made tax rules, the Internal Revenue Service will have to spend more time and resources to update forms, advice and application tools, adding to the administrative burden of an already extensive agency, she added.
