As Congress wrestles with another monumental budget resolution, the Republican Party—historically the self-proclaimed guardians of fiscal responsibility—finds itself in a somewhat awkward silence. The latest budget plan, squeezed through the House, is undoubtedly a win for House Speaker Mike Johnson and the broader ambitions of President Trump. Whether it’s a win for the country is another matter entirely.

At its core, this budget outlines $4.5 trillion in tax cuts over the next decade, while vaguely hinting at $2 trillion in spending reductions—details yet to be determined. In true Capitol Hill fashion, the bill now advances to the Senate, where even more significant tax cuts are on the table, setting the stage for another round of backroom deals, strategic brinkmanship, and—inevitably—fiscal acrobatics. The outcome? A legislative package that, if current trends persist, will add trillions more to an already staggering deficit.

There is no serious discussion on whether the US can continue borrowing at this rate. Instead, Republicans are fast-tracking their tax and spending agenda through reconciliation—a process once designed to rein in budget excesses, now creatively repurposed as a rubber stamp for unchecked deficits. Over time, repeated abuses of this procedure have fueled deficits approaching 6% of GDP, with the national debt on a relentless upward trajectory, despite a theoretically strong economy.
The centrepiece of the Republican plan—conveniently immune to filibuster under reconciliation rules—is the extension of the 2017 Tax Cuts and Jobs Act, which was itself passed through reconciliation. In a masterclass of fiscal illusion, the original tax cuts were structured to expire at the end of this year, a necessary trick to comply with budgetary rules. Instead of letting them lapse, Republicans are poised to extend them indefinitely, setting the stage for another cycle of extend, expire, extend, repeat.
Not content with merely re-upping the 2017 tax cuts, the administration also pushes for a corporate tax rate reduction from 21% to 15%, eliminating state and local tax caps, and exemptions on tips and Social Security benefits. To compensate for these measures, the administration suggests new tariffs (a tax by any other name), which, rather than closing the fiscal gap, would simply shift the burden onto consumers, making the tax system more regressive and economically restrictive.

For a party that prides itself on fiscal discipline, the Republican approach is anything but. The national debt—already projected to climb from $30 trillion to $52 trillion by 2035 (or 120% of GDP)—is heading toward levels usually associated with economic distress, not robust growth. That forecast assumes Congress will actually let the 2017 tax cuts expire, which, based on recent history, is about as likely as Washington embracing bipartisan harmony.

At some point, financial markets will call Washington’s bluff. Investors are not just concerned about unsustainable borrowing; geopolitical instability, asset bubbles, and challenges to the Fed’s independence all pose additional risks. When interest rates rise due to market forces or sheer government recklessness, America’s fiscal outlook could shift from “worrying” to “outright disastrous.”

Beyond the immediate fiscal irresponsibility, the knock-on effects on the global financial system could be severe. Government bonds form the bedrock of collateral used by financial institutions, central banks, and investors worldwide. If the value of US Treasuries is undermined by excessive issuance, rising yields, or a loss of confidence in the sustainability of US debt, the entire system of global liquidity could be thrown into disarray. Banks, hedge funds, and pension funds rely on these assets for short-term financing and leverage, meaning any instability could trigger a cascade of margin calls, credit tightening, and—at worst—a liquidity crisis. The last time US policymakers toyed with debt credibility, markets flirted with catastrophe. The next crisis may not be so easily contained if Washington continues reckless borrowing.

But for now, Congress continues its budgetary circus, blissfully ignoring economic realities. When the reckoning comes, expect a flurry of finger-pointing, performative outrage, and suddenly renewed concerns about “runaway spending”. Until then, Washington will carry on as it always has—doubling down on fiscal contradictions fuelled by short-term political convenience rather than long-term economic sustainability.