Personal Finance
What the national debt, deficit mean for your money
Annabelle Gordon/Bloomberg via Getty Images
The massive package of tax cuts House Republicans passed in May is expected to increase the U.S. debt by trillions of dollars — a sum that threatens to torpedo the legislation as the Senate starts to consider it this week.
The Committee for a Responsible Federal Budget estimates the bill, as written, would add about $3.1 trillion to the national debt over a decade with interest, to a total $53 trillion. The Penn Wharton Budget Model estimates a higher tally: $3.8 trillion, including interest and economic effects.
Rep. Thomas Massie of Kentucky was one of two Republicans to vote against the House measure, calling it a “debt bomb ticking” and noting that it “dramatically increases deficits in the near term.”
“Congress can do funny math — fantasy math — if it wants,” Massie said on the House floor on May 22. “But bond investors don’t.”
A handful of Republican Senators have also voiced concern about the bill’s potential addition to the U.S. debt load and other aspects of the legislation.
“The math doesn’t really add up,” Sen. Rand Paul, R-Kentucky, said Sunday on CBS.
The legislation comes as interest payments on U.S. debt have surpassed national spending on defense and represent the second-largest outlay behind Social Security. Federal debt as a percentage of gross domestic product, a measure of U.S. economic output, is already at an all-time high.
The notion of rising national debt may seem unimportant for the average person, but it can have a significant impact on household finances, economists said.
“I don’t think most consumers think about it at all,” said Tim Quinlan, senior economist at Wells Fargo Economics. “They think, ‘It doesn’t really impact me.’ But I think the truth is, it absolutely does.”
Consumer loans would be ‘a lot more’ expensive
A much higher U.S. debt burden would likely cause consumers to “pay a lot more” to finance homes, cars and other common purchases, said Mark Zandi, chief economist at Moody’s.
“That’s the key link back to us as consumers, businesspeople and investors: The prospect that all this borrowing, the rising debt load, mean higher interest rates,” he said.
The House legislation cuts taxes for households by about $4 trillion, most of which accrue for the wealthy. The bill offsets some of those tax cuts by slashing spending for safety-net programs like Medicaid and food assistance for lower earners.
Some Republicans and White House officials argue President Trump’s tariff policies would offset a big chunk of the tax cuts.
But economists say tariffs are an unreliable revenue generator — because a future president can undo them, and courts may take them off the books.
How rising debt impacts Treasury yields
U.S. Speaker of the House Mike Johnson (R-Louisiana) speaks to the media after the House narrowly passed a bill forwarding President Donald Trump’s agenda at the U.S. Capitol on May 22, 2025.
Kevin Dietsch | Getty Images News | Getty Images
Ultimately, higher interest rates for consumers ties to perceptions of U.S. debt loads and their effect on U.S. Treasury bonds.
Common forms of consumer borrowing like mortgages and auto loans are priced based on yields for U.S. Treasury bonds, particularly the 10-year Treasury.
Yields (i.e., interest rates) for long-term Treasury bonds are largely dictated by market forces. They rise and fall based on supply and demand from investors.
The U.S. relies on Treasury bonds to fund its operations. The government must borrow, since it doesn’t take in enough annual tax revenue to pay its bills, what’s known as an annual “budget deficit.” It pays back Treasury investors with interest.
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If the Republican bill — called the “One Big Beautiful Bill Act” — were to raise the U.S. debt and deficit by trillions of dollars, it would likely spook investors and Treasury demand may fall, economists said.
Investors would likely demand a higher interest rate to compensate for the additional risk that the U.S. government may not pay its debt obligations in a timely way down the road, economists said.
Interest rates priced to the 10-year Treasury “also have to go up because of the higher risk being taken,” said Philip Chao, chief investment officer and certified financial planner at Experiential Wealth based in Cabin John, Maryland.
Moody’s cut the U.S.’ sovereign credit rating in May, citing the increasing burden of the federal budget deficit and signaling a bigger credit risk for investors. Bond yields spiked on the news.
How debt may impact consumer borrowing
Zandi cited a general rule of thumb to illustrate what a higher debt burden could mean for consumers: The 10-year Treasury yield rises about 0.02 percentage points for each 1-point increase in the debt-to-GDP ratio, he said.
For example, if the ratio were to rise from 100% (roughly where it is now) to 130%, the 10-year Treasury yield would increase about 0.6 percentage points, Zandi said. That would push the yield to more than 5% relative to current levels of around 4.5%, he said.
“It’s a big deal,” Zandi said.
A fixed 30-year mortgage would rise from almost 7% to roughly 7.6%, all else equal — likely putting homeownership further “out of reach,” especially for many potential first-time buyers, he said.
The debt-to-GDP ratio would swell from about 101% at the end of 2025 to an estimated 148% through 2034 under the as-written House legislation, said Kent Smetters, an economist and faculty director for the Penn Wharton Budget Model.
Bond investors get hit, too
It’s not just consumer borrowers: Certain investors would also stand to lose, experts said.
When Treasury yields rise, prices fall for current bondholders. Their current Treasury bonds become less valuable, weighing on investment portfolios.
“If the market interest rate has gone up, your bond has depreciated,” Chao said. “Your net worth has gone down.”
The market for long-term Treasury bonds has been more volatile amid investor jitters, leading some experts to recommend shorter-term bonds.
On the flip side, those buying new bonds may be happy because they can earn a higher rate, he said.
‘Pouring gasoline on the fire’
The cost of consumer financing has already roughly doubled in recent years, said Quinlan of Wells Fargo.
The average 10-year Treasury yield was about 2.1% from 2012 to 2022; it has been about 4.1% from 2023 to the present, he said.
Of course, the U.S. debt burden is just one of many things that influence Treasury investors and yields, Quinlan said. For example, Treasury investors sent yields sharply higher as they rushed for the exits after Trump announced a spate of country-specific tariffs in April, as they questioned the safe-haven status of U.S. assets.
“But it’s not going out on too much of a limb to suggest financial markets the last couple years have grown increasingly concerned about debt levels,” Quinlan said.
Absent action, the U.S. debt burden would still rise, economists said. The debt-to-GDP ratio would swell to 138% even if Republicans don’t pass any legislation, Smetters said.
But the House legislation would be “pouring gasoline on the fire,” said Chao.
“It’s adding to the problems we already have,” Chao said. “And this is why the bond market is not happy with it,” he added.
A Social Security Administration (SSA) office in Washington, DC, March 26, 2025.
Saul Loeb | Afp | Getty Images
The Social Security Administration has now processed about 91% of cases related to a new law that is prompting higher benefits and lump-sum retroactive payments for nearly 3 million people, according to a new update from the agency.
The Social Security Fairness Act, which was signed into law in January, eliminated two provisions — the Windfall Elimination Provision, or WEP, and the Government Pension Offset, or GPO — that previously reduced benefits for individuals who also receive income from public pensions that did not require the payment of Social Security payroll taxes.
At the start of the year, the Social Security Administration said affected beneficiaries may have to wait more than one year to see their payments adjusted.
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The agency credits automation for helping it to expedite those payments.
The Social Security Administration currently plans to update all beneficiary records affected by the law by early November.
However, the agency is “working to exceed its estimate” under new commissioner Frank Bisignano, a Social Security Administration official said via email.
“Commissioner Bisignano committed to senators during his confirmation process that this would be finished ‘while the weather is warm’ and he will keep his promise,” the Social Security Administration official said.
Here’s the latest on the Fairness Act payments.
Who does the Social Security Fairness Act affect?
The Social Security Fairness Act, which was signed into law on Jan. 5, affects certain individuals who are eligible for Social Security benefits, but who also receive pensions from work that did not require the payment of Social Security payroll taxes.
Examples of those affected include teachers, firefighters and police officers; federal employees covered by the Civil Service Retirement System; and people who are covered by a foreign social security system, according to the Social Security Administration.
Notably, not everyone in those groups will receive a benefit increase, according to the agency. About 72% of state and local public employees pay Social Security taxes, and therefore were not affected by the new law, according to the agency.
The provisions that had previously been in place reduced Social Security benefits for more than 2.8 million people, according to SSA. To date, the agency has processed about 2.5 million cases, the agency said in its latest update.
Railroad Retirement Board beneficiaries also stand to receive adjusted annuity payments because of the law. New monthly annuity amounts for most individuals will begin in July, and one-time retroactive payments are due to arrive by the end of July, according to a Railroad Retirement Board spokeswoman.
How much are the benefit increases?
Individuals affected may see monthly Social Security check increases ranging from “very little” to more than $1,000 per month, according to SSA.
The changes will result in higher monthly payments ranging from $360 to $1,190, depending on individual circumstances, the Congressional Budget Office previously estimated.
Affected beneficiaries will also see lump-sum payments dating back as far back as January 2024. Notably, Social Security benefit payments for January 2024 were received by beneficiaries in February 2024, according to the Social Security Administration.
For each beneficiary, the monthly benefit increases and any back payments are processed together, the Social Security official said.
Who is still waiting for benefit adjustments?
The Social Security Administration is now prioritizing the remaining complex cases that could not be automated, according to the Social Security official.
Those cases require additional time to manually update records to process both the retroactive and new benefits.
The roughly 300,000 individuals who are still waiting may have unique circumstances, notes David A. Weaver, a former Social Security Administration executive who currently teaches statistics at the University of South Carolina.
For example, some eligible beneficiaries who have recently died may qualify for the lump-sum retroactive payments, Weaver said. In those circumstances, the Social Security Administration would likely try to issue that money to survivors.
Others may be affected by overpayments, whereby the Social Security Administration issued benefit payments that were too high. In those cases, the agency will generally seek reimbursement for the excess sums that were issued.
In addition to the cases that require manual processing, there are people who are now newly eligible to apply for Social Security benefits as a result of the law, Weaver said.
Those individuals may need to file an application, according to the Social Security Administration. The date of the application may determine benefit start date and benefit amount.
What could happen next?
As the implementation of the Social Security Fairness Act moves to completion, it may be wise for Congress to ask the Government Accountability Office to audit that process, Weaver said.
That may allow for an evaluation of the final administrative costs for processing the benefit changes due to the law, including both the manual cases and additional new claims, as well as phone calls from the public about the changes, he said.
That investigation could also evaluate whether other agency work was sidelined as the benefit changes were processed, he said.
Have your Social Security benefits been affected by the Social Security Fairness Act? If you would be willing to share your story, email [email protected].
Speaker of the House Mike Johnson, R-La., speaks to the media after the House narrowly passed a bill forwarding President Donald Trump’s agenda at the Capitol on May 22, 2025.
Kevin Dietsch | Getty Images
As Senate Republicans debate trillions of tax breaks advanced by the House, some business owners could be blocked from part of the proposed windfall, policy experts say.
If enacted as written, the House GOP’s “One Big Beautiful Bill Act” would raise the federal deduction limit for state and local taxes, known as SALT, to $40,000. That would phase out once income exceeds $500,000.
The bill would also boost a tax break for pass-through businesses, known as the qualified business income, or QBI, deduction, to 23%. But the measure would end a popular state-level SALT cap workaround for certain pass-through business owners.
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Here’s what to know about the proposed change and who could be impacted.
SALT deduction cap ‘workaround’
Enacted via the Tax Cuts and Jobs Act, or TCJA, of 2017, there’s currently a $10,000 limit on the SALT deduction for filers who itemize tax breaks. This cap will expire after 2025 without changes from Congress. The SALT deduction was unlimited before TCJA, but the so-called alternative minimum tax reduced the benefit for some higher earners.
The cap has been a pain point in high-tax states like New York, New Jersey and California because residents can’t deduct more than $10,000 for SALT, which includes income, property and sales taxes.
However, most states now have a “workaround” to bypass the federal SALT deduction limit for pass-through business owners, explained Garrett Watson, director of policy analysis at the Tax Foundation.
As of May 9, some 36 states and one locality, New York City, have enacted a workaround — the pass-through entity, or PTE, level tax — since the 2017 TCJA limitation, according to the American Institute of Certified Public Accountants, or AICPA.
While each state has different rules, the strategy generally involves paying individual state and local taxes through a pass-through business to sidestep the $10,000 cap, Watson said. Owners can then deduct their share of SALT paid.
How the SALT workaround could change
Certain white-collar professionals — doctors, lawyers, accountants, financial advisors and others — known as a “specified service trade or business,” or SSTB, can’t claim the qualified business income deduction once income exceeds certain limits.
As advanced, the House bill would block SSTBs from using the SALT deduction workaround, which would be “substantial” for those impacted, Watson said.
Meanwhile, some non-SSTB pass-through businesses would have two benefits under the House-approved bill. Depending on income, they could qualify for the bigger 23% QBI deduction. They could also still claim an unlimited SALT deduction via the PTE workaround, experts say.
The revised provision has faced some pushback among certain organizations.
“This loophole is likely expensive, and lawmakers and the public should demand a clear accounting of the fiscal cost to bless workarounds for this favored group,” New York University Tax Law Center deputy director Mike Kaercher said in a statement after the revised House bill text was released in late May.
Some industry groups, such as AICPA, have urged the Senate to maintain the SALT deduction workaround for SSTBs.
If the House bill is enacted as written, SSTBs would be “unfairly economically disadvantaged” by existing as a certain type of business, AICPA wrote in a May 29 letter to the Senate.
Since many SSTBs can’t organize as a C corporation, there’s “no option to escape the harsh results of the SSTB distinction,” which could limit these professionals’ SALT deduction, AICPA wrote.
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