David Seif, Chief Economist of Developed Markets at Nomura Securities International, believes that the “Big, Beautiful Bill” — contrary to widespread concerns — could actually lead to a small decrease in the US deficit over the next couple of years.
He pointed to the combination of potential spending cuts within the bill and the expected collection of “hundreds of billions of dollars per year… in tariffs” as key factors.
Seif also clarified that the bill doesn’t significantly expand the deficit compared to current tax rates. He explained that many reports of substantial deficit additions, sometimes ranging from $3 to $5 trillion, are misleading. These figures, he noted, assume that the Trump tax cuts from his first term, which are set to expire at the end of 2025, would simply be allowed to lapse. “That was never something the markets were really expecting,” Seif stated, implying that the market had already factored in the renewal of these tax provisions.
The economist highlighted that the primary purpose of the “Big, Beautiful Bill” is to renew those expiring tax cuts, rather than introducing entirely new ones. He further asserted that the bill doesn’t represent a “make-or-break moment” for the assumption of a fiscally conservative Trump administration. Seif believes there’s “no huge amount of repricing” needed, as the market largely anticipated that some form of legislation would come into play to extend the tax cuts. “I do think it’s a bit of a false narrative to say that this bill is blowing out the deficit, because the alternative would have been a big tax increase that I just don’t think anybody was really expecting to go through,” Seif concluded.
He pointed to the combination of potential spending cuts within the bill and the expected collection of “hundreds of billions of dollars per year… in tariffs” as key factors.
Seif also clarified that the bill doesn’t significantly expand the deficit compared to current tax rates. He explained that many reports of substantial deficit additions, sometimes ranging from $3 to $5 trillion, are misleading. These figures, he noted, assume that the Trump tax cuts from his first term, which are set to expire at the end of 2025, would simply be allowed to lapse. “That was never something the markets were really expecting,” Seif stated, implying that the market had already factored in the renewal of these tax provisions.
The economist highlighted that the primary purpose of the “Big, Beautiful Bill” is to renew those expiring tax cuts, rather than introducing entirely new ones. He further asserted that the bill doesn’t represent a “make-or-break moment” for the assumption of a fiscally conservative Trump administration. Seif believes there’s “no huge amount of repricing” needed, as the market largely anticipated that some form of legislation would come into play to extend the tax cuts. “I do think it’s a bit of a false narrative to say that this bill is blowing out the deficit, because the alternative would have been a big tax increase that I just don’t think anybody was really expecting to go through,” Seif concluded.
