What happened?

Last night, Elon Musk launched an all-out campaign against the "big, beautiful" bill that passed the House and now awaits Senate approval, calling it a "disgusting abomination." While the extension of Trump's 2017 tax cuts is uncontroversial, the House GOP added a litany of additional tax breaks to the $3.8 trillion bill, including no tax on tips and incentives for business investment. With only cosmetic and delayed spending cuts, the bill contradicts the administration's initial emphasis on deficit discipline. Furthermore, four Republican senators (Rand Paul, Ron Johnson, Josh Hawley, and Lisa Murkowski) have indicated that they will vote "no" unless the bill is significantly scaled back, enough to block its passage.

Source: Kevin Dietsch / Getty Images

Why does this matter?

  • Bill likely to fail: With the world's most influential media owner waging an aggressive campaign and with no majority in the Senate, the "big, beautiful" bill will not pass in its current form. It will need to be watered down, thereby losing its presumed stimulative effect on the economy.
  • Trump's honeymoon is over: Musk's denunciation is the first serious challenge to the current administration. While Democrats remain largely absent from public discourse, Musk has become the biggest threat to Republicans looking ahead to the midterms.

What's the counterpoint?

Republican leaders insist that the bill can be tweaked by reducing Medicaid cuts or adding stricter spending caps. The White House claims that tariffs will offset the revenue shortfall. However, making concessions could result in losing votes from the other side, and rolling back some of the promised tax cuts may be the path of least resistance.

finformant view With four GOP senators holding firm and Musk publicly rallying opposition, the bill will likely require substantial revisions to become more "deficit-friendly." The bond market, which already has several tailwinds, should respond positively to the change.
Subscribe Now