Shock! Dramatic 50-50 Vote, OBBB Passes Senate! (Understanding the US Legislative Process)
Friends, in the early hours of July 2nd, Korean time, something monumental happened in the US Senate that captivated global attention. Donald Trump's core legislative agenda, the 'One Big, Beautiful Bill (OBBB),' dramatically passed after a nail-biting vote. Let's delve into how it passed and why this bill is dubbed 'big and beautiful'!
The US Senate consists of 100 seats, with Republicans holding 53 and Democrats (including independents) holding 47. At first glance, it might seem like an easy pass for the Republicans, but the OBBB vote resulted in an unprecedented 50-50 tie! Just like a 'tie-breaker' rule in sports to decide a winner when there's a draw, this bill's fate hung in the balance.
Enter the US Vice President. In the US Senate, when there's a tie, the Vice President casts the deciding vote. In this case, Vice President JD Vance exercised his 'tie-breaker' authority, allowing the bill to pass dramatically.
However, it's not over yet. Although the House of Representatives had already passed the bill, some provisions were amended during the Senate's approval process, necessitating another House vote. The House is scheduled to debate and vote on the bill on July 2nd. With Republicans holding 220 seats and Democrats 212, the Republicans have an 8-seat majority, suggesting a smoother passage than in the Senate. However, a key point to watch is whether concessions made to Democrats during the Senate passage will provoke a backlash from Republican hardliners. Will it sail through to final approval?
A 'Comprehensive Gift Package'? Unpacking the Key Contents of OBBB! (Core of Trump's Promises)
Now, let's take a closer look at the key contents of the OBBB and understand why it's called the 'One Big, Beautiful Bill.' This legislation is essentially a 'comprehensive gift package' encompassing all of Trump's promises for his potential second term.
First, the security sector stands out. Strongly supported by Republicans, this area allocates a whopping $157 billion for strengthening shipbuilding capabilities to build warships and establishing the 'Golden Dome,' a space missile defense system. This reflects the Trump administration's strong commitment to enhancing US military power.
Next, a significant $150 billion has been allocated to Trump's signature promises of deporting undocumented immigrants and building a border wall, paving the way for their implementation. This is expected to bring substantial changes to US immigration policy.
However, the hottest potato in this bill is the fiscal austerity measures. With expenditures increasing significantly and income tax cuts included, concerns about growing fiscal deficits are rising. The core of the controversy centers on cuts to Medicaid benefits for low-income Americans. While there's little opposition to requiring 80 hours of work per month to receive Medicaid benefits, the issue lies with increasing the state government's share of 'food stamp' funding from 50% to 75%. As the federal government's burden decreases and the state governments' burden increases, some Republican-led states that benefit from the program are opposing it.
The largest component is the extension of the existing $4.5 trillion tax cut plan implemented during Trump's first term in 2017. This includes reductions in personal income tax rates, maintaining the top corporate tax rate cut, and extending child tax credits, which are expected to result in an average annual tax reduction of $2,119 per household. In addition, new tax cut items are included, such as tax exemptions for tips received by restaurant workers, overtime pay for workers earning less than $160,000 annually, and tax credits for car loan interest, showing an intention to reduce the tax burden on citizens.
Renewable Energy in Tears, Traditional Energy in Cheers! (Shifts in US Energy Policy)
A particularly noteworthy aspect of this bill is the reduction in support for renewable energy. This provision, strongly opposed by many business leaders like Elon Musk, significantly curtails investment tax credits for solar and wind projects based on the IRA (Inflation Reduction Act).
Projects commencing in 2025 will receive 100% of the benefits, but those starting in 2026 will see a reduction to 60%, 2027 to 20%, and benefits will disappear entirely from 2028 onwards. Starting from September 30, 2025, the $7,500 tax credit for electric vehicle purchases will also disappear. This can be interpreted as a strong signal that the U.S. is prioritizing the revival of traditional energy (oil, gas) over eco-friendly energy policies.
Growing Fiscal Deficit, What Storm Will Hit the US Economy? (US Debt Issuance, Economic Outlook)
The most concerning aspect during the Senate passage process is the rapidly increasing fiscal deficit. This bill, which was initially expected to increase the fiscal deficit by $2.4 trillion when it passed the House, surged to an astounding $3.3 trillion after passing the Senate. As the deficit ballooned by an additional $900 billion, the debt ceiling, which was approved at $4 trillion during the House passage, was revised to $5 trillion.
Due to tax cuts and increased spending, the US fiscal deficit is rapidly expanding, which will inevitably lead to an increase in government bond issuance. The stance of Republican hardliners in the House regarding the debt ceiling increase and how much they will be persuaded will be a crucial observation point in determining the final direction of this bill.
One-Line Comment: The OBBB, with its tax cuts and massive spending, is structured to significantly expand the US fiscal deficit and necessitate increased government bond issuance. Particularly, it is expected to revive traditional energy industries while negatively impacting renewable energy, potentially bringing significant changes to US energy policy and the overall economic environment.
