How Did the One Big Beautiful Bill Act Affect Federal Spending?
On July 4, 2025, the One Big Beautiful Bill Act (OBBBA) was signed into law. The legislation which was passed through the reconciliation process, includes sweeping changes to both taxes and spending across the federal budget. The Congressional Budget Office (CBO) projects that the legislation will add $3.4 trillion to deficits from 2025 to 2034, making it the most costly reconciliation act in recent history. Including additional interest costs raises the total price tag for the OBBBA to $4.1 trillion.
This piece looks at the changes to federal spending included in the OBBBA, while other entries in the series examine how the legislation affects taxes and healthcare policy.
The OBBBA Includes Net Spending Reductions
Overall, the OBBBA adds significantly to the nation’s debt, but the act contains net spending cuts that lessen that impact. The legislation includes $368 billion in spending increases and $1.4 trillion in spending reductions, which result in a net reduction of direct spending of approximately $1.0 trillion over ten years.
Spending Increases in the OBBBA
Net spending increases in the legislation totaled $368 billion. Two main categories — defense and homeland security and immigration — accounted for $281 billion of that total with other, miscellaneous provisions accounting for $86 billion.
Defense
Defense-related programs receive the largest spending increase in the bill. The CBO estimates that programs overseen by the Committee on Armed Services will add $150 billion to the deficit. Shipbuilding, air and missile defense, and the munitions and industrial base account for approximately 50 percent of that total.
Homeland Security and Immigration
The Department of Homeland Security and related programs see substantial increases, with spending increasing by $132 billion over the next decade. Almost all of the spending will go towards U.S. border security, increasing and maintaining detention capacity, and resources for Immigration and Customs Enforcement (ICE).
Other
Various programs and provisions are included within the “Other” spending category and account for $86 billion in new spending. Provisions for agriculture, U.S. Coast Guard, and Air Traffic Control are the main drivers of deficit increases over the next decade in this category. Specifically, the agriculture-related Price Loss Coverage (PLC) program accounts for $50 billion of the total spending. The PLC is a farm safety net program that provides payments to eligible agricultural producers when market prices fall below prices set by law.
Spending Decreases in the OBBBA
To partially offset the cost of the overall bill, the OBBBA reduces spending by $1.4 trillion in areas such as healthcare, education, and food security programs. Those cuts exceed non-tax spending increases and result in a $1.0 trillion net reduction in direct spending. Here's a closer look at where the cuts will happen and what they mean.
Medicaid and Other Health
The largest spending reduction comes from cuts to Medicaid and related programs. Over the next decade, funding for Medicaid and other healthcare programs will see an $819 billion decrease, accounting for 60 percent of all spending reductions in the OBBBA. Changes span three main areas: provider taxes, state directed payments, and work requirements. The most significant healthcare savings come from the establishment of community engagement requirements (often called work requirements) for certain Medicaid recipients. That provision accounts for $317 billion in reduced spending through projected reductions in the number of enrolled beneficiaries. Please see "How Did the One Big Beautiful Bill Act Change Healthcare Policy?" for a more detailed look at the healthcare policy changes included in the OBBBA.
Student Loans and Other Education
The second largest area of cuts targets federal student loan programs, with $284 billion in total reductions. The bulk of education savings, $271 billion, comes from modifications to loan repayment programs. There were substantial changes to income-driven repayment (IDR) plans, such as repealing the SAVE plans and replacing it with a new repayment plan. The OBBBA also eliminates and institutes borrowing limits on certain types of loans (e.g., Grad PLUS, Parent PLUS, and new graduate and professional loans).
Supplemental Nutrition Assistance Program (SNAP)
The Supplemental Nutrition Assistance Program (SNAP), formerly known as food stamps, received $187 billion in cuts in the legislation. These cuts span various eligibility and implementation mechanisms of the program including work requirements, benefit amounts, and matching funds. Similar to Medicaid, the bill modifies SNAP work requirements for able-bodied adults, making them more stringent and removing previously eligible groups of adults.
Spectrum Auctions
Another provision directs the Federal Communications Commission (FCC) and the National Telecommunications and Information Administration (NTIA) to identify and auction off specific portions of federally held spectrum — radio frequency bands that the U.S. government owns— for non-federal (commercial) use. The OBBBA mandates the reallocation of at least 300 MHz for exclusive non-federal use and an additional 500 MHz for shared or non-federal use. By selling rights to use specific radio frequencies to telecommunications companies, the government expects to raise $85 billion in revenue, thereby reducing overall spending of the OBBBA.
Conclusion
While the OBBBA included net spending cuts of approximately $1.0 trillion, overall, the legislation increases the federal deficit by much more. The impact of the spending cuts on the federal deficit are significantly offset by other provisions in the law — including new tax cuts, new spending programs, and the permanent extension of various tax provisions from the 2017 Tax Cuts and Jobs Act.
The final version of the OBBBA is estimated to add $4.1 trillion in debt over the next ten years, worsening America’s already unsustainable fiscal outlook. As deficits continue to grow, policymakers will need to consider reforms that stabilize the country's fiscal future and put us on a stronger, more sustainable path for the future.
Photo by Alex Brandon - Pool/Getty Images
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