The United States national debt has reached a staggering $36.2 trillion as of July 3, 2025, sparking significant concern that it could surge to $40 trillion by the end of the year. This alarming projection is largely attributed to the recent passage of President Trump’s “Big Beautiful Bill,” a comprehensive legislative package that is expected to add an estimated $3 trillion to the national debt over the next decade, according to the nonpartisan Congressional Budget Office (CBO).

A primary driver of this concern is the escalating cost of interest payments on the existing debt. In fiscal year 2024, the U.S. government spent an unprecedented $1.1 trillion solely on interest, surpassing the national military budget for the first time in history. This high interest burden limits the government’s capacity for public investment in critical areas like education, healthcare, and infrastructure, and rising interest rates could further exacerbate the problem, potentially deepening a debt spiral.

President Trump’s “Big Beautiful Bill” is a multifaceted legislative package designed to implement extensive tax cuts, fund large-scale infrastructure projects, and significantly expand defense funding. Key provisions include the permanent extension of individual and corporate tax breaks from 2017, the introduction of new deductions for tipped workers, auto loan interest, and overtime pay, and a dramatic increase in the State and Local Tax (SALT) deduction cap. Simultaneously, the bill allocates hundreds of billions of dollars to military expansion, including a “Golden Dome” missile shield, enhanced border security, and law enforcement. Conversely, it proposes deep cuts to social safety net programs such as Medicaid, SNAP (food stamps), and Obamacare subsidies, which experts warn could lead to millions losing coverage or benefits. Additionally, the bill rolls back several clean energy incentives and halts new solar and wind subsidies.

A notable component of this new legislation is a significant change to federal income tax rules for tips and overtime pay, effective from 2025 through 2028. This aims to allow millions of American workers, particularly in hospitality and hourly positions, to retain more of their earnings. Under the new law, employees can deduct up to $25,000 in tip income from their federal income taxes. While payroll taxes like Social Security and Medicare still apply, this deduction is available even for those taking the standard deduction. For overtime pay, the law eliminates federal income tax on amounts up to $25,000 for married couples filing jointly and $12,500 for single filers. These deductions, however, begin to phase out for individual filers with a modified adjusted gross income (MAGI) exceeding $150,000 and for married couples filing jointly at $300,000. It is estimated that 60% of households with reported tip income will benefit, saving an average of $1,800 annually, with the average overtime worker saving $1,400 to $1,750 per year. However, lower-income households, particularly those earning $33,000 or less, are expected to see minimal benefit, as many already pay little to no federal income tax. Some independent contractors and small business owners may also qualify under strict conditions.

The fiscal implications of these tax cuts are substantial. The tip income deduction is projected to reduce federal revenue by $40 billion between 2025 and 2034, while the overtime pay deduction is expected to cost $124 billion through 2028. This reduction in government revenue, coupled with increased spending, necessitates more borrowing, further contributing to the national debt. Concerns also exist about the potential distortion of the labor market, as making overtime more financially attractive might lead some workers to favor hourly positions over salaried ones.

The continuous rise of the national debt poses several serious risks for the U.S. economy and its citizens. These include potentially higher interest rates across the board, affecting mortgages, credit card APRs, and student loans, as investors may demand better returns on perceived riskier U.S. debt. It could also lead to a weaker U.S. dollar, making imports more expensive, and a reduction in investor confidence if the U.S. is seen as fiscally unstable, potentially causing global market shifts. More of the federal budget being consumed by interest payments could necessitate future cuts to vital social programs like Medicare and Social Security, increasing economic vulnerability. While economists are divided on the exact threshold the U.S. can sustain, a failure to control borrowing could trigger financial instability and inflation. The decisions made in Washington regarding fiscal policy in the coming years will have profound and lasting consequences on the economy, public services, and the lives of millions of Americans.