The reconciliation bill passed the House of Representatives and is now heading to the Senate. I don’t want to minimize how politically difficult it was to pass this bill, but I also want to thank those representatives who fought to improve it.

As of now, the legislation has the merit of avoiding serious tax increases on the American people. That’s a good thing and worth reminding everyone. It also requires able-bodied, childless adults to work or perform community service to keep their Medicaid benefits. It moves that requirement to 2026 from 2029 and gives new incentives for states not to expand Medicaid.

But it’s not a good bill. First, it is bad tax policy, especially compared with the original TCJA. It gets an F for tax simplification, base-broadening, and personal rate schedule. It also adds dozens of narrow, special-interest provisions, which is the opposite of what tax reform should do. I am surprised the supply-siders still out there aren’t upset about that.

It also exacerbates some of our fiscal problems by adding a government-funded “Trump Accounts” (that’s a new entitlement that we don’t need and don’t have the first dime to pay for), bailing out high-income taxpayers in blue states with the $40K SALT deduction starting this year (so much for populism), and making Medicare and Social Security more insolvent among other things.

I know that the bill adds to the deficit in the short term compared with the current baseline because it extends the few pro-growth policies in the bill, such as full expensing. These are reforms I support, though to rip off the full pro-growth benefits, they should have been done on a permanent basis. Still, responsible legislators would have paired the extension with more spending cuts or the closing of more tax expenditures — there are many to choose from here.

Politics is tough — I get it — but we should all judge the political class harshly for not caring that the country is on an unsustainable fiscal path because of its addiction to big government programs and overspending. Considering our fiscal situation, the Moody downgrade, the spike in interest rates, yesterday’s weak auction, and the upcoming explosion in entitlement spending, legislators should be willing to put their narrow interests aside for once. They aren’t.

The WSJ has this comment from Fed governor Chris Waller to FBN:

Everybody I’ve talked to in the financial markets, they’re staring at the bill, and they thought it was going to be much more in terms of fiscal restraint, and they’re not necessarily seeing it. And therefore there’s going to be a lot of issuance of Treasuries. And in order for them to buy these things, they want it at a lower price, and therefore, a higher yield.

This may not be as much of a problem if market actors believed that tons of economic growth were heading our way. Sure, we will get more growth with this bill than we would if Congress let the tax cuts expire, but it doesn’t mean it is nearly enough. That’s partly because the administration isn’t giving up on its tariff obsession, and trade adviser Peter Navarro is still around, clamoring for more ways to make life harder for U.S. and global businesses. The uncertainty surrounding the economy remains high, as one never knows what the president will do next. It probably doesn’t help that the super pro-growth stuff the administration is trying to do, like deregulation and AI dominance, will take a long time to deliver.

Unfortunately, the administration, Congress, and all of us will likely immediately feel the consequences of this mess we are in. The bond yields are spiking near-20-year highs. This is a big deal considering the size of our debt and the fact that a third of our debt has a maturity of less than a year, and 18 percent of our debt has a maturity of less than three months. It means that any increase in interest rates will be felt quickly.

So here’s hoping that the Senate will improve this legislation, altering it to reduce the needed Treasury issuance and promote more pro-growth policies.