President Donald Trump’s “big, beautiful” budget bill could dramatically accelerate investments in domestic manufacturing by allowing companies to fully depreciate their production facilities in the first year, but the bill is under threat in Congress from Republicans concerned about its impact on the federal debt.
One of the keys of the bill is its revolutionary way of applying bonus depreciation to the construction of entire buildings involved in production and manufacturing, not just upgrades or new equipment – it’s tailored to boost reshoring and industrial production.
This is JP Hampstead, co-host with Craig Fuller of the Bring It Home podcast. Welcome to the 24th edition of our newsletter, which is all about the current federal budget reconciliation bill and how it could affect reindustrialization.
Whoever coined the term “budget reconciliation,” in crafting the 1974 Budget Reform Act, deserves an award for articulating a paradox that accurately depicts the current process in Congress. The paradox of budget reconciliation is that budgets are contentious, fluid and divisive moving targets, whereas “reconciliation” means coming together on a mutually agreeable, consensus outcome. The two terms collide when fiscal reality, which has chased the tail of all members’ worthy goals and projects, catches up and forces them to limit their aspirations.
This tension between fiscal discipline and political priorities has never been more apparent than in the current congressional debates over Trump’s budget reconciliation bill – what he has called “one big, beautiful bill.” As lawmakers wrestle with competing priorities, the fundamental challenge remains: how to balance ambitious policy goals with the sobering reality of America’s fiscal situation.
Mercedes-Benz plant in Tuscaloosa County, Alabama. (Photo: Mercedes-Benz)
The GOP’s debt concerns
The fiscal impact of Trump’s “big, beautiful bill” has become a significant political concern among Republican lawmakers who have made little progress toward offsetting the $3 trillion projected cost of the legislation. Some GOP senators fear the bill’s failure to rein in federal spending in a substantial way over the next decade is fueling jitters in the bond market, where soft demand for U.S. debt has caused yields to climb in recent weeks.
Rep. Thomas Massie, R-Ky., one of only two Republicans to vote against the bill in the House, called it a “debt bomb ticking,” warning it “dramatically increases deficits in the near term” while promising fiscal reforms “five years from now.” Sen. Rick Scott, R-Fla., echoed these concerns, citing rising interest rates: “I think we’re having trouble selling our long bonds already.”
The 30-year U.S. Treasury yield rose to 5.15% after the House passed the massive package, its highest level since October 2023. Christopher Waller, a member of the Federal Reserve board of governors, said “markets are looking for a little more fiscal discipline” and called yearly deficits of more than $2 trillion “not sustainable.”
Sen. Rand Paul, R-Ky., has been particularly vocal, warning colleagues that Trump and Republican lawmakers will “wholly own” future federal deficits if they enact the legislation without making significant changes to offset costs. “The anticipated deficits per year now will be $2 trillion a year for the next two years,” Paul noted, adding that “these will be GOP spending bills, GOP deficits, and there is no change in the direction of the country.”
Defense, research and 100% depreciation
Despite these concerns, the reconciliation bill contains several provisions aimed at stimulating economic growth, particularly in the manufacturing and defense sectors. The bill would provide a $150 billion boost to defense spending, of which $24.7 billion is designated for construction of the “Golden Dome” missile defense shield proposed by the president in January.
On the tax front, the bill would reintroduce tax rules allowing companies to fully deduct domestic research costs in the year they occurred, reversing a rule introduced in the 2017 Tax Cuts and Jobs Act that requires companies to spread the deduction of R&D costs over five years. The National Association of Manufacturers has praised the bill, with President and CEO Jay Timmons stating it “brings us closer to the vision of a 15% effective tax rate for manufacturers.”
The bill also includes a qualified production property deduction that allows taxpayers to claim a 100% depreciation allowance for property used in manufacturing, production or refining. This provision effectively enables immediate expensing of new buildings or plants, which tax experts view as Ways and Means’ interpretation of Trump’s promise to reduce corporate tax rates for companies that manufacture domestically.
Additionally, the bill addresses three major provisions from the Tax Cuts and Jobs Act: It would increase the bonus depreciation rate to 100% for qualifying property placed in service between January 2025 and January 2030; temporarily suspend the requirement to capitalize domestic research and experimentation expenses for tax years 2025-2029; and reinstate the more favorable limitation on earnings before interest, taxes, depreciation and amortization for business interest deductions during the same period.
Senate considerations
Senate Majority Leader John Thune, R-S.D., has acknowledged that members of the Senate GOP conference will push for more deficit reduction in the bill. However, many of the proposals to cut spending already face opposition from other Republican senators, creating a significant challenge for passage.
Sens. Susan Collins, R-Maine, Lisa Murkowski, R-Alaska, Josh Hawley, R-Mo., and Jerry Moran, R-Kan., have warned against Medicaid reforms that would reduce benefits or threaten the finances of rural hospitals. Similarly, Murkowski, Moran and Sens. Thom Tillis, R-N.C., and John Curtis, R-Utah, have expressed concerns about the sudden repeal of renewable energy tax breaks and incentives, arguing they would destabilize the clean energy industry and potentially lead to job losses.
With a 53-seat majority, Senate Republicans can only afford to lose three votes and still pass the bill. This narrow margin gives any group of four senators significant leverage to demand changes, creating a delicate balancing act for leadership.
The paradox of budget reconciliation continues to play out in Congress, with lawmakers struggling to reconcile ambitious policy goals with fiscal constraints. The much-sought golden age of prosperity through prudent fiscal management remains elusive, as political pressures continually push against meaningful deficit reduction.
As Don Wolfensberger, a 28-year congressional staff veteran, observed, “Deficits will continue to climb, government spending will continue to grow, and false savings will continue to be fabricated. The paradox of budgeting is that its shifting parameters will never be reconciled with utopian grand fixes.” The stark reality is that entitlement benefits, where the real money is, remain politically untouchable.
Quotable
“Chairman Smith and the Ways and Means Committee are delivering what manufacturers in America have called for and what our industry needs to compete and win. The 2017 tax reforms were rocket fuel for manufacturers – driving job growth, higher wages and investment in communities. This bill brings us closer to the vision of a 15% effective tax rate for manufacturers that President Trump and I discussed in 2016.”
Kraft Heinz will spend $3 billion on its U.S. manufacturing facilities, the company confirmed to Food Dive. It’s the largest investment in its plants in decades.
Pedro Navio, president of Kraft Heinz’s North America operations, told Reuters recently that planned investments could add 3,500 employees to the Lunchables producer’s workforce. Part of Kraft Heinz’s investment includes a $400 million distribution center in DeKalb, Illinois, that is set to create 60 jobs, a transaction first announced in 2023.
Carrier Global, a provider of intelligent climate and energy solutions, has revealed plans to invest an additional $1 billion over five years in U.S. manufacturing, innovation and workforce expansion.
Carrier says the investment is “incremental to its ongoing commitments to American operations” and is expected to create 4,000 highly skilled jobs in R&D, manufacturing and field service.
U.S. industrial output stalled in April after contracting a month earlier, the Federal Reserve said Thursday, with a decline in manufacturing counteracted by growth in electricity and gas production.
The data covers the period of time when Trump imposed his sweeping “Liberation Day” tariffs, which have lifted levies substantially above their historical average for most countries.
U.S. industrial production was “little changed” last month after contracting 0.3% in March, the Fed said in a statement.
