Donald and Elon broke up. First amicably at an official conference, then far less so, each on their own social media platform. Although the feud was entertaining to watch, as was the movement in Tesla shares, today we cover the Bill that killed the unsuspecting bromance between two of the most influential people in the world.
The One Big Beautiful Bill Act, a sweeping tax and spending package, was officially introduced on May 16 and passed the House on May 22 by a razor-thin 215-214 vote. Just a few days later, Musk gently criticized the Bill’s scope in a TV interview, stating that “a bill can be big or it can be beautiful – don’t know if it can be both”, and expressing disappointment with its massive price tag.
Generally, Musk could be considered a libertarian, but this directly contradicted his role in the Department of Government Efficiency (DOGE) and his consistent stance of reducing public spending to lower the deficit and public debt. He subsequently resigned from the administration – a move that had already been signaled, as he announced his intention to return to his private companies. A few days later, the feud went fully public.
Epstein files, ketamine references, insults, and threats soon flooded Truth Social and X, lasting several days, dominating headlines, and impacting stock markets – Tesla stock in particular. However, we won’t analyze the tweets, retruths, or whatever else was posted. Nor will we debate whether this is bullish or bearish for Tesla shares. Instead, we will focus on the Bill itself, and why it generated so much controversy.
The One Big Beautifull Bill is essentially a summary of everything Trump promised to do from the beginning of his campaign. It is a sprawling budget and tax package that bundles together spending priorities, tax code changes, and policy riders. It introduces major spending provisions and cuts, dramatically shifting federal spending toward Trump’s favored areas while slashing many social programs.
The Bill pours substantial new funding into border and military projects. It allocates $70 billion for border security, including $46.5 billion specifically intended to extend the US-Mexico border wall and upgrade patrol infrastructure. It also boosts defense spending by $150 billion, with a strong emphasis on drones and other unmanned systems.
To offset some of this new spending, the Bill makes deep cuts to social safety nets. It would trim $698 billion from Medicaid by introducing work requirements, higher fees, and tighter eligibility checks for recipients, potentially causing millions to lose Medicaid coverage. The Bill also slashes spending for food stamps, alarming critics who argue that the most vulnerable Americans will bear the brunt, losing healthcare and food assistance to fund other priorities.
Musk himself has not focused specifically on these humanitarian criticisms. His opposition is rooted more in the aggregate spending level, as the Bill’s spending increases dwarf those cuts and DOGE savings.
The Bill also imposes a 10-year ban on state-level regulation of artificial intelligence, preventing states from enacting new AI rules. It removes federal taxes on firearm suppressors and bans Medicaid funding for gender-affirming care and for nonprofit associated with abortion services. This reflects a conservative, right-wing social agenda packaged within the broader budget bill. Again, this is all Trump stood for from the beginning, and he was elected to make those things come true.
On the tax side, the Bill extends the 2017 Trump-era tax cuts and Jobs Act provisions, maintaining corporate and individual tax rate cuts. It also introduces a few taxpayer-friendly perks, such as raising the child tax credit to $2,500 from $2,000, creating a deduction for tip income and overtime pay, and even proposing a special “MAGA savings accounts” that would give parents $1,000 per child to invest. Moreover, the Bill raises the State and Local Tax (SALT) deduction cap from $10,000 to $40,000 for taxpayers under $500k annually.
A key flashpoint in the Trump-Musk dispute is the Bill’s treatment of clean energy incentives, specifically the elimination of the federal $7,500 EV tax credit by the end of 2025. This removes a subsidy that has helped Tesla and other automakers sell electric cars. The Bill also repeals or rolls back many green energy subsidies that were enacted under Biden’s Inflation Reduction Act.
US Federal Deficit (USD trillion, 2015 – 2024)
Source: US Department of Treasury, InterCapital Research
Even with sizeable spending cuts to entitlement programs, the Bill’s mix of tax cuts and new expenditures would widen the budget deficit substantially in the near term. The Bill’s heavy reliance on debt financing was recognized by credit rating agencies as well, with Moody’s downgrading US government debt just days after the Bill’s introduction, explicitly citing the Bill’s passage efforts as undermining confidence in US fiscal management.
Not only does the Bill increase spending and reduce certain revenues, but it also raises the statutory debt ceiling by $4 trillion. This is a notable reversal, as Trump had once railed against rising debt, yet now authorizes a massive debt increase to fund new government spending. His counterargument is that investments and tax relief will spur economic growth and boost future revenues, eventually offsetting the increased debt.
US National Debt (USD trillion, Jun 2015 – Jun 2025)
Source: US Department of Treasury, InterCapital Research
Will this large federal spending on defense, border security, and infrastructure prove to be a “winner” and a “big growth bill”? Or is this “disgusting abomination” of a “mammoth” bill filled with “pork” destined to worsen the already inflated debt and deficit levels of the world’s largest economy? Time will tell, the Bill has not yet been fully approved. But one thing is clear – it will definitely shape the direction of US economic and political policy for years to come, and it will likely add volatility and uncertainty to the capital markets. Nevertheless, stay invested and well-diversified.