The Hidden Reefs of the "Big and Beautiful Act": The Deep Contradictions of the U.S. Federal Government

On July 1, 2025, the "One Big Beautiful Bill Act" (commonly known as the "Big and Beautiful Act") narrowly passed in the Senate after a tie vote of 50 to 50, with Vice President Vance casting the deciding vote, marking an important step toward becoming formal legislation. Recently, public opinion surrounding the bill has surged, with supporters claiming it will "reshape federal efficiency and boost the economy"; critics warn that it will only accelerate the already looming debt clock. Musk has also struck back, threatening to establish a rival entity. It's no wonder he is outraged, as the Congressional Budget Office (CBO) dynamic scoring shows that the bill will add approximately $3.3 to $3.9 trillion in federal debt between 2025 and 2034, with peak year interest expenditures nearing $70 billion.

But this is not Trump's fault; to understand this debate, we must return to the origins of the American federal system.

During the Constitutional Convention in 1787, Federalist Paper No. 45 established the "enumerated powers" model: the federal government only manages a few affairs such as foreign relations, national defense, tariffs, and coinage, while the remaining powers are reserved for the states and the people. The Tenth Amendment subsequently enshrined this arrangement into the constitutional text, aiming to curb the central government's impulse to extract resources through decentralization and interstate competition. For most years in the nineteenth century, federal spending remained around 2-3% of GDP.

However, the three rounds of historical shocks have continued to expand the scale of the federal government. Mobilization finance (from the Civil War, World War I to World War II) - wars and the income tax amendment raised spending to between 10% and 40%; welfare state (New Deal - "Great Society" legislation) - the normalization of Social Security and federal healthcare programs; crisis expansion (9/11, 2008 financial crisis, 2020 pandemic relief) - each extraordinary expenditure has pushed the budget to a new level.

By the 2024 fiscal year, federal spending will be $6.75 trillion, accounting for about 23% of GDP—"the night watchman government" has long become a historical footnote.

The problem is that the core feature of the American federal system has never changed with fiscal expansion. The highly autonomous states possess independent legislative, judicial, and administrative systems, and the federal government lacks direct coercive power in the vast majority of internal affairs. The legal-institutional tension formed by this determines that the centralization of power almost inevitably accompanies diminishing efficiency and rising costs under the current framework.

First, according to the Tenth Amendment of the Constitution, each state can establish its own criminal laws, tax laws, corporate laws, labor laws, and even environmental and gun regulations. For example, California is known for its strict emission standards, while Texas follows a more lenient gun policy. This difference reflects the Constitution's encouragement for localities to make diverse decisions based on their own interests. In fact, the United States is not a single legal system, but rather 51 legal systems (one for each of the 50 states plus one for the federal government). Moreover, each state also has its own independent legislative, executive, and judicial systems.

Correspondingly, apart from a few universal legislations such as civil rights and immigration, the federal government's influence on education, public health, and local tax systems mainly relies on financial incentives (grant-in-aid). State governments retain discretionary power and can choose to accept, modify, or reject federal programs. As a result, the same federal policy often exhibits distinct variations in implementation pathways and intensity across different states.

When the federal government induces states to act uniformly through legislation or funding, states may deviate from federal goals based on local political or economic interests. In recent cases, under a Democratic administration, red states often set aside their welfare policy proposals; under the Trump administration, blue states have more vigorously resisted, whether softly or hard.

State governments can even resist or delay federal regulations (with precedents in environmental protection, immigration, and even epidemic prevention policies) through legislation or litigation. This vertical game increases the uncertainty and legal costs of policy implementation, and undermines the governance capacity of centralizing resources.

Secondly, as previously mentioned, each state originally had a complete governance system. However, after the federal expansion of powers, there was an overlap of roles with the states in areas such as education, healthcare, and transportation, leading to a "disconnection between upstream and downstream" and redundant construction. Local priorities and intrinsic interests clash with the federal pursuit of national standards, making it difficult for the two to align precisely, ultimately resulting in scattered funding and ineffective responsibilities.

Under the "centralized taxation, local spending" model, the political burden of overspending at the local level is diluted by national taxpayers, lacking incentives to save funds. Simply put, it means "if you don't spend, it's a waste of opportunity." Federal departments, considering political factors, tend to "allocate more funds with less accountability," which fosters this waste. As of 2025, the Government Accountability Office (GAO) has identified over 2,000 "fragmented-overlapping-duplicate" projects, and the waste uncovered during Musk's tenure at the Department of Government Efficiency (DOGE) was even more shocking.

Moreover, the American legal system emphasizes decentralization rather than centralization. In addition to the checks of the Senate, House of Representatives, presidential vetoes, and federal court reviews, it adds the legislative and auditing procedures of each state itself. While multiple checkpoints strengthen the checks and balances of power, they also extend the approval cycles and compliance costs of projects. In practice, certain government projects have not only been delayed to exorbitant costs but also seem to have no end in sight.

In other words, the American federal system legally restricts central coercion while concentrating the tax base financially—this expansion of power inevitably undergoes a chain reaction of information distortion, incentive misalignment, procedural friction, cost increase, and efficiency decrease.

Let's take a look at the "Big and Beautiful Act" at the beginning. This act promises to improve federal governance while expanding spending on defense, borders, infrastructure, and industry, continuing large-scale tax cuts, eliminating new energy subsidies, and cutting welfare. However, the act fails to change the aforementioned structural contradictions, namely that the federal government wants to strengthen its own responsibilities, but the corresponding economic costs are inevitably high. Among them, the tax and expenditure clauses clearly strengthen federal functions, while states still have discretion in the areas of healthcare, welfare, and clean energy, making the policy effects dependent on local cooperation and difficult to ensure uniform implementation. Under the premise of not touching the decentralized structure, federal revenue has significantly shrunk, while new defense and border spending further increases the deficit.

In other words, this bill attempts to achieve both "stronger federal functions" and "lower fiscal burdens" without reshaping the logic of constitutional decentralization, but these two are precisely a combination of goals that the current federal system cannot accommodate, resulting in a final outcome of raising the federal debt ceiling by $5 trillion!

There are only two possible ways out: 1. Return to enumerated powers - significantly shrink federal functions, reduce spending, and increase autonomy; 2. Restructure fiscal powers - while retaining the current scope of federal functions, establish a closer mechanism of accountability and fiscal power equivalence (such as unified block grants, strengthening outcome evaluations, and reducing project details). Each path has its political and institutional obstacles. In the absence of consensus, the U.S. government may continue to cycle through expansion of power - inefficiency - and further expansion of power.