#14 - The Big Beautiful Bill
Be it the Rockaways or somewhere more remote, hopefully you’re getting away for the holidays.
That said, just because July 4th is this week doesn’t mean it’s a slow news environment. Far from it actually. Donald Trump is en route to passing a signature piece of legislation: The Big Beautiful Bill.
Between a NYC mayoral primary last week that the Financial Times is calling “one of the great political upsets,” in American history and American strikes in Iran it might not be enticing to pay attention to this story. That said, of the three news events it will probably have the most immediate impact on everyday Americans lives. Millions are expected to lose their healthcare and the corporate tax cuts from the first Trump administration will be made permanent.
The Big Beautiful Bill (BBB) is a budget reconciliation bill, a piece of legislation typically used for tax cuts and spending reforms. The previous two administrations passed these at the beginning of their terms before midterm campaigns began and political capital was at its highest.
You need political capital when you are trying to enact something this unpopular. Harry Enten of CNN said he’s never seen such bad polling for legislation before. Elon Musk, one of the more vocal opponents of the bill, has tamped down his comments. Whereas a month ago it was a “disgusting abomination,” now its only “utterly insane.” The bill could be considered a double whammy rebuke of Musk - it will increase the deficit (he started DOGE to cut it) and increases taxes on Tesla manufacturing materials.
I don’t have Truth Social but it doesn’t seem like Trump has responded to Elons follow up comments yet. I’m sure he’ll get to it. For now, he seems focused on gloating that Thom Tillis, a Republican who voted against the bill, isn’t seeking reelection anymore.
Last month, the Polymarket Substack posted about 5 different BBB related prediction markets. On the imminent passage of the bill I went back to see where and how they moved, if at all.
Late last week the multiple outcome market about what would be in the bill had the most trading volume. Abolishing the debt ceiling and the SALT cap increase were the outcomes with the highest chance of happening but they are all above 80% (except for reducing taxes on social security). Chances of EV tax credit cuts (86%) went down 14% this morning but has since picked up by about 3% points.
Another market counting Elon’s tweets has had a swell of activity in the last day and the highest outcome in that market is 150-164 tweets this week. The market must not be taking any continued Trump and Elon fallout too seriously or I would expect the odds of the EV tax credit cuts to be less than they are.
Now, the market with the highest transaction volume is when the bill will pass. Republicans are “wish-casting,” a vote for tomorrow, June 30th. In the last week, the chances of it passing have gone up (5%) but but it’s still only 10%. Trump said he wanted this passed by July 4th but the markets appears to be pricing this at only a 75% chance likelihood. While it’s gone up 25% in the last week, I am seeing more no’s, both in terms of volume and transaction amount.
You break it, you buy it. The same elected officials who close rural hospitals and cut people off of SNAP assistance are going to need to be reelected in the places where they do that. Or put another way:
Corporate taxes are not expected to be cut in this bill. More generally speaking, since Trumps inauguration chances of corporate taxes being slashed have torpedo-ed from as high as 79% to currently sitting at 19%. The activity is less sporadic on this market with only two trades being made today. Polymarket suggests that part of the decrease in this market is coming from the populist MAGA wing. While I think that’s the case, the Big Beautiful Bill permanent tax cuts keeps executives happy as “their idea of a “win” is not seeing rates go up.”
On multiple occasions, the Trump team has expressed their goal to fund these tax cuts with tariffs. The market is not buying this will address the gap, one of the reasons Elon and Senators like Rand Paul have been holdouts. The outcome with the highest chance of happening is $100-200Bn collected and it has gone up 20% since being introduced in April. Market participants aren’t playing ball either: the last transaction on this market was two days ago.
The last BBB related market is about DOGE balancing the budget in 2025. DOGE fell woefully short of its goals so its unlikely that this would happen.
I like the way Calone1, the most recent commenter on the market, put it:
