Budget Bill: Trump Cuts Climate and Social Spending, Pushes for More Deportations

The Budget Reconciliation Law - in Trump’s terms, “the Big Beautiful Bill” - is the first, and likely most important, law to implement Trump’s agenda in his second term. From climate change to migration, foreign policy to international trade, it touches on almost every issue.

The sweeping bill was highly controversial even among Republicans, who had concerns about the growing deficit, the cuts to healthcare, and the impact on rural communities. Vice President JD Vance cast the tie-breaking vote in the Senate and final passage in the House was razor thin (218 to 214).

The bill extends the sweeping tax cuts for billionaires from Trump's first term - totaling 4.5 trillion US dollar over the next ten years - at the cost of major cuts to social programs for poor and working class Americans. It is in direct opposition to the populist economic message that Trump and Vance ran on and will harm their own voters. And while the tax benefits for billionaires are renewed as of January 2026, the deep cuts to social programs only take effect after the 2026 Midterms - a clever political maneuver designed to help Republicans evade accountability in the next elections.

Key provisions of the new budget include:

• a historic investment in Immigration and Customs Enforcement (ICE), the agency carrying out deportations, making it the highest-funded law enforcement agency in the entire federal government
• extensive roll-backs of Biden-era climate legislation, including subsidies and tax incentives from the Inflation Reduction Act
• the most significant change to healthcare since Obamacare, with deep Medicaid cuts that will strip health coverage from an estimated 11 million low-income and disabled Americans
• large financial outlays for the US military, including for the “Golden Dome” - a dubious attempt to replicate Israel’s Iron Dome over the entire US territory
• the dismantling of popular public safety net programs, including the largest cut in domestic food aid in US history

We have dug into the weeds of this 870-page bill to explain how it will fundamentally change the US trajectory on climate & environmental policy, foreign & security policy, social policy, immigration policy, and digital policy. We also look at some of the pieces that were cut during negotiations and what they suggest about future policy priorities.

Sections

Climate & Environmental Policy

Foreign & Security Policy

Social Policy

Immigration Policy

Digital Policy

Unfinished Business

Conclusion

Climate & Environmental Policy

The FY 2026 Budget represents a fundamental reversal of the United States’ most ambitious climate legislation to date - the Inflation Reduction Act (IRA) - by gutting clean energy support, boosting fossil fuel production, and dismantling the regulatory and community frameworks needed for an equitable energy transition. It will stall technological advancement and private investment and undermine US credibility in global climate leadership.

Key IRA provisions directed clean energy, resilience funding, and pollution reduction efforts toward disadvantaged communities - those historically overburdened by fossil fuel infrastructure and under-served by federal investment. This bill dismantles those environmental and climate justice programs, including the Greenhouse Gas Reduction Fund, and blocks local and tribal governments from implementing their own clean energy solutions.

By prioritizing fossil fuel expansion and curtailing local and national climate action, the new budget undercuts the principle that the energy transition should be equitable, accessible, and community-driven. It will widen environmental disparities and roll back a generation’s worth of progress toward a more just and sustainable future.

• The bill undermines clean-tech supply chains. It extends Foreign Entity of Concern (FEOC) restrictions - originally applied to electric vehicle (EV) batteries - to all clean‑tech credits, penalizing any company linked at any tier to an FEOC like China, Iran, Russia, or North Korea. For example, a single bolt sourced via a Chinese‑owned subcontractor could disqualify an entire solar project. Industry leaders, including NextEra’s CEO John Ketchum, have called the rules “unworkable,” warning they could block over 500 billion US dollar in planned clean energy investments. Furthermore, by rescinding investments in US clean tech manufacturing, the bill bolsters China’s global dominance of future-oriented manufacturing supply chains.
• It reduces domestic renewable energy production. The new budget repeals key tax credits for solar, wind, battery storage, and other clean technologies. Those credits, introduced in the IRA, fueled the remarkable growth of clean tech: the sector is now responsible for over 90 percent of new electricity generation capacity in the US annually. By dismantling crucial incentives and creating barriers that threaten the sector, the bill undermines domestic renewable energy production. This disruption comes at a time when the US grid urgently needs clean energy expansion, particularly in rural and industrial regions.
• It makes the energy transition more expensive for consumers. The bill repeals several landmark consumer incentives from the Inflation Reduction Act, such as the 7,500 US dollar federal electric vehicle tax credit and subsidies for residential solar and heat pump installation. These programs had helped lower the cost barrier for American households looking to transition to clean energy. With their removal, clean technologies become less affordable, stalling mass adoption. This also reduces demand for EU-produced green goods and services, such as EV components and solar equipment, that were increasingly finding a market in the US.
• It rolls back federal support for emissions monitoring and corporate climate disclosures. This directly impacts US companies’ ability to comply with European standards like the Corporate Sustainability Reporting Directive (CSRD) and the Carbon Border Adjustment Mechanism (CBAM), making trade between the US and EU more difficult.
• It blocks state and local climate leadership. The bill includes federal preemption provisions designed to override progressive state and local climate initiatives, including California’s zero-emission vehicle mandate and New York’s clean building standards. These regional policies have historically led US climate innovation. An especially egregious example of the bill’s hostility toward local climate action affects elementary and secondary schools in districts across the country. In a June 27 letter, several Democratic Senators warned that the repeal of clean energy tax credits will derail over 250 primary and secondary school solar projects in 26 states.
• Public land policy now favors fossil fuels. While the bill reduces the total federal land available for new leasing, it mandates a set number of annual oil, gas, and coal lease sales, including in the Arctic National Wildlife Refuge. It also slashes royalty rates paid to the federal government by private companies operating on public lands: from 18.75 percent to 12.5 percent for oil and gas, and from 12.5 percent to just 7 percent for coal. These steep reductions amount to a direct subsidy for fossil fuel extraction, disproportionately benefiting companies like Liberty Energy, whose former CEO now serves as US Energy Secretary. At the same time, clean energy developers continue to face regulatory barriers and permitting delays when attempting to access federal lands for wind or solar projects.

Foreign & Security Policy

Defense spending, which is already at a record-high in the United States, will now increase even further. In contrast to other parts of the bill, defense and security items were never contested among different factions of the GOP. Both Republicans in the House and the Senate agreed to significantly increase the funding for defense and add an extra 150 billion US dollar for additional ship building, munitions production, and modernizing the nuclear arsenal.

• The bill drastically increases the yearly annual defense budget by about 13 percent, totaling more than $1 trillion. The US already has the highest military expenditures in the world, 37 percent of the world’s total military spending as of 2024. In past years, US defense spending accounted for about 13 percent of the overall federal budget, topped only by health insurance (24 percent) and Social Security (21 percent) spending. Notably, the new funding will not put the US in reach of the proposed NATO target of spending 5 percent of GDP on defense, though it will slightly boost spending beyond the current level of 3.4 percent.
• It grants Trump funding for his signature military project, a “Golden Dome” modeled on Israel’s missile defense shield “Iron Dome.” The new budget entails an initial 25 billion US dollar for the project, which is supposed to be finished by 2029 - the end of Trump’s second presidential term. Military experts question the feasibility of the project, given the huge landmass and different set of missile threats the US faces from China and Russia compared to Israel.
• Future US support for Ukraine remains uncertain. While the budget does not include any items directly related to NATO or support for Ukraine (this will be handled via a different budgeting mechanism in Congress, known as “appropriations” or “supplemental appropriations”), Republican Senator Lindsey Graham indicated that Trump had given the okay to move forward on a bill that would impose new sanctions on Russia. The “Sanctioning Russia Act 2025” has overwhelming support in the Senate and would enact secondary sanctions in the form of 500 percent tariffs on countries that trade with Russia, specifically India and China. Ukraine’s allies in Europe are supposed to be shielded from these penalties. However, even if the bill passes in Congress, Trump could still veto it and refuse to sign it into law. The recent back and forth on weapons deliveries to Ukraine suggests that the Trump Administration will continue to be an unreliable partner for Europe.

Social Policy

The new law changes how people with low income and their children in the US are able to access government support, from healthcare to food assistance. It makes the American welfare state, already small in comparison to European countries, even smaller and less generous. Reproductive healthcare will become harder to access across the country. Financial support for higher education will be less accessible, and some universities will face increased tax burdens.

• Millions of children and families will lose access to some or all forms of health insurance. Medicaid, a kind of health insurance funded through the federal government and US states and available to those with low incomes and disabilities, and which currently covers about 72 million Americans, will be cut by 1 trillion US dollar. For the 20 percent of the US population that lives in rural areas, 1 in 4 people is covered by Medicaid, and nearly half of all births are covered by Medicaid, all of which will be severely impacted by the new law. Estimates report that 11.8 million people could become uninsured by 2034 through a combination of cuts to Medicaid and policy changes to the US healthcare marketplace. Further changes in the bill and through federal rule-making mean that up to 17 million people will be affected in total.
• Millions of children and families will lose food and nutritional support. The near 300 billion US dollar cuts to Supplemental Nutritional Assistance Program (SNAP) will result in the loss of some or all food assistance to the 40 million people, including 16 million children, who currently benefit from it. These cuts will reduce funding to US states, significantly expand work requirements, deny benefits to many kinds of immigrants and noncitizens, and reduce the amount of food people have access to. It is the largest cut to food aid in the program’s history.
• The bill reduces access to reproductive healthcare, including by substantially curtailing Planned Parenthood’s ability to operate. Planned Parenthood - a major provider of both reproductive and general healthcare, including in rural and remote areas - will be barred from receiving any Medicaid funds, meaning that poor and working class Americans who rely on Medicaid can no longer access their clinics. As a result, whole clinics may have to shut down. More than two million Americans who cannot afford services elsewhere rely on Planned Parenthood.
• Universities will face increased tax burdens while students will have reduced access to student loans. The world-renowned caliber of US universities is made possibly in part by their high endowments. Universities use the earnings on those endowments to sustainably fund their operating costs and provide financial aid for students. The new budget law directly targets academia by increasing taxes on those endowments from 1.4 percent currently to up to 8 percent for the largest endowments. At the same time, it changes and reduces the types and total amounts of loans that students use to fund their higher education. These changes will impact universities’ financial standing at a time many are already facing massive federal funding cuts from cancelled research grants, and create serious financial hardships for many Americans faced with the burdens of the costs of US undergraduate and graduate degrees.

Immigration Policy

Numerous provisions of the bill fundamentally undermine the rule of law with targeted anti-immigrant policies and extraordinary investment into immigration enforcement. The new policies make life for immigrants, asylum seekers, and their US citizen family and children more difficult, and lay the groundwork for a broader rollback of rule of law and civil rights. These policies will not only result in deportations of large numbers of immigrants who will have little legal recourse or due process, but also tear apart families, including mixed-status families and children, and impact local communities.

• The new budget invests 170 billion US dollar, an unprecedented amount of funding, into scaled-up immigration enforcement - and makes ICE the highest-funded law enforcement agency in the federal government. It dedicates 45 billion US dollar to construct new immigration detention facilities, including family detention centers, which could ultimately detain over 110,000 noncitizens on any given day. Tens of billions more are included to expand the border wall, hire more federal immigration agents, and other unrestricted funds for immigration enforcement. The budget also gives 1 billion US dollar to fund the Department of Defense to use military personnel and military sites for immigration enforcement.
• It makes life harder for immigrants and their children - and undermines due process for everyone. The bill attempts to dismantle protections for people in ICE custody and specifically long standing protections that restrict the detention of immigrant children and ensure strict standards for their care. Immigrant children could now be indefinitely detained. Many fees for visas and other immigration benefits will dramatically increase, in many cases with no possibilities of exceptions for low income or vulnerable populations. People seeking asylum will be required to pay expensive and repeated fees for each year their application is in progress, but because the bill also limits funding for immigration judges, the backlogs in asylum and many other cases will increase. The bill also targets many groups of lawful immigrants by denying their access to social welfare and other support.
• It creates a new tax on remittances sent from the US. Remittances to low- and middle-income countries are estimated to have reached 685 US dollar billion in 2024, outmatching official development assistance and foreign direct investments combined. These flows go directly to households, bypassing bureaucracies, and often outperform formal aid in reaching the poorest. They have become even more important for the recipient countries in the aftermath of the cuts to official development assistance by the US and several European countries. The 1 percent tax rate proposed (down from an original 3.5 percent) will mean that less money arrives in the intended households and will also discourage senders from using official channels. This could drive up fees, lead to more underground transactions, and actually hurt the US companies that currently dominate the remittance industry.

Digital Policy

From increasing the government’s ability to surveil the border to continued support for onshoring chip production, the new budget law has direct impacts on US digital policy. Efforts to combat disinformation will be reduced.

• The bill grows the government’s surveillance infrastructure. Within the expanded funding for immigration enforcement is support for surveillance systems powered by artificial intelligence, targeting biometric data, and for towers that monitor activity near the borders. The new surveillance technology will contribute to the government’s broader efforts to build unprecedented databases of user information and require visa applicants to make their social media history publicly available for review.
• It shifts power from civilian cybersecurity resilience efforts to military defense. The bill makes significant cuts to the civil agency in charge of coordinating the federal government’s cybersecurity work. That agency, the Cybersecurity and Infrastructure Security Agency (CISA), protects US elections against foreign interference and previously came under pressure from President Trump for rebutting election-related disinformation.
• It creates new incentives for semiconductor manufacturing in the US as China’s chip industry continues to grow. New tax breaks will support efforts to onshore chip production started under the Biden Administration. The US and EU share the goal of reducing dependence on China for high tech manufacturing, and the EU is moving forward with its own incentives for semiconductor manufacturing. However, with transatlantic trade negotiations ongoing, it remains unclear how much room for cooperation there is on semiconductor trade and knowledge sharing between the US and EU. 

Unfinished Business

While the bill included large parts of Trump’s agenda, not everything made it into the final version. These missing items may provide a roadmap to the Administration’s legislative ambitions for the coming years.

Earlier versions of the bill sought to:

• Prohibit individual US states from regulating AI for ten years. During the final negotiations, the Senate removed the provision that would have prevented states from addressing the risks of AI. While tech companies supported the rule, it would have undone the efforts of some states to address AI, including those led by Republicans, with laws related to the protection of children, personal likeness, and elections.
• Attack trans rights by forbidding the use of Medicaid for any gender-affirming health care, regardless of age. These attacks are very likely to continue to be mainstays of Republican policy, both federally and at the state level.
• Limit the ability of federal courts to enforce their own court orders. This provision would have dramatically affected public interest litigation by requiring that anyone suing the federal government first pay a bond. Without the bond, courts would have been barred from using their powers to enforce rulings. Given how many times courts have found the Trump administration in violation of the law, and the number of times the Trump administration has violated court orders, stripping courts of their contempt powers would have fundamentally undermined the rule of law.
• Implement large-scale sales of federal land in the Western US. The federal government owns roughly one fourth of land in the US, a majority of which is located in Alaska and west of the Rocky Mountains. Some conservatives want to sell this land for commercial use, but a provision to do so was eventually removed from the bill after opposition.

Conclusion

Trump’s 2024 campaign focused on affordability and promised to make life better for working-class Americans. Instead, nearly every fiscal analysis suggests that the new budget will significantly increase costs and lower the quality of life for poor, working-class, and rural Americans. Additionally, despite the urgency of the climate crisis and geopolitical concerns over China’s rise, the bill functionally ends the US’s ability to compete on green technology - it hands a new and important part of the global economy to China and sets US climate action back by decades.