Base Case Scenario: “Polarized Stability” (55% Probability)

In this scenario, the bill’s provisions largely unfold as projected without major surprises. Tax cuts and new deductions drive a moderate boost in consumer spending and business investment, particularly among higher-income households. Defense contractors and border security firms see sustained revenue increases, supporting employment and regional growth in military-centric states. Meanwhile, Medicaid and SNAP cuts incrementally reduce health coverage and food security for millions, but the impact is uneven across states, leading to only modest public backlash in the near term. Treasury yields climb gradually as deficits widen, nudging the Federal Reserve to maintain higher interest rates, but no immediate fiscal crisis emerges. Democrats capitalize on the coverage losses and inequality narrative to energize their 2026 campaign, but Republicans retain their base with claims of pro-growth reforms. Overall, the economy grows at a moderate pace, and partisan polarization remains the dominant feature of policymaking.

Upside Scenario: “Growth Without Backlash” (25% Probability)

Here, the tax cuts, higher defense outlays, and rural health investments generate stronger-than-expected economic expansion. Consumer confidence rises, pushing GDP growth above 4% annualized over the next two years. Job creation accelerates in both defense manufacturing and construction, and the sunset of clean energy credits proves less disruptive than anticipated as private investment fills the gap. Medicaid losses are partly offset by state-level expansions or employer coverage, limiting the worst-case health impacts. Treasury yields rise only moderately, as foreign investors maintain robust demand for U.S. debt. Public opposition to the bill fades as disposable incomes increase and inflation remains contained. Republicans solidify their hold in swing districts, framing the legislation as an economic revival. The midterms yield only modest Democratic gains, preserving Republican control of Congress.

Downside Scenario: “Fiscal Shock and Political Blowback” (20% Probability)

In the worst case, the combined tax cuts and spending hikes rapidly expand deficits beyond forecasts, triggering a sharp rise in Treasury yields to over 5% on the 10-year note. Higher borrowing costs feed through to mortgages and corporate debt, slowing housing and business investment. Simultaneously, Medicaid work requirements and SNAP cuts result in widespread loss of benefits, driving spikes in uncompensated care and hunger, particularly in rural and Southern states. Clean energy layoffs exceed 100,000, compounding regional economic strain. Public anger intensifies as the negative effects become more visible. Democrats mount successful legal challenges against Medicaid restrictions and energize a coalition of voters around healthcare access, inequality, and climate setbacks. The stock market loses confidence in fiscal discipline, leading to heightened volatility. In the 2026 midterms, Democrats gain substantial ground, flipping the House and threatening Republican Senate control. This scenario would set the stage for gridlock, economic uncertainty, and urgent deficit reduction measures in the next Congress.