Senate version of Trump's budget bill would raise the debt ceiling by $5 trillion—what it could mean for your wallet

Senate Republicans are backing a budget package that would raise the debt ceiling by $5 trillion, the largest increase in U.S. history, raising questions about its economic impact.

The proposal is part of President Donald Trump's “One Big Beautiful Bill Act” and would give the government more room to spend.

It looks like they'll need it: The bill continues and expands tax breaks set to expire after 2025, and similar provisions in the House version of the bill were estimated to increase the deficit by around $3.8 trillion over the next decade, according to the Congressional Budget Office.

The bill comes as federal borrowing is accelerating and deficit spending continues to grow. The government has run annual shortfalls since 2001, steadily adding to the national debt.

Here's what it could mean for the economy — and your wallet.

The debt is up 50% since 2020 — and still climbing

Congress raises the debt ceiling regularly to keep the government funded, and another deadline is fast approaching.

Without action, the U.S. could run out of borrowing room as soon as August, according to estimates from the Treasury Department and independent analysts. That would coincide with a broader deadline to fund the government and avoid a shutdown.

Extending the ceiling through a reconciliation bill would allow the government to keep making scheduled payments — including Social Security checks, veterans' benefits and tax refunds — and help avoid the kind of financial market turmoil that can negatively affect the broader economy.

At the same time, authorizing $5 trillion in new borrowing could add to a debt load that has already grown quickly. The national debt has risen from about $23 trillion in early 2020 to more than $36 trillion today, driven by pandemic relief, higher interest costs and growing budget shortfalls.

Wall Street is starting to push back

JPMorgan Chase CEO Jamie Dimon recently warned that rising deficits could eventually rattle investors. “One day … the bond markets are gonna have a tough time,” he said in a FOX Business interview on June 16. “I don't know if it's six months or six years.”

The concern, echoed by billionaire investor Ray Dalio, is that as the government takes on more debt, investors could grow uneasy about its long-term fiscal outlook. To offset that risk, they may demand higher returns to keep buying U.S. Treasury bonds. That would push up Treasury yields, which influence interest rates on mortgages, credit cards, auto loans and more.

The 10-year Treasury yield — a key benchmark for mortgage and loan rates — is nearly unchanged from a year ago, even after several Fed rate cuts aimed at lowering borrowing costs. That suggests markets aren't yet flashing major warning signs, says Thomas Simons, chief U.S. economist at Jefferies.

“We don't see evidence of digestion problems when the Treasury is issuing new bonds,” Simons tells CNBC Make It.

What it means for your wallet

For now, consumers may not see big changes in everyday borrowing costs.

“I don't think this is an issue that's going to push rates much higher from here, not in any kind of short-term time horizon,” says Simons.

However, while raising the debt ceiling might not result in higher borrowing costs now, “long-term, the debt trajectory does matter,” says Christopher Haigh, a certified financial planner in New York City.

“Ignoring the long-term cost of chronic overspending is like ignoring rust on a bridge. It won't matter today, but someday — it will.”