The Senate's $3.8 Trillion Magic Trick

How budget gimmicks and trick-down dogma threaten America's fiscal sanity -- and its national security

Jun 30, 2025

Good morning,

The U.S. Senate is rushing to vote on President Trump’s 'Big, Beautiful Bill' before the holiday weekend—but not before gaming the rules to do it. Before they can vote on the bill, however, they have to vote on a series of amendments to it, and more importantly have to vote on a measure that seeks to write-off $3.8T in deficit spending from extending Trump’s tax cuts from 2017.

It’s a sneaky way of sidestepping precedent and avoiding the Senate’s parliamentarian (the senior advisor to the Senate on its own rules) having to make a formal finding and recommendation.

Senator Lindsey Graham (R-SC), chair of the Senate Budget Committee—and who has built himself a reputation for flip-flopping over the past 10 years—is pushing for this ‘current policy baseline’. By assuming the Trump tax cuts are baked into future budgets, the Senate avoids having to account for their actual cost—an accounting sleight-of-hand that sidesteps both fiscal reality and Senate rules. It’s the only way that Trump’s bill passes with the tax cuts and without violating the Senate’s own budget blueprint adopted earlier this year, in which the Finance Committee can only increase the deficit by a maximum of $1.5T.

So what? Aren’t tax cuts good? Yes, they’re good. We all want to control our own money. And, a mainstay of political planks from conservatives since Reagan was president, is that of ‘trickle down economics.’ This plank purports that cutting taxes on the wealthiest members of a society will eventually trickle down to the benefit of all society. Jeff Bezos, Elon Musk, and Bill Gates will spend that extra $1B that they each save on taxes. So goes the theory. In fact, this theory has become a bit of an accepted truism and appears to go hand-in-glove with Republican policies. Three of the last four Republican presidents adopted policies and pushed legislation of the sort.

We should note, that wasn’t always the case. George H.W. Bush referred to the theory as ‘voodoo economics’ in 1980 while running against Ronald Reagan in the presidential primaries.

We should also note that the practice of implementing trickle-down economics hasn’t exactly delivered transformative results. Take our three billionaires—Bezos, Musk, and Gates. With a combined net worth of over $700 billion, each of them could spend more than $6 million per day for fifty years and still not run out of money.

That’s not a moral critique—it’s just arithmetic. They already have more than they could possibly spend. Giving them even more through tax cuts isn’t going to suddenly boost consumer spending or unleash new waves of economic activity. At a certain point, the marginal utility of an extra billion just… doesn’t matter.

But, that’s really neither here nor there. What’s more important is that we still don’t have a truly balanced budget and haven’t since 2001. This means that our National Debt (already at $37T of which $9.3T is held by foreign countries including $308B held by China), will grow by an extra $3.25T.

All of this is to say that the Senate’s push to use the ‘current policy baseline’ is a terrible, horrible, no good, very bad idea with potentially important ramifications for national security. That kind of fiscal recklessness weakens America’s long-term security posture—making it harder to invest in next-generation defense capabilities, compete with China’s state-backed industrial policy, or even manage the interest payments that now dwarf our military R&D budget.

Alright, let’s get on to the news around advanced computing.

News Headlines

Senate expected to vote on Big, Beautiful Bill this week (NYT)
HASC member Rep. Don Bacon (R-NE) believes we're being too cautious with cyber capabilities (DS)
Iran refuses additional negotiations unless U.S. promises no more strikes (BBC)
Russia has seized one of Europe's largest lithium deposits (DB)
Sinaloa drug cartel hacked security cameras to track and kill FBI informants (TG)
Canada folds on digital tax to resume trade talks with U.S. (POL)
Trump says there's a buyer for TikTok but won't disclose name (TH)

Quantum Tech

E.U. presses for quantum-safe encryption by 2030 as risks grow (QI)
Canada eyes 2035 as deadline for post-quantum cryptography of all federal non-classified IT systems (QI)
S. Korea recognizes quantum, AI chip designs as national strategic technologies (QI)
Breakthrough QC could solve problems 200x faster, using 2,000x less power than supercomputer (LS)
Discovery in quantum materials could make electronics 1,000 times faster (PHYS)
Quantinuum crosses key quantum error correction threshold, marking turn to utility scale (QI)
DARPA thinks quantum stealth could render stealth technologies obsolete (ASF)

AI / ML

Military vets patent hallucination-resistant, explainable AI tech (DS)
DeepSeek aids China's military and evaded export controls: U.S. officials (RT)
Tech firm uses AI to make Pentagon budget, spending easier to track (DN)
Laser-cooled GPUs get buy-in from the U.S. military (THW)
Over 40% of agentic AI projects will be scrapped by 2027, Gartner says (RT)
Meta poached four OpenAI researchers (RT)
Zuckerberg is compiling 'The List' of AI geniuses in wild recruiting push (WSJ)
OpenAI, Jony Ive accused of trying to 'bury' rival startup (FT)
SoftBank aims to become leading 'artificial super intelligence' platform (RT)

NanoTech / Chips

Taiwan blacklists Chinese tech firms including Huawei, SMIC, upping the ante in chip war (FT)
Huawei, SMIC struggle to advance chips to 5-nm level (MP)
Nvidia insiders have cashed out of over $1B in stock amid market surge (CNBC)
OpenAI turns to Google's AI chips to power its products (RT)
Microsoft's AI chip delayed 6 months in major setback (THW)

AR / VR / XR

German army orders new IRIS goggles with thermal and AR features (GDN)
Apple reportedly working on 'a bunch' of new XR devices (TV)
xMEMS creates fan chip for XR smart glasses, allowing thermal control of wearables (BW)

Deal Flow

Funds

Sorenson Capital closed its third early-stage cybersecurity VC fund at $150M (PU)
European Investment Fund invests $35.2M into Quantonation's planned $235M Fund II for quantum techs and deep physics (QI)

VC

Chinese AI chip startup Biren Technology raised $207M in fresh funding and is preparing for a Hong Kong IPO (RT)
Snowcap Compute raised a $23M seed round led by Playground Global for superconducting AI chips (RT)
EFFECT Photonics, a next-gen optical solutions, raised a $24M Series D (BW)
Eventual, a Python-native open source data processing engine, raised a $20M Series A led by Felicis (FSME)
LIDROTEC, a startup building next gen laser systems for low damage, high precision chip cutting, raised a $13.5M Series A-2 led by Lam Capital and Goose Capital (TEU)
Qunnect, an eight-year-old New York startup that builds hardware that enables quantum computers and networks to securely transmit data over long distances, raised a $10 million Series A extension round. Airbus Ventures led the financing (HPC)
Swave raised a $7M follow-on to its Series A, led by IAG Capital Partners for holographic XR platform (AUG)
PhotonPath, a startup designing integrated photonics chipsets and plug and play modules, raised a $6M Series A led by Join Capital (TEU)

PE / M&A / Exits

AI cloud computing firm CoreWeave is in talks to buy $5B-listed digital infrastructure firm Core Scientific (WSJ)
Chip design company Ambarella, valued at ~$2.6 billion, is exploring strategic options including a sale (BBG)
Quantum Computing Inc. closed a private placement of common stock for $200M (PRN)
Meta is in advanced talks to acquire voice replication AI startup PlayAI (TC)
Intel Capital-backed Chinese visual perception, AI company Reconova Technologies is planning to raise $100M in a Hong Kong IPO this year (BBG)
Chinese chip designer Montage Technology is planning a Hong Kong IPO that could raise ~$1B (AInv)