Dear colleagues, friends, economy & policy watchers, and interested citizens:
Welcome to Trillions, Washington’s newest weekly, delivering nonpartisan, factual, plain English explanations and commentary on recent developments in federal spending and tax policy and solutions to preserve and strengthen our democracy.
I’m Chuck Konigsberg. Over the last four decades, I have served on both sides of the political aisle as Assistant Director at the White House Office of Management and Budget, General Counsel at the U.S. Senate Finance Committee, Chief Counsel at the U.S. Senate Rules Committee, Staff Attorney at the U.S. Senate Budget Committee, Staff Director of the Bipartisan Debt Reduction Task Force, and Congressional Affairs Director at two federal agencies, CFPB and CNCS.
I founded and publish Appropriations.com and GovBudget.com which track major developments each day; and each year I publish a new edition of the book Trillions: A Primer on Federal Spending, Taxes, the U.S. Debt Ceiling, and Fiscal Law. (The 2024-25 edition is currently available at LexisNexis.com; this spring, shortly after release of President Trump’s budget, the 2025-26 edition will be published by Amazon.com.)
Since January 20, we have seen a flood of executive orders, reversals, lawsuits and restraining orders. The following are key developments of the first two weeks and what to watch for in coming weeks and months. Updates will be released weekly only on Substack.
Highlights of the Trump Administration’s First Two Weeks:
What You Should Know and What to Expect (Read Time: 17 minutes)
1. The Big Bill – Tax & Spending Cuts, Immigration, Infrastructure/Climate Rollback
House Republicans are reportedly coalescing around one large tax and spending bill to advance the Trump agenda, that would:
· extend and expand the 1997 tax cuts,
· limit immigration and tighten border security,
· add spending for defense, border security and immigration operations;
· cut spending for Medicaid (which provides low income health coverage) and food stamps (SNAP) by imposing work requirements,
· cut costs of federal retirement by increasing employee contributions, and
· repeal provisions of the Biden Administration’s bipartisan infrastructure law and climate investments (Inflation Reduction Act).
Although Republicans hold the White House and have majorities in the House and Senate, their pathway to passing the bill is not as easy as you might think.
Assuming no Democrats support their legislation, their majority in the House of Representatives is so slim they cannot afford a single Republican defection in the House. However, a significant number of fiscal conservatives in the House may not support the bill if budgetary offsets are not included to pay for the tax cut extensions and new tax cuts (costing $5.5 trillion over 10 years).
Currently, House GOP leadership appears to be favoring budget gimmicks—either not counting the cost of the tax cut extensions or pretending the extensions would be paid for by economic growth—rather than finding legitimate offsets. Following this path would add massively to the nation’s public debt, a concern for House GOP deficit hawks.
In the Senate, the major hurdle for the bill is the “filibuster” which allows Senators to prevent a final vote on bills or amendments simply by engaging in extended debate (under Senate rules, votes cannot take place until all debate has concluded). Sixty (60) votes—7 more votes than the GOP currently has—are required to end a filibuster and reach a vote.
Consequently, the GOP strategy is to use a special procedure under the 1974 Budget Act to advance the Trump agenda called “Budget Reconciliation” that is filibuster-proof, because it limits Senate debate time. But there are challenges to this procedure as well.
In order to generate a filibuster-proof reconciliation bill, the Congress must first pass a Budget Resolution—an internal congressional framework that sets total spending, revenue and debt levels, and instructs committees of the Congress to report pieces of the reconciliation legislation within their jurisdiction. The House Budget Committee may attempt to vote on a Budget Resolution this week, but that will happen only if there are no Republican defections—a big “if.” If the House Republicans are unable to achieve unanimity, Senate Republicans may reportedly try to move the Trump agenda in two separate reconciliation bills, rather than one.
If House and Senate Republicans manage to move one or two reconciliation bills, they face another major obstacle—the Senate’s “Byrd Rule.” Sponsored by the late Senator Robert C. Byrd (D-WV) when I was staff attorney at the Senate Budget Committee, the Byrd Rule limits what can be included in a budget reconciliation bill to provisions that are budgetary in nature. Any provision of the bill that is not strictly budgetary is considered to be “extraneous” and can be stricken from the bill by any Senator raising a point of order. For example, policy changes that have “merely incidental” budgetary effects are extraneous, as are tax cuts or spending increases that would increase deficits beyond the 10-year budget window (which is why tax cuts are routinely limited to 10 years). The Byrd Rule is a powerful tool for opponents of the bill.
Budget Reconciliation was used 14 times in the 1980s and 1990s to reduce budget deficits. However, since 2001, the filibuster-proof reconciliation budget procedure has been turned on its head and used 9 times to cut taxes or increase spending, increasing deficits and the public debt. Most recently, reconciliation was used in 2017 by President Trump to pass the TCJA tax cuts, and in 2021 and 2022 by President Biden to pass the American Rescue Plan Act and the Inflation Reduction Act. For more background, see my book Trillions. Sign up to receive this column each week for updates on the Trump reconciliation bill.
2. Tariffs on Canada, Mexico, China could Trigger Inflation
Late-breaking: Monday morning, President Trump agreed to pause tariffs on Mexico for one month. He is speaking to Canada’s Prime Minister Trudeau later on Monday.
The big economic news this past weekend is that Saturday President Trump exercised authority delegated to Presidents by Congress to impose tariffs on our three biggest trading partners—Canada, Mexico, and China. The Founders gave to Congress the authority to set tariffs, but Congress has delegated to Presidents authority to negotiate trade deals and raise tariffs.
President Trump ostensibly has imposed tariffs to cajole the three countries into cutting off the flow of undocumented migrants and fentanyl into the U.S., but this rationale falls apart when you examine the miniscule amount of fentanyl crossing the border with Canada.
Trump also claims the tariffs will improve the economic position of the U.S., but most economists disagree. The more likely outcome is that prices on imports from all three countries will increase quickly and markedly, triggering higher inflation.
The Administration repeatedly claims that the three countries will pay the tariffs, but that is not how tariffs work. Import tariffs are paid by the U.S. companies importing the products and, in many or most cases, the costs are passed along to consumers as higher prices.
Aside from the inflation risks, the tariffs also seriously damage U.S. relations with our two closest neighbors, Canada and Mexico (see Fareed Zakaria’s Sunday interview with Chrystia Freeland of Canada). Freeland, a leading candidate to replace Prime Minister Trudeau called the Trump tariffs an “act of economic warfare.”
Moreover, if you believe that strong economic ties with China are an important stabilizing force for the two global powers, provoking an unnecessary trade war makes little sense. History teaches that countries that are economically interdependent are less likely to go to war.
3. President v. Congress and Power of the Purse
The Trump Administration threw the federal government, state and local governments, contractors, and citizens into chaos last Monday, 1/27, when Office of Management and Budget (OMB) Acting Director Matthew Vaeth issued Memorandum #M-25-13, temporarily freezing federal grant and loan payments pending further review of conformance with presidential policies. The temporary pause was to be effective Tuesday, 1/28, at 5pm. See JD Supra for additional background.
However, before the pause became effective, several nonprofit advocacy groups and others filed a request in federal court to temporarily stay the Memorandum’s directives, citing violations of the First Amendment and the Administrative Procedure Act. “The scope of what you are ordering is breathtaking, unprecedented, and will have devastating consequences across the country,” warned Rep. Rosa DeLauro (Connecticut) and Sen. Patty Murray (Washington), the top Democrats on their chambers’ appropriations committees, in a letter to the OMB.
OMB attempted to quell fears in a clarification “fact sheet,” midday on Tuesday, 1/28, but later that day, U.S. District Judge Loren AliKhan of the DC District, agreed to stay the OMB directive until the following Monday, 2/3. On Wednesday, 1/29, OMB rescinded the spending pause, although the White House press secretary insisted “this is not a rescission of the federal funding freeze” and that the President’s Executive Orders “on federal funding remain in full force and effect, and will be rigorously implemented.”
Meanwhile, a separate lawsuit was filed on Tuesday, 1/28, in federal district court in Rhode Island by two dozen Democratic state attorneys general challenging the spending freeze. Due to the statement of the White House press secretary insisting the pause remained in effect, the U.S. District Court judge in Rhode Island stated that he was inclined to grant a request for a temporary restraining order despite the recission of the OMB Memo.
On Friday, 1/31, US District Court John McConnell of Rhode Island granted a temporary restraining order providing that the Administration "shall not pause, freeze, impede, block, cancel, or terminate... awards and obligations to provide federal financial assistance to the States….” In a clear and forceful decision, Judge McConnell found that:
· “No federal law authorizes the Executive’s unilateral action here";
The Administration's action violates the constitutional separation of powers and the Administrative Procedure Act, and is contrary to Congress' intent in funding the various programs;
The Administration's claim "that the Executive Branch has a duty 'to align Federal spending and action with the will of the American people as expressed through Presidential priorities,' is a constitutionally flawed statement. The Executive Branch has a duty to align federal spending and action with the will of the people as expressed through congressional appropriations, not through 'Presidential priorities'"; and
The Administration failed to follow the congressional notification procedures established by the Impoundment Control Act.
In a hint of future Supreme Court review, the District Judge quoted Justice Kavanaugh's 2013 opinion when he was on the DC Circuit that with respect to "the suggestion that the President has a constitutional power to decline to spend appropriated funds, we must conclude that existence of such a broad power is supported by neither reason nor precedent."
Outlook: President Trump’s OMB Director nominee Russ Vought has repeatedly stated his conviction that the Impoundment Control Act of 1974 unconstitutionally impedes the President’s inherent authority to withhold congressionally appropriated funds. Watch for repeated actions by OMB pushing the limits of presidential impoundment authority until the issue is finally resolved by the Supreme Court. For more background on Impoundment, see my book Trillions.
4. DOGE Targets Federal Work Force and the Services they Provide
Last week, the Trump Administration’s “DOGE” headed up by Elon Musk launched an unprecedented assault on the federal workforce.
On November 12, 2024, President-elect Trump named Musk and Vivek Ramaswamy to head up a nongovernmental “Department of Government Efficiency” to focus on three types of reforms: regulatory rescissions, administrative reductions, and cost savings.
Following Trump’s inauguration on January 20, 2025, Ramaswamy left as co-director of the project and DOGE became an office inside the White House, with Musk as Director; its location in the White House was accomplished by taking over the former U.S. Digital Service which resided in the Executive Office of the President. (See GovBudget.com/doge/ for more background and continuing coverage).
DOGE initially made headlines with Musk’s wild assertion that he could cut the $7 trillion annual federal budget by nearly a third—$2 trillion. I will address the absurdity of this claim in future columns; for now, take a look at my federal budget overview at GovBudget.com where you will see that cutting $2 trillion in a single year would require eliminating all spending other than defense, interest payments, Medicare, Social Security, and Medicaid payments to the States. This would mean eliminating all spending on key American priorities: Veterans Compensation and Healthcare, Homeland Security, Highways, Farm Programs, Disaster Relief, Law Enforcement, Housing, Health Research, Education, Airport & Airways Safety and Security, NASA, US Embassies, Special Education, Prisons, Pandemic Response, Food and Drug Safety, Emergency Nutrition, and Student Loans—among many priorities the American people strongly support.
Of course, we all support eliminating fraud, waste, and duplication, and many of us, myself included, see the exploding federal debt as dangerous and unsustainable. But suggesting that one-third of the budget is fraud, waste and abuse is simplistic and irresponsible. As a reality check, consider that the House Budget Committee, in designing a resolution to advance Trump priorities, is reportedly aiming to save $315 billion over 10 years compared to Musk’s $20 trillion over 10 years.
In addition to making wild statements about the budget, DOGE is targeting federal workers, apparently thinking that the key American priorities listed above can be eliminated in a backdoor manner by scaring federal employees into resigning. And so, last Tuesday, 1/28, DOGE engineered an OPM email to all federal employees giving them a week to accept a buyout plan with pay continuing through September 30, 2025—with the possibility that their jobs would be eliminated without any severance pay should they decline to resign.
Senator Tim Kaine (D-VA) said on the Senate Floor, in response, “The President has no authority to make that offer. There’s no budget line item to pay people who are not showing up for work….If you accept that offer and resign, he’ll stiff you.” To add insult to injury, late Thursday evening, OPM sent another mass email repeating the buyout offer saying, “we encourage you to find a job in the private sector as soon as you would like to do so….The way to greater American prosperity is encouraging people to move from lower productivity jobs in the public sector to higher productivity jobs in the private sector.”
Apparently, Musk and his cronies believe that public sector jobs that defend our nation, teach our children, care for our Veterans, inspect our food and drugs, secure the homeland, build our highways, secure our airspace, respond to pandemics, stabilize our world-class agriculture sector, and enforce our laws are “low productivity jobs.”
Outlook: experts are examining whether the emails from OPM and agency officials may violate the Anti-Deficiency Act by promising buyout payments through September 30 without any underlying federal appropriation. For more background on the Anti-Deficiency Act, see my book Trillions.
5. Immediate Issues: Expiring 2025 Funding and another Debt Limit Crisis
Looking ahead to future weekly columns, I will update you on each of the issues above – the Reconciliation Bill, Tariffs, Impoundment, and Federal Employees – as well as two other fiscal issues of immediate importance:
(1) expiration of the temporary FY 2025 funding measure next month on March 14, 2025; and
(2) the “X-date” when Treasury will run out of measures to raise the cash necessary to honor U.S. obligations under the new debt limit that became effective January 2, 2025.
For additional background on the expiring FY 2025 funding, see Appropriations.com which is updated daily; and for more background on the Debt Ceiling see GovBudget.com/key-debt-ceiling-developments and my book Trillions.