TRILLIONS – Week in Brief – July 1, 2025
Senate Narrowly Passes Budget Megabill Sending it to House—Bill Explodes the Public Debt, Surges Deportations, Slashes Health Coverage and Food Aid, Ends Clean Energy Initiatives, Limits Student Loans
Estimated reading time: 14 minutes
(1) SENATE NARROWLY PASSES NEW VERSION OF TAX AND SPENDING CUT MEGABILL, SENDING IT BACK TO THE HOUSE: Would Explode the Public Debt, Surge Deportations, Slash Health Coverage and Food Aid for Millions, End Clean Energy Initiatives, and Limit Student Loans
The Senate today passed 51-50 (with the Vice President breaking the tie) its own version of the Trump tax and spending megabill sending it back to the House. The vote was party-line, with the exception of GOP “no” votes by Rand Paul of Kentucky (opposed to the debt limit increase in the bill), and Susan Collins of Maine and Thom Tillis of N. Carolina (both opposed to the Senate’s higher Medicaid cuts). Read the revised senate bill.
The Senate bill would explode the public debt by nearly $4 trillion over 10 years, surge immigrant deportations, and slash Medicaid, SNAP (federal food aid), clean energy initiatives, and student loans. The bill also circumvents the annual appropriations process by increasing defense spending $150 billion with little detail or oversight—an invitation for waste, fraud, and abuse.
During Senate consideration, the Senate defeated a raft of Democratic amendments.
The House will now either vote on the Senate version or seek to iron out the differences between the House-passed and Senate-passed bills (by formally requesting a House-Senate conference or informally resolving the differences and sending a compromise version back to the Senate).
Highlights of the Senate-passed version (all of the following are 10-year numbers):
Senate Bill Adds $4 Trillion to the Public Debt: Contrary to White House and Senate GOP claims, the bill would increase deficits by $3.253 trillion over 10 years—close to $4 trillion when interest payments on the additional debt are included.
The $4 Trillion Public Debt Increase results from:
Tax Cuts of $4.5 trillion (extending the 2017 cuts and adding new business and individual tax cuts);
Spending Increases of roughly $300 billion for mass deportations, border security, and defense;
[offset by:]Spending Cuts of $1.5 billion from Medicaid, clean energy investments, student loans, SNAP (food stamps), and other health care programs.
Despite the $4 Trillion Debt Increase, Senate Republicans Falsely Claim The Senate Bill “Reduces Deficits”: This contention is based on the phony assertion that extending the 2017 tax cuts—scheduled to expire at the end of 2025—costs “nothing” because the bill simply extends “current tax policies.”
Why the GOP assertion of “no cost” is wrong: The reality is that many of the 2017 tax cuts will expire in December 2025 and, without congressional action, additional revenues would flow into the Treasury beginning in 2026. However, the Senate reconciliation bill would extend the expiring provisions cutting current law revenues by $3.8 trillion over 10 years.
Senate Republicans voted yesterday afternoon to hide the enormous cost of extending the tax cuts. They did this for three reasons: First, they want to claim that the overall bill cuts deficits rather than explodes the public debt. Second, they wanted to prevent a parliamentary objection that the Senate Finance Committee had violated its reconciliation instructions which cap revenue losses in the bill at $1.5 trillion. Third, their bill makes many of the 2017 tax cuts permanent which should have violated the Byrd Rule’s prohibition on long-term deficit increases if the bill had been properly scored.
How were Senate Republicans able to do this without running afoul of the Parliamentarian? The 1974 Congressional Budget Act gives final authority over budget scorekeeping to the Chairman of the Budget Committee—so the Chairman can choose to hide the true cost of the bill—which is exactly what Chairman Lindsey Graham did as he presides over the largest increase in the public debt in U.S. history.
The Senate Bill Includes a $5 Trillion Debt Limit Increase: If you are still unsure who is telling the truth about the cost of the Senate bill, consider this: Section 72001 of the bill includes a huge $5 trillion increase in the public debt limit—which would be unnecessary if the Senate bill was reducing deficits as claimed by the White House and Senate GOP leaders.
The Senate Bill’s Most Expensive Tax Cuts are: $2.2 trillion to permanently extend 2017 tax rates and brackets; $1.4 trillion to permanently extend the higher standard deduction; $1.4 trillion to permanently extend the increased alternative minimum tax exemption; $817 billion to permanently increase the child tax credit and tie it to inflation; $737 billion to extend and make permanent the 20 percent deduction for owners of pass-through businesses; $363 billion to permanently allow immediate expensing of new capital investments; $212 billion to permanently extend the increased estate tax exemption threshold; $141 billion to permanently allow full expensing of domestic R&E expenditures; and $141 billion for a special depreciation allowance to incentivize factory construction and enable businesses to recover the costs of qualifying assets more quickly.
The bill also adds new temporary tax breaks for tips, overtime pay, seniors’ income (to partially offset taxation of Social Security benefits), and auto loan interest for U.S. vehicles. It includes for 5 years an increase in the State and Local Tax (SALT) deduction cap to $40,000. It establishes a new federal private school voucher program. It also increases a tax on university endowments and includes so-called Trump investment accounts for newborns seeded with $1,000 of taxpayer money.
Follow this link for a complete list of tax cuts and tax savings.
Click here to fact-check White House claims on the tax cuts.The Senate Bill Makes Deeper Cuts to Medicaid than House Bill: The Senate bill cuts Medicaid by $1.02 trillion, compared to $863 b in the House bill. The biggest Medicaid cuts are:
reducing Medicaid enrollment by imposing 80-hour per month work requirements with every-6-months-eligibility-checks (reducing federal funding $326 billion);
a cap on state provider taxes (reducing federal funding by $191b); and
cuts in federal funding for “state directed payments” to hospitals and other providers (reducing funding $149 billion).
Overall, the Senate bill’s Medicaid cuts and other cuts to federal healthcare programs would increase the number of uninsured by 11.8 million in 2034.
GOP Senator Thom Tillis of North Carolina said, “What do I tell 663,000 people (in my state) in two years or three years when President Trump breaks his promise by pushing them off of Medicaid because the funding’s not there anymore?”
The Senate added a $50 billion Rural Hospital Transformation Program to mollify concerns about how the Medicaid cuts would impact rural hospitals.
Drill down on all the healthcare provisions in the Senate and House bills HERE.
The Senate Bill Cuts SNAP and other federal food assistance $180 billion—for the first time requiring states to cover a portion of SNAP benefits and administration costs. Since states have balanced budget requirements, this will force them to cut food assistance or opt out of the program altogether.
SNAP currently provides basic food assistance to 40 million people, including 16 million children, 8 million seniors, and 4 million non-elderly adults with disabilities. Any of these beneficiaries could be impacted by the cuts.
In order to secure the support of Alaska Senator Lisa Murkowski, the bill includes a delay in SNAP cuts for certain states, including Alaska, that have a higher payment error rate.
The Senate Bill “reshapes the federal student loan repayment system for nearly every borrower currently in repayment.” Read about last minute changes to the Senate bill HERE. The Senate bill:
Eliminates Graduate Plus Loans for graduate and professional students.
Limits Parent PLUS Loans by restricting access to income-driven repayment options. Read more.
Phases out several popular income-driven repayment plans starting next year--Income Contingent Repayment (ICR), Pay As You Earn (PAYE), and Saving on a Valuable Education (SAVE)-- causing many borrowers to experience higher monthly payments. Read more.
Limits repayment plan options for new student loan borrowers beginning July 1, 2026, to two repayment plans: (1) a Standard plan, with a term of 10 to 25 years depending on the loan balance, or (2) a new income-driven “Repayment Assistance Plan” (RAP) which allows student loan forgiveness only after 30 years of payments (far longer than any other current plan). Read more.
Pell Grants: The Senate bill, like the House bill, would provide $10.5 billion to stabilize the Pell Grant program’s finances, however the House bill would add conditions to Pell Grants which would put the grants out of reach for some part-time working students.
The Senate Bill Rolls Back Clean Energy Investments and Tax Incentives that were enacted in 2022 to slow the effects of climate change (increased wildfires, droughts, floods, and extreme weather).
Under a last minute compromise, Wind and Solar credits still phase out, but more slowly: “The bill allows wind and solar projects that begin construction within a year… to get a full tax credit…. Wind and solar projects that begin later must be placed in service by the end of 2027 to get a credit.”
Opponents of the wind and solar phase out say it would crush growth in the wind and solar industries and lead to a spike in Americans’ utility bills — especially at a time when AI and crypto are surging the demand for more electricity nationwide.Senate bill scraps the tax break for people who buy new or used electric vehicles (advancing the 2032 expiration date to September 30 of this year).
The bill blocks a fee designed to curb excess methane emissions from oil and gas drilling. Methane is the most potent greenhouse gas.
(However, the bill retains incentives for other clean energy technologies such as advanced nuclear, geothermal and hydropower through 2032.)
The Senate Bill Surges Federal Spending on Mass Deportations including $46 billion for the U.S.-Mexico border wall, $45 billion for 100,000 migrant detention facility beds, and hiring 10,000 new ICE agents—aiming for 1 million deportations per year.
Due to the Tax Cuts and Spending Cuts, the Senate bill is HIGHLY REGRESSIVE hurting the poorest Americans and enriching the wealthiest: The Yale Budget Lab estimates the bottom quintile would see household resources decline by nearly 3 percent, while the top 1 percent of Americans would receive a tax cut averaging $30,000. Middle-income taxpayers would see a tax break of only $500 to $1,500.
(Moreover, the Administration’s pending tariffs would make the Trump agenda even more regressive due to the likelihood that tariff taxes will be passed along to consumers.)The bill also resurrects the 1980s “star wars” boondoggle for defense contractors spending $25 billion on a “golden dome” missile defense system without any public hearings or evidence-based planning to support the expenditure.
(The author managed budget reconciliation and debt limit legislation as General Counsel at the Senate Finance Committee.)
(2) APPROPRIATIONS: House continues marking up FY 2026 bills.
On a parallel track to the budget reconciliation bill, the House Appropriations Committee is continuing to markup its FY 2026 spending bills. Last week, the full committee: approved the FY26 Agriculture-Rural-FDA appropriation bill 35-27 vote; approved the FY26 Homeland Security appropriation bill 36-27; and approved the FY26 Legislative Branch appropriation bill 34-28.
Also, the full House of Representatives approved the FY26 Military Construction-VA appropriation bill 218-206.
Notably, the Legislative Branch bill would cut funding for the Government Accountability Office (GAO) by nearly half. Since the GAO is the legislative branch agency that investigates and identifies government waste, fraud and abuse, this move to gut the GAO belies the seriousness of the White House and congressional Republicans about making government more efficient. (This also comes on the heels of the White House firing 12 agency Inspectors General, who are the Executive Branch leads in identifying waste, fraud and abuse.)
Also notable is that the House GOP is not negotiating compromise funding levels with Democrats. Since Senate passage of appropriation bills requires 60 votes (and Democratic support), the House GOP appropriation bills for FY 2026 are on a road to nowhere—with a stopgap continuing resolution likely to provide FY 2026 funding, further ceding the power of the purse to the Executive Branch.
(3) TARIFFS AND THE ECONOMY:
U.S. - EU Trade Negotiations: Bloomberg reports that “the European Union is willing to accept a trade arrangement with the U.S. that includes a 10% universal tariff on many of its exports, but wants the U.S. to commit to lower rates on key sectors.” The EU is seeking ways to effectively “lower Washington's tariffs on automobiles, car parts, steel, and aluminum.”
U.S.-Canada Trade Negotiations: After negotiations with Canada were temporarily derailed at the end of last week by a new Canadian digital services tax targeting U.S. technology firms, Canada dropped the digital tax and negotiations have resumed.
China’s rare earths are flowing again: Reuters reports the “threat of mass shutdowns across the automotive supply chain is fading as Chinese rare earth magnets begin to flow, though automakers and suppliers say production plans still face uncertainties and a continued risk of shortages.” Read more about the U.S. – China trade framework to lift export controls.
Investors turning to Europe: As a consequence of the Trump-initiated tariff wars and his tax-and-spending megabill on the verge of seriously worsening the U.S. public debt, Reuters reports that investors are turning their attention from the U.S. to the E.U., and the Financial Times reports that “Donald Trump’s fiscal policy and Fed attacks imperil U.S. haven status.”
U.S. consumer confidence dropped in June: Bloomberg reported that U.S. consumer confidence declined in June “ due to lingering anxiety about the potential impacts on the economy and job market from higher US import duties.”
(4) MAJOR DEVELOPMENTS ACROSS GOVERNMENT:
Immigration raids leave crops unharvested and farms at risk. This is only the beginning of the economic chaos that will result from deporting millions of workers who have become integral to the U.S. economy. We will report much more on this as the labor crisis unfolds.
More than one-quarter of Internal Revenue Service staff have left in the past three months—raising the likelihood of service gaps and processing details, and declining revenue collections at a time of fiscal peril for the U.S.
CNN reported last week that the Trump Administration is quietly scrambling to rehire key federal workers after DOGE firings.
A physician and professor of family medicine at VCU explains why RFK Jr’s chaotic cuts to America’s public health programs “will cost lives.”
(5) THE FIGHT FOR DEMOCRACY AND THE RULE OF LAW:
The Week’s Must Read from the Washington Post: How Trump’s emergencies and wins dominated the Supreme Court term. The justices’ regular caseload was overshadowed by requests from the president to allow some of his most controversial policies to go forward.
After last Friday’s controversial Supreme Court decision to limit the power of Federal judges to issue nationwide injunctions, Trump says he will move aggressively to undo nationwide blocks on his agenda.
About the author: Charles S. Konigsberg, J.D., served as Assistant Director at the White House Office of Management and Budget for three successive Budget Directors; General Counsel at the U.S. Senate Finance Committee; Minority Chief Counsel at the U.S. Senate Rules Committee; Staff Attorney at the U.S. Senate Budget Committee; Director of Congressional Affairs at CFPB and AmeriCorps; and Staff Director of a national bipartisan budget task force.
He is author of the book, Trillions: A Primer on Federal Spending, Taxes, the U.S. Debt Ceiling, and Fiscal Law. Click here to purchase.
He is also Publisher of Appropriations.com which tracks appropriation bills; and GovBudget.com which tracks the Reconciliation Bill and major federal developments, by subject area, each day.
Speaking engagements and press interviews can be scheduled by calling: (202) 818-8578 or (301) 509-5688. Email comments, suggestions, and questions to: ckonigsberg@capitolpublicpolicy.com.
Unfortunately, DT and Rs are keeping you being a very busy man, with best in class reporting of continuously depressing news