(1) 10-YEAR ENTITLEMENT & TAX CHANGES (“Budget Reconciliation”): House and Senate GOP negotiators disagree over Medicaid and taxes.
(2) ECONOMY: slowdown and higher inflation begin; Trump’s response—more tariffs.
(3) MAJOR DEVELOPMENTS: Tax records to ramp up deportations; GOP chairmen warn Trump on NATO; FTC independence in doubt; White House waffles on Education shutdown; Tax revenue could drop by 10% with IRS staff cuts; Food shortages; Worker hire-backs; Key Court Actions of the Week.
(4) THE ROAD TO AUTOCRACY: Latest Developments and How to Respond.
(5) BUDGET FACT CHECK: Trump tax policies could double the public debt.
(Total Read-Time: 15-minutes)
1. 10-YEAR ENTITLEMENT & TAX CHANGES (“Budget Reconciliation”): House and Senate GOP negotiators face disagreements over Medicaid and taxes.
House and Senate GOP negotiators are focused on resolving their differences on a budget resolution framework for enactment of President Trump’s multiyear budget agenda: (1) hundreds of billions in new spending for mass deportations, the coast guard, and missile defense; (2) extending the 2017 tax cuts and enacting new tax cuts; (3) paying for the tax cuts with major cuts to entitlement spending, likely to include Medicaid and food stamps; and (4) increasing the debt limit by $4 trillion.
GOP leaders aim to advance this agenda using the fast-track “budget reconciliation” process which allows tax and entitlement changes to move forward in the Senate with 50 votes, rather than the 60 votes normally needed for major legislation (this is key to the GOP which holds only 53 seats in the Senate).
However, before the budget reconciliation process can begin, House and Senate Republicans must negotiate a budget resolution, which is needed to initiate the process with budget reconciliation instructions to committees of the House and Senate to draft changes to tax and entitlement programs.
House and Senate GOP negotiators on the budget resolution are currently divided over the following issues:
1) Small bill or big bill?
Senate GOP prefers a limited bill now—focusing on $345 billion in spending increases to support missile defense, mass deportations, and the coast guard—while putting off tax and spending cuts to a second bill later in the year.
House GOP wants to include in one large bill, the defense and immigration
spending increases, plus $4.0 to $4.5 trillion in tax cuts, paid for by cutting entitlement spending, likely to include Medicaid, Food Stamps (SNAP) and other cuts totaling $1.5 to $2 trillion.
2) House and Senate are divided on whether to use an accounting gimmick to overlook the enormous cost of the tax cut extensions: GOP Senators and President Trump want to use a budget gimmick to ignore the more than $4 trillion cost of extending the 2017 tax cuts, arguing that extending current tax cuts is simply “continuing current policies” and should not be shown as a cost, while House deficit hawks oppose the gimmick and instead want to use the tax cuts to justify deep spending cuts. On Friday, the nonpartisan Congressional Budget Office confirmed that extending the tax cuts beyond 2025 would, in fact, increase deficits by $4 trillion (and more if interest is included).
3) The House and Senate GOP are divided on Medicaid cuts: The House GOP wants up to $880 billion in Medicaid cuts over 10 years (through work requirements and other limitations), as well as several hundred billion in cuts to food stamps and other entitlements, which are opposed by GOP Senate moderates and advocacy groups. The White House continues to insist that Medicaid will not be cut, but the House-passed budget resolution instructs the House Energy & Commerce Committee to cut $880 billion. Cuts of that size could be achieved only by cutting Medicaid or Medicare (and Medicare cuts are unlikely).
4) House and Senate GOP are divided on the debt limit: House GOP wants to raise the public debt limit in the filibuster-proof reconciliation bill, while Senators want a separate debate on the debt ceiling.
The author managed multiple reconciliation bills for the Senate Finance and Senate Budget Committees. For daily updates on budget reconciliation, see our website GovBudget.com.
2. ECONOMY: slowdown and higher inflation has begun; Trump’s response—more tariffs.
On Wednesday, the Federal Reserve confirmed that growth is slowing and inflation is increasing, leading some economists to predict a period of “stagflation” (the term combines a stagnant economy and rising inflation). In a note to clients on Wednesday, JPMorgan chief US economist Michael Feroli said projections “were revised in a stagflationary direction.”
Fed Chair Jay Powell said, “clearly some of (the current situation), a good part of it,” is related to the President’s tariffs which “tend to bring growth down and push inflation up.” He said, as a result, the Fed did “not need to be in a hurry” to lower interest rates given “unusually elevated” uncertainty, and progress on inflation was “probably delayed for the time being.”
President Trump’s response was to attack the Federal Reserve for not lowering short-term interest rates to offset the damaging effects of tariffs, AND prepping a new and broader set of global tariffs on U.S. imports to be implemented in early April.
In other words, the Trump Administration is taking the “dumbest trade war in history” (the Wall Street Journal’s words) and planning to deepen the trade war next month with global tariffs. This broad taxation of imports from all global trading partners will further push up prices for U.S. consumers and businesses, decrease consumer demand, and slow U.S. economic growth even more. At the same time, the reduction in federal employment and spending will further deepen the economic slowdown.
The damnable thing about this is that the tariff-induced slowdown and inflation we now face is entirely unnecessary and entirely predictable. In 1930, the Smoot-Hawley tariffs raised U.S. tariffs from already high levels (set in the 1920s) and U.S. imports and exports fell 40 percent in the following two years.
Recommended reading:
Tracking every Trump tariff and its economic effect (Bloomberg)
Trump’s manufacturing dream is a mirage (WashPost/Zakaria).
For daily updates see GovBudget.com/tariffs and GovBudget.com/economic-news.
3. MAJOR DEVELOPMENTS: Tax records to ramp up deportations; GOP Chairmen Warn Trump on NATO; FTC independence in doubt; White House waffles on Education shutdown; Tax revenue could drop by 10% with staff cuts; Food shortages; Worker hire-backs; Key Court Actions of the Week
The following are key developments from last week, including court actions:
ICE and IRS near deal to use tax records to ramp up deportations of undocumented migrants: Washington Post reports, “Under the draft agreement, Immigration and Customs Enforcement would be able to submit names and address to the IRS to cross-reference with confidential taxpayer databases…. The IRS has for years told undocumented workers that their tax information is confidential and that it is safe to file income tax returns without fear of being deported. About half — possibly more — of the roughly 11 million undocumented immigrants in the country file income tax returns to document their payments to the U.S. government, according to researchers.”
Congress Pushes Back on NATO: House and Senate GOP Armed Services Chairmen warned Trump not to step back from NATO: Responding to reports that the Administration is weighing relinquishing the U.S. role as NATO's Supreme Allied Commander Europe, Senator Roger Wicker (R-MS) and Representative Mike Rogers (R-AL) who chair the Armed Services Committees said, "We will not accept significant changes to our warfighting structure that are made without a rigorous interagency process, coordination with combatant commanders and the Joint Staff, and collaboration with Congress."
Trump Threatens FTC, a consumer watchdog agency and primary regulator of Big Tech: Trump’s firing of Democrats on the panel puts the independence of the Federal Trade Commission in doubt. The undermining of the FTC would be a further blow to American consumers after the Trump Administration’s shuttering of the Consumer Financial Protection Bureau. These moves leave Americans less protected from fraudsters, and antitrust violations by Meta, Amazon and other Big Tech. Democratic Senators issued a strong objection. Read more.
White House waffles on Education Department shutdown – The Washington Post reports, “White House press secretary Karoline Leavitt told reporters that the department will not be completely shut down, which would require congressional action, but said a smaller version will continue to administer ‘critical functions.’ She said those functions included the student loan program, Pell grants, civil rights enforcement and major grant programs of Title I and IDEA, which helps pay the cost of educating students with disabilities. Together, those programs represent the vast majority of what the department does.” On Friday, Trump said management of student loans would move to the Small Business Administration (even though it is slated for a 43 percent reduction in staff) and special needs programs would move to Health and Human Services (where RFK Jr. continues to spread conspiracy theories about autism and vaccines).
USDA cancels $500 million in food deliveries, leaving food banks scrambling to feed hungry Americans.
Responding to criticism that his Administration violated a court order barring deportation of migrants under the Alien Enemies Act of 1798, President Trump claims he never signed the proclamation invoking the Act – even though his signed proclamation appears (HERE) in the Federal Register with Trump’s signature.
Musk claims no one has died since foreign aid funding cuts. Not true, says NYTimes investigation.
Elon Musk’s “Department” of Inefficiency is increasing annual deficits by hundreds of billions due to revenue losses (read more) and “is making government almost comically inefficient.”
Some agencies began “hiring back” fired probationary workers last week in response to court rulings; however, they are not working – they are on paid administrative leave while court cases play out. Read more
Key Court Actions Last Week (for full details on litigation, link to the Just Security website or WP Tracker): Federal Judge, MD, on March 18 ordered DOGE to halt its dismantling of USAID and begin certain restorations; Federal Judge, DC, has temporarily blocked EPA and Citibank from terminating a grant under the National Clean Investment Fund and transferring the funds; Ninth Circuit denied Trump Administration’s appeal of District Judge’s order barring mass termination of probationary employees; Federal Judge, MD, granted a temporary restraining order barring DOGE access to Social Security data; Federal Judge, DC, denied a temporary restraining order to block disclosure of taxpayer records to immigration officials; Federal Judge, DC, denied a restraining order to block DOGE takeover of the US Institute of Peace.
4. The Road to Autocracy: Latest Developments and How You Can Respond
President Trump and his congressional enablers continue down the dangerous road to dictatorship:
Breaking the law repeatedly: Washington Post reports that more than a dozen judges have said President Trump and his Administration probably broke the law, and they are now averaging one such finding about every four days.
Undermining the independent Judiciary by:
Using political and financial intimidation to weaken Congress, with President Trump’s threat to “primary” any Republicans who dissent from Administration actions, and Elon Musk ready to bankroll primary challengers. Sen. Lisa Murkowski (R-AK), a lone independent-minded GOP Senator, says her colleagues are “afraid” of Trump and Musk: “(Y)ou’ve got everybody…not saying a word because they’re afraid they’re going to be taken down. They’re going to be primaried.”
Undermining freedom of the press by excluding the Associated Press from White House coverage and “dismantling (Voice of America and other) programs that push back against dictatorship and reach people in closed societies.”
Undermining academic freedom: The Administration is now using the cudgel of federal research funds to force its own policies on universities. Recent examples: Columbia and University of Pennsylvania.
Aiming for a One-Party State: NYTimes analysis: “The President and his allies in Congress are targeting the financial, digital and legal machinery that powers the Democratic Party.”
Undermining the American legal system: See the recent executive order aimed at crippling a Democrat-aligned law firm that represented the Hillary Clinton campaign; and why another firm was forced to make a deal with Trump. Trump is “doubling down on his threats against the American legal system,” writes Politico, as he takes “an increasingly adversarial stance toward the legal system, including both judges who have ruled against his policies and lawyers and firms that he has viewed as wronging him.”
Failing to execute congressionally enacted appropriations in violation of the Impoundment Control Act. Read this explanation from the House Appropriations Committee minority.
Refusing to spend appropriated funds to staff agencies at the levels required to fulfill their statutory obligations to the American people: DOGE has fired or is seeking to fire thousands of probationary employees at multiple agencies, and is planning or already conducted mass firings of tens of thousands (some of these may eventually be reversed depending on the outcomes of numerous lawsuits).
Backing away from NATO treaty obligations, established by a Senate-ratified treaty which all Presidents are constitutionally bound to follow.
Trump signaling an intention to run for a third term in violation of the plain language of the 22d Amendment.
Perhaps most troubling is that autocrats in other countries are already using Trump’s example as a template for rolling back the rule of law in their own countries.
Here are a few concrete ways for you to defend American liberty:
· Support the Associated Press and Reuters in their fight to preserve press freedom.
· Support media which provide detailed daily coverage of the White House and Congress: NYTimes; Washington Post; Wall Street Journal; Politico.com; and Bloomberg.com.
· Contribute to NYU’s litigation tracker, and Democracy Forward’s advocacy arm.
· Support a challenger to your current Member of Congress or Senator, if they have failed to speak out against Donald Trump’s illegal dismantling of congressionally established agencies and impoundment of congressionally appropriated funds.
· NEED A SPEAKER? If you are a member of a trade association, business, or nonprofit looking for an independent, nonpartisan speaker on current developments, contact us.
· Recommended reading: Robert Litan’s Substack newsletter which you can find at robertlitan.substack.com.
5. BUDGET FACT CHECK: Instead of “making America wealthy,” Donald Trump’s tax policies will explode America’s public debt.
Here are the estimated costs of tax changes currently under consideration by the Trump Administration and GOP tax writers in Congress:
Extension of the individual and estate tax portions of the 2017 tax cuts are estimated to cost between $4.0 and $4.8 trillion over 10 years.
Exempting tip income is estimated to cost up to $550 billion over 10 years.
Exempting overtime pay is estimated to cost up to $3 trillion over 10 years.
Exempting Social Security benefits is estimated to cost up to $1.5 trillion over 10 years.
Lifting the cap on State and Local Tax (SALT) deductions is estimated to cost up to $1.2 trillion over 10 years.
The most recent Trump Administration proposal to waive all taxes for those making less than $150,000 is estimated to cost up to $15 trillion over 10 years.
DOGE’s recent staff cuts at the IRS is estimated to cost up to $5 trillion over 10 years due to reduced tax compliance.
Additional revenue losses will result from mass deportations of undocumented workers who are currently paying taxes, and falling revenues that will result from the economic slowdown likely to result from Trump’s tariff policies.
Bottom line – Doubling the Public Debt: The Trump Administration is currently considering tax policies that could reduce revenues—and increase public debt—by more than $30 trillion over 10 years. If these estimates seem unrealistic, consider that debt held by the public increased by 50% during President Trump’s first term.
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 CNCS; and Staff Director of a national bipartisan budget task force. He is an Independent, having served Democratic and Republican Administrations and Senators.
He is author of the book, Trillions: A Primer on Federal Spending, Taxes, the U.S. Debt Ceiling, and Fiscal Law. (Contact the author for the 2024-25 edition. The 2025-26 edition will be published by Amazon.com after release of the Trump FY 2026 budget this spring.)
He is also Publisher of Appropriations.com which tracks appropriation bills; and GovBudget.com which tracks major federal developments, by subject area, each day.
Speaking engagements and press interviews can be scheduled by calling: (202) 818-8578. Email comments, suggestions, and questions to: ckonigsberg@capitolpublicpolicy.com.