(Average Read-Time: 12 minutes)
(1) TRUMP’S 10-YEAR BUDGET RECONCILIATION BILL: House Republicans will markup legislation in three committees beginning this Tuesday.
Ways & Means meets Tuesday, 5/13 at 2pm to consider the tax title. Preliminary bill text and Joint Committee on Taxation description were released on Friday. The preliminary package would cost $4.9 trillion over 10 years in lost revenues, financed by Treasury borrowing and spending cuts to: Medicaid, food stamps, student financial aid, worker pay and benefits and other federal activities.
Key tax provisions would permanently extend the current rate structure, boost the standard deduction and child tax credit, permanently extend higher estate-tax exemptions, boost the deduction for pass-through businesses, increase a tax break for unincorporated businesses, and reduce rates on multinationals.
Issues not yet addressed in the preliminary text include: how high to raise the SALT cap (state and local tax deduction); whether to increase a tax on college endowment investment earnings; whether to repeal all of the Biden green energy tax credits; whether to reestablish a top rate of 39.6% for high-income earners (unlikely); whether to close the carried interest loophole for the private equity industry; and whether to add new tax cuts for tip income, overtime pay, and Social Security benefits.Energy & Commerce meets Tuesday, 5/13 at 2pm to determine how to cut entitlement spending $880 billion over 10 years. The Committee released the energy, environment, communications, and health subtitles Sunday evening, as well as a section-by-section summary—all of which can be accessed HERE or at https://govbudget.com/reconciliation-tracker/.
According to a Wall Street Journal summary, the health subtitle includes “work requirements and more frequent eligibility checks. But it does not lower the minimum share the federal government contributes to Medicaid in each state (or) cap per-person federal spending in the program… The Republican plan would freeze at current rates…provider taxes and ban states from establishing new ones…. The proposal would also require some able-bodied Medicaid recipients—those making more than 100% of the federal poverty level, or $15,650 for a single adult—to pay for some of their coverage. The contributions would be capped at $35 a service, or 5% of an individual’s income, and wouldn’t be required for primary, prenatal, pediatric or emergency care…. It also aims to stop federal dollars from going to facilities and organizations that provide abortion services…The bill would require Medicaid recipients to work, volunteer or attend school for 80 hours a month. The requirement would apply to most able-bodied adults through age 64 without dependents and includes exceptions for pregnant women, people with substance-use disorders and others.”Agriculture Committee meets Tuesday evening, 5/13, after votes to consider up to $230 billion in controversial cuts to the low-income food stamp program (“SNAP”) including shifting some of the costs to state governments, as well as certain farm program extensions.
Reconciliation actions already taken by House committees:
Armed Services Committee approved legislation increasing defense spending $150 billion for missile defense, planes and ships, nuclear modernization, and border security.
Education & Workforce Committee approved sweeping financial aid reforms to cut spending more than $330 billion. The legislation would cap the amount of federal loans a student can take out, cut Pell Grants for students who attend less than half time, consolidate income-driven repayment plans, and introduce a risk-sharing program where colleges are partially responsible for unpaid student loans.
Financial Services Committee approved provisions to rescind funds for energy efficiency retrofits of housing; dissolve the Public Company Accounting Oversight Board (responsible for auditing publicly traded companies) and fold its mission into the Securities and Exchange Commission; and reduce the amount of funding the Consumer Financial Protection Bureau may receive from the Federal Reserve. (CBO cost estimate)
Homeland Security Committee approved $67 billion in new spending for border barrier system and technology, border security facilities, border personnel and vehicles, aircraft, watercraft, and unmanned aircraft systems, state homeland security grants, and reimbursement of state and local law enforcement for costs incurred to protect the President’s private residences.
Judiciary Committee approved new spending for migrant detention and removal, more Immigration and Customs Enforcement (ICE) agents, and a controversial mechanism requiring sunsetting of existing regulations and congressional approval for new regs.
Natural Resources Committee approved provisions to expedite new on-shore and off-shore fossil fuel leases on public lands, reduce federal royalties, expedite permitting to incentivize leases, and impose filing fees to discourage protests. Committee Democrats are calling it “the most destructive environmental bill in American history.”
Oversight & Government Reform Committee approved $50 billion in cuts that effectively cut federal worker take-home pay by requiring higher pension contributions, cut pensions by changing from a “high-3” to a “high-5” calculation, and require all new federal employees to decide between taking a reduced paycheck or keeping civil service protections.
Transportation & Infrastructure Committee approved provisions to rescind Inflation Reduction Act climate investments, impose fees on electric vehicles and hybrids to offset gas tax losses, and increase spending for Coast Guard ($21b) and air traffic control ($12b) modernization, with net deficit reduction exceeding the Committee’s $10 billion reconciliation instruction. The Committee rejected a universal $20 car fee to stabilize the ailing Highway Trust Fund.
Following this week’s markups, the House Budget Committee will package each of the committee titles into a single bill, followed by House Floor action. However, prior to Floor action, House leadership may changes elements of the bill as they attempt to ensure sufficient GOP votes for passage.
Meanwhile, Senate GOP Leadership and committees are taking a wait-and-see approach until the House has acted. When a reconciliation bill eventually reaches the Senate Floor, it will be subject to the strict requirements of the Senate’s Byrd Rule, under which provisions that are not “budgetary” in nature and provisions that increase long-term budget deficits can be stripped from the bill on the Senate Floor. The Byrd Rule will be explained in detail (in plain English) in a special upcoming issue of Trillions—for paid subscribers.
For daily updates on Reconciliation, see our Reconciliation Tracker: govbudget.com/reconciliation-tracker/.
The author worked on multiple reconciliation bills for the Senate Finance, Senate Budget, and Senate Rules Committees and the White House Office of Management and Budget. Call (202) 818-8578 or (301) 509-5688 for consultations on budget reconciliation, media interviews, or speaking engagements on budget reconciliation.
(2) MAJOR DEVELOPMENTS LAST WEEK ACROSS GOVERNMENT:
Treasury Secretary Bessent, in a May 9 letter to Congress, says “X-Date” (when the Department will have exhausted all “extraordinary measures” and run out of borrowing authority) is August—making it imperative for Congress to raise the debt limit prior to its August recess. To keep up with daily developments and for additional background on the debt ceiling, see our Debt Limit Tracker. The author served as General Counsel at the U.S. Senate Finance Committee where he had primary responsibility for debt limit legislation.
Federal Judge Temporarily Blocks Further Federal Layoffs: A federal judge Friday temporarily blocked (for two weeks) sweeping layoffs across much of the government. She found that the reductions in force likely require seeking the consent of Congress. Major departments affected include Agriculture, Energy, Labor, Interior, State, Treasury and the VA; it also applies to the National Science Foundation, Small Business Administration, Social Security Administration, and Environmental Protection Agency. However, the order does not require departments to rehire people.
Firings Paralyze Consumer Product Safety Commission: The White House fired three Democratic commissioners on the Consumer Product Safety Commission, paralyzing the independent consumer watchdog agency.
Executive Order Targeting “Sanctuary Cities”: A federal judge ruled on Friday that an executive order targeting federal funding of so-called sanctuary cities (jurisdictions resisting Trump immigration policies) is unconstitutional unless there is a sufficient connection between the targeted funding and the "sanctuary" policies.
Surgeon General nominee is a vaccine skeptic: Trump’s nominee for surgeon general said last week, “ I think vaccine mandates are criminal.” This comes in the wake of estimates that “measles, once virtually wiped out in the U.S., could become commonplace again if declining vaccination rates continue.”
The Voice of America is replacing journalism with propaganda, opting to broadcast feeds from the Trump-aligned One America News Network.
The Treasury Department Inspector General says the Internal Revenue Service has lost nearly one-third of its tax auditors as a result of firing recent employees and encouraging resignations. How much this will cost the nation in lost revenues and higher deficits is not yet clear.
Congress temporarily increased Affordable Care Act premium subsidies during COVID, but they will expire this year without action. The Congressional Budget Office estimates that letting the higher subsidies expire would lead to millions losing coverage.
Wondering about the status of lawsuits against the Administration’s executive actions? Link to Just Security Tracker or NYTimes Tracker.
(3) TARIFFS AND THE ECONOMY:
U.S. – U.K. “trade deal” draws rebuke from U.S. automakers: “Under this deal, it will now be cheaper to import a UK vehicle with very little U.S. content than a USMCA compliant vehicle from Mexico or Canada that is half American parts. This hurts American automakers, suppliers, and auto workers.”
The Federal Reserve’s FOMC last Wednesday elected not to reduce interest rates saying “uncertainty about the economic outlook has increased further” citing risks of higher inflation and higher unemployment.
“Global economy already feeling drag from Trump tariffs,” reported Reuters last week. “U.S. President Donald Trump's tariffs are increasingly clogging up the wheels of a world economy which for decades were greased by predictable and relatively free trade. Big-name multinationals right down to niche e-commerce players last week cut sales targets, warned of job cuts and reviewed their business plans, while major economies revised down growth prospects amid bleak data read-outs.”
EU would tax US cars, planes, bourbon: Bloomberg reported last week that “the European Union is planning to impose additional tariffs on $108 billion of US exports if trade talks with the US administration fail to yield a satisfactory result.”
(4) AT RISK - DEMOCRACY, FREE SPEECH, PRIVACY, and THE RULE OF LAW:
This week’s MUST READ: How will we know when we have lost our democracy?
“Under authoritarianism… opposition comes with a price. Citizens and organizations that run afoul of the government become targets of a range of punitive measures: Politicians may be investigated and prosecuted on baseless or petty charges, media outlets may be hit with frivolous defamation suits or adverse regulatory rulings, businesses may face tax audits or be denied critical contracts or licenses, universities and other civic institutions may lose essential funding or tax-exempt status, and journalists, activists and other critics may be harassed, threatened or physically attacked by government supporters…. By that measure, America has crossed the line into competitive authoritarianism. The Trump administration’s weaponization of government agencies and flurry of punitive actions against critics has raised the cost of opposition for a wide range of Americans…. America’s slide into authoritarianism is reversible. But no one has ever defeated autocracy from the sidelines.”White House floats suspension of habeas corpus to deny due process rights to immigrants. The “petition for habeas corpus,” guarantees individuals who have been arrested the right to appear before a judge to review the legality of their confinement. The centuries-old principle is enshrined in Article I, Section 9, Clause 2 of the U.S. Constitution which provides that, “The privilege of the Writ of Habeas Corpus shall not be suspended, unless when in Cases of Rebellion or Invasion the public Safety may require it.” The Trump Administration has in the past claimed an “invasion” by gangs linked to the Venezuelan government to justify emergency powers under the Alien Enemies Act—which has already been soundly rejected by the intelligence community and the courts. Nevertheless, the White House is reportedly still considering a claim of “invasion” as a way to justify suspending habeas corpus, without congressional consent, and ignoring judicial orders to provide due process to immigrants.
President Trump and Attorney General Bondi stoke attacks on Judges: Reuters reports on judges who have ruled against the Administration suffering death threats and attacks on their families. Reuters identified “more than 600 posts on social media and right-leaning message boards since February targeting family members of judges who ruled against the Trump administration.” Last week, Trump threw gasoline on the fire saying, “We cannot allow a handful of communist radical left judges to obstruct the enforcement of our laws and assume the duties that belong solely to the president of the United States.” Trump’s attorney general, Pam Bondi, has referred to the judges who ruled against the administration’s interests as “out of control” and said they “need to be removed.”
Trump continued his autocratic firings, last week firing FEMA Acting Administrator Cameron Hamilton, who—when simply answering a question at a congressional hearing—said he believes the disaster response agency should not be eliminated. He was abruptly replaced by a Trump administration official, David Richardson, who promptly issued a brash declaration to staff that he would temporarily take over every decision at the agency, including on spending, and “run right over” anyone who opposed him, reported Reuters.
Musk’s DOGE office is building a centralized database on U.S. citizens and residents “with unprecedented access to data about Social Security, taxes, medical diagnoses, and other private information” disregarding protections meant to keep such information safe. Critics are alarmed that the information will be highly vulnerable to hackers (ignoring industry protocols for keeping sensitive information segmented) and could be used by the Trump Administration against political foes.
The Trump Administration continued its effort to impose federal control over higher education by threatening last week to freeze all new grants to Harvard, reported the Washington Post.
The Trump Administration continued its shutdown of funding to public television by eliminating a grant for PBS children’s shows. Click here to fill the funding gap by contributing to PBS; and help to preserve an independent free press by contributing to the Associated Press. Also, consider subscribing to Reuters, The Wall Street Journal, Bloomberg, the New York Times, and the Washington Post—to support their ongoing coverage of the Trump Administration, Congress, and the Judiciary.
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 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.