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(1) HOUSE BUDGET COMMITTEE SUNDAY NIGHT VOTED TO ADVANCE TRUMP-JOHNSON BUDGET RECONCILIATION BILL WHILE NEGOTIATIONS CONTINUE.
The House Budget Committee in a rare Sunday night markup advanced the Trump-Johnson budget reconciliation bill 17-16 (with 4 Republicans voting present)—after initially rejecting it on Friday 16-21 over demands by 5 committee Republicans for additional spending cuts.
Weekend negotiations with the 5 GOP “no” votes allowed the bill to move forward Sunday evening with assurances of continuing negotiations on more spending cuts and allowing 4 of the 5 Republicans to vote “present,” rather than “yes,” on reporting the bill to the full House.
The ongoing negotiations are reportedly looking at speeding up the effective dates of new Medicaid work requirements and provisions aimed at forcing states to terminate Medicaid coverage of undocumented immigrants.
The massive budget bill—which combines the work of 11 House committees—now goes to the House Rules Committee where additional changes will be considered to secure sufficient GOP votes for passage by the full House, with Speaker Johnson still aiming for a final House vote by Thursday, when the House recesses for Memorial Day.
Assuming House passage, the Reconciliation bill will then move to the Senate for consideration by Senate committees and the full chamber in June. GOP Senators will likely want considerable changes in the House version.
Reckless Use of Budget Reconciliation
Congress began using the filibuster-proof budget reconciliation process in 1980 in order to fast-track large deficit reduction packages. During the 1980s and 1990s, budget reconciliation—together with discretionary spending caps and the (“PAYGO”) requirement that new tax cuts and entitlements had to be fully paid for—produced four years of balanced budgets from 1998 through 2001.
That all changed in 2001 when the Bush-43 Administration used budget reconciliation to fast-track major tax cuts that increased federal deficits. With that procedural door opened, Republicans and Democrats have multiple times used the filibuster-proof reconciliation process to increase deficits—Republicans for tax cuts and Democrats for spending increases.
The result of this reckless use of budget reconciliation by both political parties is that America now has a debt equivalent to 100% of the economy’s output (GDP), with annual interest payments of $1 trillion per year—more than the entire defense budget. Moreover, the outlook is for current policies to continue driving the debt even higher—with debt projected to increase to 118% of GDP in 10 years, with interest payments approaching $1.8 trillion.
This dangerous fiscal position, caused the U.S. to lose its last perfect credit score last week with Moody’s downgrading U.S. credit.
Overview of the Deficit-Increasing Trump-Johnson Reconciliation Bill:
Yet here we go again… using the filibuster-proof reconciliation process to fast-track more deficit increases—this time, with another huge tax cut and spending increases that are not fully paid for. The following are preliminary 10-year spending and revenue numbers:
· The Trump tax cuts will cost $3.8 trillion in lost revenues.
· Increases in defense and immigration/border spending will cost $321 billion.
· Spending cuts will save about $1.6 trillion.
· Increased interest costs from additional borrowing: $580 billion.
· Net increases in federal deficits: $3.1 trillion over 10 years. If temporary tax and new spending provisions are extended—as is often the case—the 10-year deficit increases could rise above $5 trillion.
President Trump’s “one big, beautiful bill,” as he calls it, is certainly big (over 1,100 pages few have read)—but looking at the pros and cons, it is not beautiful. It is, in fact, a huge economic wrong turn for the nation and a humanitarian disaster for the millions who will suffer cuts in food assistance, health care, education, and other vital services.
The solution to this budget quandary is to defeat this deficit-increasing and inhumane reconciliation bill, reform the budget reconciliation process to prevent its misuse for tax cuts and spending increases, and establish a bipartisan, bicameral debt reduction commission—similar to the Domenici-Rivlin or Simpson-Bowles commissions in 2010.
As for the specific policies in this mega-bill, the following is straightforward nonpartisan look at the pros and cons.
Pros:
The bill would make permanent the 2017 tax law’s lower tax rates (at a cost of $2.2 trillion). This is reasonable for low- and middle-income Americans, but fiscally irresponsible for high-income households as discussed below).
The bill extends and gives temporary boosts to the standard deduction ($1.3 trillion) and child tax credit ($797 billion). More details on the CTC.
The bill raises the cap on state and local tax (SALT) deductions to $30,000 (phased out for high incomes) to address the burden of high housing prices and real estate taxes in some areas of the country. (Imposing a cap raises $916 b in new revenues, compared to current law which would allow unlimited deductions after this year.)
The bill increases spending for air traffic control staffing and modernization by more than $12 billion. (Too little, too late!)
The bill increases spending for the Coast Guard by $21 billion to secure the maritime border and interdict migrants and drugs. The Coast Guard funding is needed but should be properly targeted by the Appropriations Committee.
The bill imposes a new fee on electric and hybrid vehicles (EVs) to compensate for gasoline tax losses to the Highway Trust Fund. This is reasonable because the Highway Trust Fund is needed to fund highway improvements.
Cons:
The bill is fiscally irresponsible, adding between $3 trillion and $5 trillion over 10 years (with interest costs) to a public debt load that is already unsustainable.
The tax bill’s provisions are heavily skewed towards the wealthiest taxpayers, with the top 20% seeing the largest percentage increase in after-tax income – not a wise policy at a time of unsustainable deficits.
The bill fails to restore a 39.6% top bracket on high-income taxpayers, which is needed to pay for the extension of lower rates for low- and middle-income households.
The bill adds unaffordable new temporary tax cuts—aimed at next year’s mid-term election voters—for tips ($40 b) and overtime pay ($124 b), and for seniors ($72 b), as well as a boost from 20% to 23% for the pass-through business tax deduction ($104 b), and a new deduction for auto loan interest ($58 b, where the car’s final assembly is in the U.S.).
Medicaid, the federal-state low-income health program that covers 1 in 5 Americans, would face its largest cut in history, $625 billion according to preliminary estimates, by limiting states’ ability to impose taxes on providers; imposing work requirements on childless adults; requiring Medicaid renewals twice per year; allowing states to impose up to $35 copayments for people just above the poverty level; and using heavy-handed federal penalties to force state governments to drop universal coverage paid for with their own tax dollars. An estimated 7.7 million people would lose health coverage as a result of these Medicaid funding cuts (and some Affordable Care Act changes). Read more.
An additional 4.2 million low-income people would lose coverage under the bill because it fails to extend the expanded health premium tax credits to purchase private insurance under the Affordable Care Act—which expire at the end of this year.
In total, the changes in the bill are projected to result in at least 13.7 million more uninsured under this “big, beautiful bill.”
The bill cuts $300 billion from SNAP (food stamps)—removing about 3 million recipients from the program—by shifting costs onto the states based on payment error rates, imposing stricter work and eligibility requirements, disallowing eligibility deductions for money spent on home heating and internet access, and limiting future updates to food benefits.
The bill cuts student financial aid $349 billion through new federal limits on student loans, Pell grants, and income-based repayment plans.
The bill recklessly increases federal spending—outside the normal appropriations process—for an unproven missile defense system and a chaotic, expensive and economically stupid mass deportation of undocumented families and individuals—most of whom have no criminal record, and many of whom have been paying taxes and contributing significantly to U.S. economic growth.
The bill’s repeal of clean energy tax incentives could seriously hinder the nation’s ability to meet soaring energy demand and eliminate hundreds of thousands of energy sector jobs. “Electricity demand is forecast to increase up to 16% in the next four years, with 128 gigawatts of new load expected on the grid as the AI race heats up."
Moreover, the provisions that enable increased fossil fuel leases on public lands are reckless in the extreme as the American people suffer increasingly damaging extreme weather, floods, and wildfires.
This reconciliation bill is also loaded up with pork—provisions giving special interest tax breaks to narrow political interests including: a $1.4 billion tax break for purchase of gun silencers; a $900 million tax cut on income in the Virgin Islands for multinationals; and $11 billion for certain gym memberships. (What happened to rooting out “waste and abuse”?)
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) TARIFFS AND THE ECONOMY:
Bloomberg reported Friday that US consumer sentiment unexpectedly fell to the second-lowest level on record and inflation expectations climbed to multi-decade highs amid growing concerns about tariffs.
Walmart said consumers will start to see higher prices soon as it works through inventory and begins to pass on the costs of newer merchandise. “The price increases related to tariffs – we really haven’t seen yet,” Chief Financial Officer John David Rainey said in an interview on Thursday. “These are happening right now, and they’ll become more obvious.” President Trump has called on Walmart to “absorb” the tariff costs.
Last week in Qatar, President Trump again reiterated his intention to “pay the debt off.” Reality check: Trump, in his first term, increased the public debt by 50% and the pending budget reconciliation bill would add between $3 trillion and $5 trillion to the public debt over the next 10 years as explained above.
(3) MAJOR DEVELOPMENTS LAST WEEK ACROSS GOVERNMENT:
Demonstrating an utter lack of understanding or regard for the separation of powers in our government, DOGE attempted last week to assign downsizing teams to the Government Accountability Office and the Office of Congressional Worker Rights, both of which are part of the Legislative Branch and not subject to presidential authority or decisions. GAO responded: “As a legislative branch agency, GAO is not subject to Executive Orders and has therefore declined any requests to have a DOGE team assigned to GAO.”
This follows a presidential action the previous week firing the Librarian of Congress without any congressional consultation. The Library of Congress, like the GAO, is a strictly legislative branch entity. It is time to bring the appointment of the Librarian of Congress and Comptroller General under Congress’ exclusive purview—similar to the Congressional Budget Office.The Trump Administration’s cancelling of billions in federal research dollars, together with pending budget reconciliation provisions to raise taxes on endowment funds, are triggering hiring freezes, research pauses, broad budget cuts, and layoffs at major U.S. public and private universities. These actions threaten to end the decades-long national investment that have made U.S. universities the premier research institutions in the world and will weaken U.S. global competitiveness.
The Washington Post reports, “The Trump administration’s workforce policies are fueling a voluntary exodus of experienced, knowledgeable federal workers unlike anything in living memory. The scores of departures will have immediate and long-term consequences, employees predicted, imperiling the quality of government services.”
Nearly 600 contractors for Voice of America, the government-funded news network aimed at spreading democracy and freedom of the press, received termination notices Thursday from its parent agency, the U.S. Agency for Global Media.
This week’s MUST READ: Catherine Rampell’s column on the Administration’s multiple attacks on children by simultaneously cutting healthcare, nutrition, dismantling Head Start, ending tracking of lead poisoning, defunding SIDS prevention, and stripping children born in America of birthright citizenship.
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.