1. House, Senate Committees Approve Budget Plans to Advance Trump Agenda, But Split on Strategy—Full Senate Could Move Next Week
This week, the House and Senate Budget Committees began the long march toward a filibuster-proof budget reconciliation bill. The Committees reported out their respective versions of a Budget Resolution--an internal congressional framework that sets overall ceilings and floors for federal spending, revenues and debt, and instructs committees of Congress to report changes to spending programs or tax laws (which are then packaged into a reconciliation bill).
The House Budget Committee (HBC) version, which passed committee on Thursday Feb. 13 on a 21-16 party-line vote, calls for $1.5 trillion in spending cuts, $4.5 trillion in tax cuts to extend Trump’s expiring 2017 cuts, $300 billion in additional spending for border security, immigration enforcement, and defense, and a $4 trillion increase in the debt ceiling—with the caveat that additional spending cuts could enable additional tax cuts. The net effect of the House plan: increasing the public debt by $4 trillion.
The Ranking Democrat at HBC said, “this budget rips healthcare away from millions while handing out $4.5 trillion in tax breaks, the overwhelming majority of which go to billionaires and wealthy corporations… It slashes at least $230 billion from food assistance programs, at a time when grocery prices remain at record highs. And it proposes… at least $880 billion in cuts to Medicaid and the Affordable Care Act. ”
The Senate Budget Committee advanced a two-bill reconciliation strategy on Wednesday, Feb. 12. The budget resolution, which passed the Committee on an 11-10 party-line vote, calls for a first reconciliation bill that would increase spending for border security, immigration enforcement, and defense; and a second budget resolution and reconciliation bill, later in the year, that would address the politically more difficult tax cuts and spending cuts. Description Text Budget Levels
The Senate may take up their budget resolution the week of Feb. 18, although they will be under pressure to let the House try to pass its one bill approach first. However, the House bill faces an uphill battle due to the GOP’s razor-thin majority. Politico reports that “Johnson’s most immediate problem comes from swing-district Republicans who believe that the steep spending cuts Johnson wants across Medicaid, food assistance and other safety-net programs for low-income Americans could cost them their seats.”
Under either strategy, Republicans will have to contend with the Senate’s powerful “Byrd Rule,” which enables any Senator to strike from a reconciliation bill any provision that is a policy change without a budgetary impact. The Byrd Rule also prevents long-term deficit increases which is why tax cuts are typically limited to 10 years.
For a detailed, plain English explanation of the Byrd Rule, see the Author’s book, Trillions.
2. Funding the Government: Shutdown Looms--Funding Expires March 14; Debt Limit X-date Approaches; Funding Bills for FY 2026 begin
We are closely following three key fiscal issues on parallel tracks:
(1) Expiration of the FY 2025 funding on March 14, 2025: The outlook is complicated because Republicans lack the votes to pass an FY 2025 funding measure on their own (60 votes being required in the Senate), while Democrats may aim to use the measure to leverage limitations on OMB’s funding freeze and actions by Musk’s DOGE team to cut funding, personnel and access to information. In a Feb. 10 letter, Senate Democratic Leader Schumer (NY) hinted at a government shutdown in March, saying, "legislation in the Senate requires 60 votes and Senate Democrats will use our votes to help steady the ship for the American people in these turbulent times." Follow daily developments at Appropriations.com.
(2) Debt Limit and Potential Default on U.S. Obligations: The “X-date” when Treasury will run out of borrowing authority is looming due to the new debt limit that became effective January 2, 2025. Treasury’s “extraordinary measures” have enabled borrowing to continue, but the “X-date” when they run out of borrowing authority looms. The nation will default on its financial obligations if Treasury reaches the X-Date without a debt limit suspension or increase. Default would be economically catastrophic. Follow daily developments at: GovBudget.com/key-debt-ceiling-developments, where you can also drill down on debt limit background.
(3) FY 2026 Funding Bills: House Appropriations Chairman Tom Cole (R-OK) announced this week that the 12 Appropriations subcommittees would begin marking up their FY 2026 funding bills in late April (the new fiscal year begins Oct. 1, 2025). FY 2026 annual funding levels for federal agencies will have to be negotiated with Democrats because discretionary appropriations bills need 60 votes to pass the Senate (unlike tax and entitlement changes which can pass with 50 votes using the filibuster-proof budget reconciliation process).
3. OMB, DOGE Accelerate Cuts in Resources and Workers Without Forethought, Legal Authorization, or Oversight
Russell Vought, now in place as Director of the Office of Management and Budget, and Elon Musk, Director of the White House government efficiency or “DOGE” office, are advancing federal firings, agency shutdowns, elimination of websites, and spending cuts at a lightening pace intended to overwhelm media coverage and congressional and public opposition. Highlights:
· Hundreds of billions remain frozen despite judge’s order: The Government-wide Freeze on Grants, Loans and Assistance Is paused by judicial action in New York et al v. Trump et al. However, congressional appropriators and media continue to report that despite the judge’s order, funding continues to be disrupted. Senate Appropriations Democrats say at least $396 billion in federal funds for farmers, broadband, infrastructure, housing, national parks, disaster prevention, infectious disease response, and medical research remains in jeopardy.
· Federal Worker Firings/Resignations Accelerate: This week OMB directed agencies to fire most of the recently hired 200,000 workers still on “probation”; the IRS is reportedly preparing to layoff thousands of employees as soon as next week, reversing an initiative to speed up customer service; a federal judge lifted a temporary pause on Trump’s deferred resignation plan; and President Trump gave DOGE broad authority to fire federal employees.
· Federal worker firings quickly impact services in cities and farm communities, but barely impact total federal spending and may actually cost the government money. In a fact sheet released Friday, Senate Appropriations Ranking Democrat Patty Murray highlighted impacts on critical functions and services provided to Americans by the VA, the Small Business Admin., HUD, Dept. of Energy, Indian Health Service, Dept. of Interior, the FBI, the Forest Service, EPA, HHS, Dept. of Education, USDA, and NOAA.
· Firings save little and could cost money. The Washington Post reports that a one-fourth reduction in government personnel would reduce federal spending by only 1%. (The bulk of federal expenditures are payments to individuals, States, cities, and contractors; see the book, Trillions for details.) Moreover, the impending layoff of IRS employees will actually cost the government money by reducing revenue collections—which will offset savings from layoffs in the rest of the government.
· DOGE cost savings claims are inflated: Washington Post fact checker says claims of DOGE saving tens of billions are “not even close” to accurate.
· Pandemic response and health information at risk: The Trump Administration fired 10% of the workforce at the Centers for Disease Control and Prevention, which provides public health information relied on throughout the country.
· Consumer financial protection at risk: Congress created the Consumer Financial Protection Bureau following the 2008 financial crisis and recession to supervise large banks, thrifts, and credit unions, ensure equal access to mortgages and financial products, and protect consumers from high fees and abusive practices in the lending, debt collection, and credit card industries. Last weekend, OMB Director Russell Vought, as acting “Acting Director” of the CFPB, ordered all staff of the consumer agency to cease all bank supervision and consumer protection activity—despite the agency having been established by Act of Congress (the Dodd-Frank law). The CFPB website, which was loaded with helpful information for consumers attempting to navigate home loans and other financial products has been shut down. On Friday, a Federal Judge temporarily barred the firing of any CFPB employee except for cause. See also, “With attack on consumer bureau, Musk removes obstacle to his ‘X money’ vision.”
· Treasury payment system compromised: Early in the week, five former Treasury secretaries warned that the normally nonpartisan and secure payment system at Treasury has been “compromised by political actors.”
· Inspector General fired for identifying waste: This week, after the Inspector General for USAID revealed that nearly a half billion dollars’ worth of food is spoiling in warehouses due to the agency shutdown, President Trump fired the IG.
· Emblematic of the reckless and ill-conceived nature of the firings, the Trump Administration fired more than 300 workers at the National Nuclear Security Admin., which manages the nation's nuclear weapons—although there are some reports that the Energy Dept. may have paused this.
· Are OMB and DOGE actions legal? This week a former Counsel for the Reagan and Bush-41 Administrations said DOGE is unconstitutional. Numerous lawsuits have been filed challenging: the freeze placed on grants, loans, and assistance programs; the reclassification of workers in order to remove civil service protections; the legality and constitutionality of establishing the DOGE; the access of DOGE to sensitive personal and financial information; the removal of independent agency leaders; and large scale reductions in force. To read the details of these and other suits and to follow court action, link to the Just Security website.
· In court action during the week just ended: a Federal Judge in Rhode Island on Feb. 10 granted a motion to enforce a previous order barring the funding freeze noting that defendants “have continued to improperly freeze federal funds and refused to resume disbursement of appropriated federal funds;” a Federal Judge in Massachusetts who had initially ordered a pause in the “deferred resignation” program, on Feb. 12 lifted the pause; a Federal Judge in D.C. extended until Feb. 21 a restraining order preventing USAID from placing employees on administrative leave or evacuating them from host countries; a Federal Judge in D.C. on Feb. 13 barred the blanket suspension of foreign aid funding, but not individual personnel decisions or termination of contracts; a Federal Judge in D.C. on Feb . 14 temporarily barred the Administration from terminating any CFPB employee except for cause; a Federal Judge in D.C. on Feb. 12 temporarily barred the removal of the Special Counsel whose function is to protect federal employees who come forward as whistleblowers; a Federal Judge in Massachusetts on Feb. 10 issued a nationwide temporary restraining order barring a reduction in indirect cost reimbursement by NIH; and a Federal Judge in D.C. on Feb. 11 required that the Administration restore websites at HHS, including the CDC and FDA sites.
4. The Economy at Risk: Stagflation Risks from Tariffs, Shrinking Labor Force, and Rising Debt
At the beginning of 2025, the U.S. economy, broadly speaking was praised as the engine of global growth, with inflation leveling out near 2%, interest rates falling, and steady growth close to 3%. However, with the new Administration, three major issues—followed weekly in this space—have injected substantial uncertainty:
(1) President Trump’s imposition of import tariffs could trigger higher inflation, imperil U.S. exports and cause an economic slowdown or recession.
· Steel/Aluminum import tariffs: President Trump on Feb. 10 ordered a 25% tariff on steel and aluminum imports effective March 4 (including from Canada and Mexico, the top two foreign suppliers). This comes on top of 10% tariffs on goods from China, 25% tariffs on goods from Canada and Mexico (currently paused); and his plan to impose reciprocal duties on other nations that have tariffs on U.S. goods. While the President has authority delegated by Congress to impose tariffs, these measures are highly likely to boost inflation since import tariffs are paid by companies importing products into the U.S. and are typically passed on to consumers. Moreover, inflation is already on the rise.
(2) The Administration’s aim to deport all undocumented immigrants will hit businesses with labor shortages and higher labor costs.
· Stagflation Warning: Economist and former Fed Vice-Chair Alan Blinder said this week that mass deportations and tariffs constitute “stagflationary shocks” to the economy, that will cause inflation and economic slowdown.
· Litigation Update: Watch for developments in the immigration lawsuits this week on GovBudget.com/immigration-news/ or see the Just Security litigation tracker for developments.
(3) The GOP effort to extend the 2017 tax cuts would further explode a public debt that is already unsustainable—putting upward pressure on interest rates.
· The nonpartisan Congressional Budget Office projects that extending current spending and tax policies, without change, will lead to debt-held-by-the-public increasing from its current level of $30 Trillion to $52 Trillion within 10 years (increasing from 100% of GDP to 118%).
· No one knows what amount of government debt as a percentage of the economy should be concerning. However, there is one common sense metric that should raise concerns—interest payments. Federal interest payments—already, $1 trillion per year—are growing rapidly. An economic scenario where larger and larger amounts are being borrowed each year simply to pay interest on a ballooning debt, is a vicious cycle that cannot be sustained. Current long-term projections show interest payments rising to nearly one-quarter of all federal spending if current spending and tax policies continue unchanged.
· President Trump’s first term saw a 50% increase in the public debt. For his second term, his tax cuts and spending bill currently working its way through Congress would add $4 trillion to an already dangerous public debt.
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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. (2024-25 edition currently available at LexisNexis.com; 2025-26 edition will be published by Amazon.com shortly after release of the Trump budget.)
He is also Publisher of Appropriations.com and GovBudget.com which track major federal developments, by subject area, each day.
Press interviews and Washington updates for your organization can be scheduled by calling: (202) 818-8578 or (301) 509-5688. Email comments and suggestions to: charles.s.konigsberg@gmail.com.
Again a masterful summary of the blizzard of stuff coming out of the Trump administration. Tracking it is a full time job, which of course is the point