The Archive

IN THIS EDITION

A turbulent vote brings Congress to the tricky part of reconciliation

The Vault: The House’s hunt for tax offsets could hit buybacks and more

On the hot seat, Cassidy talks national debt

Cornyn rakes in cash at 2026 kickoff fundraiser

Patrick McHenry is going to a16z

THE TOP

A turbulent vote brings Congress to the tricky part of reconciliation

Happy Wednesday morning.

That was a major win for Speaker Mike Johnson.

The House’s dramatic passage of Republicans’ multi-trillion dollar budget resolution Tuesday evening marked the biggest victory of Johnson’s brief leadership career. It was the result of weeks of hard work and intense focus amid the chaos of President Donald Trump’s Washington. It also was a victory against a GOP-run Senate that was in direct conflict with him.

But make no mistake — Johnson couldn’t have done this without Trump. Less than two months ago, Johnson survived a cliffhanger speaker vote only because of Trump. Johnson can now lay the groundwork for major spending and tax cuts, but Trump will have to close the deal. It’ll be the same for Senate Majority Leader John Thune in the Senate.

Tuesday night’s House vote was dramatic. Johnson and the House GOP leaders held the floor open for an hour while corralling votes for the resolution. But lacking support to pass the measure, Johnson pulled the resolution and sent members home for the night, a seemingly embarrassing setback.

Yet just minutes later — Johnson, House Majority Leader Steve Scalise and Majority Whip Tom Emmer hadn’t even left the floor — House GOP leaders reversed course. They ordered the House back into session to vote on the budget proposal. Their gamble paid off.

The 217-215 vote saw every wavering Republican flip besides Rep. Thomas Massie (R-Ky.). Rep. Warren Davidson (R-Ohio), who spent all day saying he’d vote no, voted yes. Rep. Victoria Spartz (R-Ind.) voted yes after saying that she couldn’t support the measure.

Trump and Johnson tag-teamed this effort. Trump started making calls Monday to lobby undecided Republicans. In the final stretch, Trump and Johnson worked over Spartz together. Johnson flipped Davidson, who had questions about discretionary spending cuts.

The fallout. First, the battle lines are drawn for 2026. Everyone understands that House Republicans will try to extract huge savings from Medicaid, Pell Grants and SNAP to reach the $1.5 trillion in spending cuts they promised. In turn, Democrats will make these social safety net cuts the central part of their efforts to wrest back control of the House. House Minority Leader Hakeem Jeffries and the DCCC will hang this vote — and future ones — around the neck of every vulnerable Republican.

Second, this now kicks off the most difficult part of the reconciliation process, a phase that will take several months to complete if GOP leaders and the White House are lucky.

Senate Republicans “will want to do some things with” the House’s plan, Thune said Tuesday night with a laugh as he left the Capitol. That’s putting it lightly.

Will the Senate agree to the $1.5 trillion in spending cuts that the House outlined? How about the $4 trillion debt-limit hike? And what about the $4.5 trillion for tax cuts, which does not provide enough budgetary room to permanently extend the 2017 Trump tax cuts?

Here are four dynamics you should keep an eye on as Congress moves into the really difficult part of advancing Trump’s agenda.

1) Timing. Johnson and Thune need to find a compromise budget resolution that can eventually win the support of conservative House Republicans, who will oppose any attempts to scale back spending cuts.

That compromise budget resolution won’t come to the House floor until early April, most likely. That’s when two new House Republicans from Florida will be sworn in. (Although New York GOP Rep. Elise Stefanik can now exit for her U.N. gig.)

Johnson wants to send a reconciliation package to Trump by the early part of May. Thune told us Tuesday night that Johnson’s timeline is “possible” but noted that there are many more steps to go.

2) Medicaid. One of the critical fights will be over cuts to popular programs, especially Medicaid. In passing the budget resolution, House Republican leadership convinced wobbly moderates that the Senate would likely water down the hundreds of billions of dollars in Medicaid cuts called for in the House’s plan.

The real challenge for the House GOP will be accepting that Senate Republicans don’t have an appetite for giant spending cuts.

3) Tax policy. Perhaps the most important demand of Senate Republicans is that the 2017 tax cuts be made permanent. This is Thune’s red line, as he made clear once again in his statement last night. The House’s budget plan doesn’t realistically allow for permanence. Thune also hinted that there could be changes to the $4 trillion debt-limit increase included in the House bill, a nod to some GOP senators’ opposition to using reconciliation for this purpose.

There’s openness on the House side to using the scoring method that Senate Republicans want to employ to make permanent extensions feasible without having to dip into huge offsets because of reconciliation rules.

But along with the tax instructions, there’s lots of policy to work out between the chambers. For one, Senate Republicans have far less of a reason to set a higher cap on deducting state and local taxes, a key demand for a handful of House Republicans from blue states.

This is news: Key Hill Republicans and Trump administration officials are huddling at the White House complex this afternoon to work on nailing down tax plans, with more meetings to come. The meeting is expected to include Treasury Secretary Scott Bessent and White House National Economic Council Director Kevin Hassett on the administration side. From the Hill, it’ll include Johnson and Thune along with the tax committee chairs, Rep. Jason Smith (R-Mo.) and Sen. Mike Crapo (R-Idaho).

4) Trump. The next few months will test Trump’s patience and discipline. Hill Republicans can’t pass a reconciliation package without the president staying engaged and taking cues from congressional leaders on where he could be helpful. Remember, in 2017, Trump nearly blew up the tax bill on several different occasions.

— Jake Sherman, Laura Weiss, John Bresnahan and Andrew Desiderio

SENATE REPUBLICANS

On the hot seat, Cassidy talks national debt

As Sen. Bill Cassidy (R-La.) faces a fight for his political future, he’s been in the center of the action in the opening months of President Donald Trump’s second term.

The Louisiana Republican attracted headlines for his initial skepticism — and eventual support — of Robert F. Kennedy Jr. as HHS secretary. But as Cassidy stares down a right-wing primary challenge inspired by his 2021 vote to convict Trump following the Jan. 6 insurrection, he wants to reorient the narrative around the national debt.

As reconciliation kicks into gear, Cassidy told us in an interview that he sees the rising U.S. debt as an existential threat to the country’s status as a great power. While the Louisiana Republican voted to advance the Senate GOP budget resolution last week, Cassidy said he wants “the House to succeed” in their aggressive plans to cut the deficit.

“Twenty percent of our revenue is currently going for debt service and that’s growing,” Cassidy said. “At one point, 100% of the revenue is going to go for Medicare, Social Security and interest payments. You cannot preserve the American Dream by having that much of your revenue go for only three programs.”

Cassidy said he expects the national debt to rise to $65 trillion during the next ten years, which he said would spell disaster for future aspiring homeowners and the middle class.

“We are now at almost a 20-year high for 30-year mortgage rates. If it goes up higher, it’s going to be that much more difficult for people to afford it,” Cassidy said.

So where to cut? Cassidy notably appeared content for the Senate to take a back seat to the House.

Cassidy mentioned that the House Education and Workforce Committee is looking to roll back the Biden administration’s student debt forgiveness plan. When we brought up PBM reform, Cassidy didn’t seem too enthused and said the policy wouldn’t shrink the debt.

2026 watch: Republicans see Cassidy as the Senate GOP incumbent most vulnerable to a primary challenge. Cassidy voted to convict Trump four years ago, which has motivated former Rep. John Fleming (R-La.) to try to unseat Cassidy.

We asked whether Cassidy is seeking an endorsement from Trump in the race. Here’s his response, which was instructive in its evasiveness:

— Max Cohen

THE CAMPAIGN

Cornyn rakes in cash at 2026 kickoff fundraiser

News: Sen. John Cornyn (R-Texas) kicked off his reelection bid Tuesday night with a campaign reception at D.C.’s Hill Country Barbecue Market.

The event raised more than $100,000, per a source familiar with Cornyn’s political operation. Several GOP senators attended.

This comes as the Texas Republican, who has long insisted he’s running for a fifth term, is continuing to ramp up his reelection effort in preparation for a 2026 onslaught – not only from Democrats – but potentially from the right.

Cornyn met with longtime donors across the Lone Star State over the past two months, the source added, with more meetings scheduled. Cornyn has consistently been a powerhouse fundraiser among Senate Republicans, most notably through his joint fundraising committee. His super PAC is also actively raising money.

Democrats have been hoping that Cornyn, who just turned 73, would retire, especially after losing the Senate GOP leadership race to Majority Leader John Thune. An open seat would be easier for Democrats to flip, though still a steep uphill climb in red state Texas.

Still, Cornyn will need to keep his usual fundraising pace, if not exceed it, with Democrats expected to continue pouring money into the state. Cornyn reported having more than $4 million in the bank at the end of December, according to FEC records. While Cornyn is an excellent fundraiser, this could be a $100 million-plus reelection bid.

Cornyn may also face a GOP primary challenger. Texas Attorney General Ken Paxton has been openly flirting with a bid against Cornyn.

In an interview earlier this month with Tucker Carlson, Paxton said Cornyn is “wrong about most everything” and noted that Cornyn was critical of President Donald Trump before ultimately embracing him during the 2024 presidential campaign.

In the meantime, Cornyn is steadfastly supporting Trump’s agenda, including all of his Cabinet nominees. Cornyn also played a big role in Trump’s first administration as Senate majority whip.

Here’s what Cornyn told us after last night’s kickoff event:

— Andrew Desiderio

… AND THERE’S MORE

Patrick McHenry is going to a16z

News: Former House Financial Services Chair Patrick McHenry (R-N.C.) is joining the legendary Silicon Valley venture capital firm Andreessen Horowitz as a senior adviser.

Andreessen Horowitz, known as a16z, is one of the most active venture capital firms in Silicon Valley with $45 billion under management. It was an early investor in Twitter, Airbnb and Facebook.

A16z’s two founders, Marc Andreessen and Ben Horowitz, are both politically active. Andreessen has been outspoken about his support for President Donald Trump. The pair fund Fairshake, a super PAC that has spent on behalf of both Republicans and Democrats.

McHenry, who was in Congress for 20 years and served a notable stint as speaker pro tempore of the House, will help a16z with its politics and assist its portfolio companies with navigating the regulatory landscape in D.C.

Big day for crypto: The Senate’s first subcommittee on digital asset policy convenes today. We got a sneak peek at the opening remarks from the panel’s top Democrat Sen. Ruben Gallego (Ariz.).

The Arizona Democrat, whose election bid was backed by the crypto super PAC network Fairshake, will say crypto “presents both extraordinary opportunities and significant challenges.” Gallego will also stress the need for “robust oversight,” including a call to make sure crypto is “not used to circumvent existing laws on money laundering, tax evasion, or illicit financing.”

Gallego also wants to focus on “encouraging innovation that is productive and useful to everyday Americans. The growth of things like ‘meme coins’ on everything from Trump to DOGE to Peanut the Squirrel are about flashy headlines and trending on social media, not about helping traditionally un- and under-banked communities gain access to the financial system.”

— Jake Sherman and Brendan Pedersen

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