The Archive

IN THIS EDITION

The SALT Republicans have more leverage than you think

GOP leaders clash over Medicaid

2026 spending fight off to rough start

Tech: Cruz to push ‘light touch’ AI regulation

A new corporate SALT group is spending dough

THE TOP

The SALT Republicans have more leverage than you think

Happy Thursday morning.

It’s time to talk about SALT and why we think that New York, New Jersey and California Republicans have exponentially more leverage than some in the House Republican Conference are giving them credit for.

Let’s put this plainly: A handful of SALT members are willing to tank the reconciliation package and President Donald Trump’s domestic agenda if they don’t get a SALT deal they like.

“It is a hill I am willing to stake my entire congressional career on,” Rep. Nick LaLota (R-N.Y.) said. LaLota said he’d be “pressing the red no button” if the SALT cap isn’t high enough.

Here’s Rep. Mike Lawler (R-N.Y.), who represents a swing district and is eyeing a gubernatorial run:

Remember: This entire reconciliation package is a snake pit for moderate House Republicans. Some have privately argued to us that they’d be better off voting against it because of the cuts to Medicaid, SNAP and social programs. But SALT is also an acute and immediate problem that Republicans are nowhere close to solving.

What Lawler said is important – and is getting lost a bit in the debate over the state-and-local tax deduction limit.The SALT cap will disappear completely at the beginning of 2026 if Congress does nothing – and that’s precisely what the SALT Republicans want. So these members don’t have any incentive to cut a deal.

The House Republican leadership – namely Speaker Mike Johnson and Ways and Means Committee Chair Jason Smith (R-Mo.) – have been meeting with the blue-state Republicans to try to work out a new cap that would provide SALT relief but not lose conservative votes.

But here’s the problem for Johnson and Smith: Lawler, LaLota, plus Reps. Andrew Garbarino (R-N.Y.), Young Kim (R-Calif.) and Tom Kean (R-N.J.) are incentivized to drag this process out as long as possible to get the best deal they can. And most of them seem absolutely willing to do that.

In fact, some GOP lawmakers and aides have privately argued they’re better off letting the entire reconciliation process collapse and holding out for a late December tax deal with Democrats. A bill like that would almost certainly keep all tax cuts in place, be silent on politically risky spending cuts and restore the full deduction of state and local taxes. That would be a nightmare for the majority of the House Republican Conference but would be a dream for blue-state Republicans.

Where negotiations stand. Right now, the talks between Smith, the SALT crew and the Republican leadership are nowhere. To make things worse, it seems glaringly obvious that the SALT lawmakers understand their power.

A meeting between Ways and Means Committee Republicans, Kim and Garbarino went absolutely sideways.

Garbarino and Kim made the case that their districts need relief. Kim asked Smith to give them an offer. Smith countered that it wasn’t his job to do that.

The SALT Caucus also feels as if it’s not their job to negotiate against themselves. They view their willingness to even consider a cap as enough of a give on their end.

In other words, they can’t even decide whose responsibility it is to make the first offer.

The GOP leadership view. Top House Republicans are quite aware of this massive problem. They think the longer the SALT group holds out, the easier it will be to split them.

The problem for the SALT crew is that they lose completely if they can’t stick together. They may have to do it in the face of massive pressure from fellow House Republicans and Trump. So this will be an exercise in trust, particularly for the five Republicans who’ve vowed to stay united on this issue.

The ideal SALT cap varies in each district. No two areas of the country are identical. It’ll get tempting to break if the House GOP leadership hits a number that one or two of the members are OK with but others oppose.

The politics. “If I vote for a cap that I can’t sell at home, I might as well just pack up my office now,” Garbarino said.

Here’s more from Kim: “I campaigned on the promise that I’m going to get a SALT fix,” Kim said. “Don’t make me a liar on this. That’s what I’m asking the leadership.”

Meanwhile in crypto: The Senate is moving ahead on a cloture vote on the GENIUS Act at 1:45 p.m. It’s far from clear how crypto-friendly Democrats will vote on the legislation to regulate stablecoins, but they hold significant leverage.

Negotiators were tight-lipped leaving their second meeting of the day Wednesday night. GENIUS co-sponsor Sen. Kirsten Gillibrand (D-N.Y.) said she was “very hopeful about the agreements we’ve made.” She declined to speculate on the fate of the cloture vote.

“That’s all on the leadership level now,” Gillibrand said.

— Jake Sherman, Laura Weiss, John Bresnahan and Brendan Pedersen

Don’t miss it: On Thursday, May 22 at 9 a.m. ET, we’re talking small business and supplier development with SBA Administrator Kelly Loeffler. Punchbowl News’ Jake Sherman will also sit down with Andrea Albright of Walmart and Jeff Picken of Beaumont Products. Register to be part of the conversation.

MEDICAID WATCH

GOP leaders clash over Medicaid

House and Senate GOP leaders are divided over Medicaid cuts, going in opposite directions on the biggest obstacle to their reconciliation package.

Democrats are slamming the GOP over proposals to slash hundreds of billions of dollars from Medicaid. Meanwhile, Speaker Mike Johnson and Senate Majority Leader John Thune can’t agree on how much to cut the program.

After Thune and Senate Finance Chair Mike Crapo (R-Idaho) privately said Wednesday that they wanted to consider lowering the federal match rate, Johnson reiterated that option is dead.

“The Senate is going to get their opportunity real soon,” House Majority Leader Steve Scalise said about the differing views.

The stakes couldn’t be higher for Hill Republicans. House and Senate Republicans need to agree on the extent of Medicaid reductions to ultimately enact the tax cuts that are crucial for President Donald Trump’s agenda.

The full picture: The White House hasn’t been keen on drastic Medicaid cuts, as the Trump administration sees the policy as the most politically perilous plank of reconciliation.

Democratic groups are flooding the airwaves with ads accusing Republicans of putting health care for millions of Americans at risk. Republicans are starting to respond by insisting they’re only focused on rooting out waste, fraud and abuse.

Meanwhile, fiscal conservatives are urging GOP leadership to remain committed to big spending cuts.

House and Senate GOP disagree. Johnson and House Republican moderates ruled out lowering the federal match rate or instituting per capita caps. That’s a challenge for the Energy and Commerce Committee, which still needs to find $880 billion in savings to comply with reconciliation instructions.

Thune and Crapo’s comments on Medicaid were news to Energy and Commerce Republicans, who learned about it during their four-hour Wednesday reconciliation huddle.

Even if Senate GOP leaders do push for those massive Medicaid cuts, they’ll have issues among their own colleagues. Sens. Susan Collins (R-Maine), Lisa Murkowski (R-Alaska) and Josh Hawley (R-Mo.) aren’t likely to go for those proposals.

Time for Trump? With a self-imposed July 4 deadline for reconciliation approaching, senators acknowledge they’re not on the verge of any deal.

“I think at some point the president is going to have to become intimately involved,” Sen. John Kennedy (R-La.) said.

House Republicans also said it’s difficult to find consensus given the conflicting demands of moderates and conservatives.

“It’s really hard to have those conversations in isolation, so that’s part of the challenge of the way we do these markups – one policy committee at a time,” Rep. Jay Obernolte (R-Calif.) said.

— Samantha Handler and Max Cohen

GOV’T FUNDING

2026 spending fight off to rough start

FBI Director Kash Patel made some unexpected news on Wednesday.

During his first appearance before House appropriators, the combative Patel told the Commerce-Justice-Science subcommittee that he didn’t agree with the $500 million spending cut that the White House wants for the FBI in FY2026, which would force layoffs. In fact, Patel had sought a $500 million increase, only to be rebuffed by OMB.

“We are focusing our energies on how not to have them cut by coming in here and highlighting to you that we can’t do the mission” if the FBI’s budget is reduced, Patel told a surprised Rep. Rosa DeLauro (Conn.), ranking Democrat on the Appropriations Committee.

“I’m working through the appropriations process to explain why we need more than what has been proposed,” Patel added.

Patel’s eyebrow-raising comments show how hard it’s going to be to draft or pass FY2026 spending bills. When senior administration officials like Patel – a true President Donald Trump loyalist – don’t agree with the huge spending cuts the White House is proposing for next year, then it’s hard to see how Congress will either.

The chair’s view: House Appropriations Committee Chair Tom Cole (R-Okla.) – who was there for Patel’s comments – insists he’s going to try to draft spending bills that stick close to the “skinny budget” level called for by the White House. The full version of the FY2026 budget is expected next month.

Trump wants to slash $163 billion from non-defense spending while boosting defense spending by 13% and DHS funding by 65%. While Senate Republicans don’t like it – and some House Republicans don’t either – Cole said he will “stick close to what the president wants.”

“We’re still going through it. We’re still waiting for the full budget,” Cole said in an interview on Wednesday. “But we’re going to adhere closely to where the president wants to start because we think it’s a negotiation.”

Cole added that the Senate “will come in at higher numbers and we’ll meet at someplace in between.”

Dem rebuttal: DeLauro sees no chance to find a deal at the White House-requested levels.

“We’re looking at, at the bare minimum, a 23% cut in everything, in non-defense spending,” DeLauro said. “It makes no sense. These are programs in the past that had bipartisan support.”

DeLauro won’t predict a shutdown this fall, but she noted that with DOGE layoffs, the White House withholding tens of billions of dollars in spending already approved by Congress and what’s happening on reconciliation, the likelihood of finding common ground with Republicans on FY2026 funding is hard to envision at this point.

“Somebody has to explain all this to me,” DeLauro added. “Everything they are doing is in violation of the law. That’s where we have to start.”

– John Bresnahan

Tech: Cruz to push ‘light touch’ AI regulation

Senate Commerce Committee Chair Ted Cruz (R-Texas) will use a high profile hearing today to push for “light-touch” regulation of AI and preview legislation to accomplish this goal.

The hearing will feature OpenAI CEO Sam Altman, Microsoft President Brad Smith and AMD CEO Lisa Su.

Cruz will describe his upcoming bill as one that would “remove barriers to AI adoption, prevent needless state over-regulation and allow the AI supply chain to rapidly grow here in the U.S.,” according to a copy of his remarks shared with us.

The Texas Republican was a longtime critic of the Biden administration’s emphasis on assessing the risks of advanced AI systems and trying to write best practices to mitigate any concerns. In Cruz’s remarks, he’ll slam people in the tech industry who agreed the government should have a hand in AI safety.

“Many in industry foolishly and eagerly support such paternalism,” Cruz will say. “All of this busybody bureaucracy is a wolf in sheep’s clothing.”

Altman et al. The OpenAI CEO is planning to weigh in on safety. Altman will express confidence that the United States will reach artificial general intelligence — which can match humans in a range of tasks — within President Donald Trump’s term.

“But AGI’s full potential won’t be realized unless it’s safe,” Altman will say, according to excerpts we obtained. Still, Altman focuses on safety efforts within OpenAI, not government initiatives.

AMD’s Su will urge the panel to champion open approaches to AI so that different models and hardware systems can work together. The open approach allows startups to get into the industry more quickly, she’ll say.

The chips CEO is also expected to call for building up the U.S. supply chain for manufacturing advanced semiconductors. And Su is planning to touch on immigration as part of a workforce strategy involving education and training.

And Microsoft’s Smith is planning to discuss the importance of exporting AI to allies, we learned.

— Ben Brody

…AND THERE’S MORE

A new corporate SALT group is spending dough

News: Dan Conston, the former head of the House Republicans’ super PAC, is launching the American Job Creation Alliance, which will run ads to press members of Congress to not cap corporations’ state-and-local tax deductions.

The group, which is organized as a 501(c)(4), is launching a $750,000 campaign praising six GOP members of the Ways and Means Committee: Reps. Rudy Yakym (Ind.), Ron Estes (Kan.), Mike Carey (Ohio), Brian Fitzpatrick (Pa.), Max Miller (Ohio) and David Kustoff (Tenn.).

Here’s one of the spots in Fitzpatrick’s district. The group expects to spend significantly more money during the tax reform process.

Also: The U.S. Chamber of Commerce held a fly-in on Wednesday with CFOs and tax executives. Their goal was also to press House Republicans against creating a SALT cap for businesses.

The U.S. Chamber group met with aides to Speaker Mike Johnson and House Majority Whip Tom Emmer. They also targeted members both on and off the tax committee, including Reps. Adrian Smith (R-Neb.), John Joyce (R-Pa.), David Valadao (R-Calif.), Dusty Johnson (R-S.D.) and Scott Fitzgerald (R-Wis.).

Mailbag: Dozens of Democrats sent a letter to Republican leadership urging them to stop trying to cut spending on Medicaid and crack down on Medicare “upcoding” instead. It’s Democrats’ latest move to put the GOP in a tough spot over cuts to federal health benefits but with a new twist: they’re offering an alternative.

– More than 80 House Democrats, led by Reps. Salud Carbajal (D-Calif.) and Ami Bera (D-Calif.), are pressing the Trump administration to resume the flow of humanitarian aid to Gaza ahead of President Donald Trump’s Middle East trip.

– The Defend Main Street Growth Coalition sent a letter to Johnson and Senate Majority Leader John Thune urging them to extend the 2017 Trump tax cuts, especially provisions favored by small businesses. The coalition also urged the GOP leaders to get moving on it already, please.

Amazon follow: Rep. Jamie Raskin (D-Md.) is introducing a bill today that would require larger retailers to display “in a clear and conspicuous manner” the portion of the cost attributable to Trump’s tariffs. Amazon was going to do this, as we scooped, but backed off after White House pressure.

– Laura Weiss, John Bresnahan, Mica Soellner and Jake Sherman

MOMENTS

CLIPS