Inside the Senate GOP's tough reconciliation negotiation

IN THIS EDITION

Senate GOP in for tough reconciliation negotiations

The Senate is monitoring the situation in Israel — and that’s about it

The Vault: Just how historic is the GENIUS Act?

ICYMI: The Creator Economy

THE TOP

Senate GOP in for tough reconciliation negotiations

Happy Tuesday morning.

Senate Republican leaders have their work cut out for them.

The Senate Finance Committee’s mix of tax policies and Medicaid cuts are raising alarms for several GOP senators, threatening the leadership’s path to 51 votes. House Republicans also have major problems with the Senate GOP leadership’s proposed changes, as released Monday by the committee.

Senate GOP leaders desperately want to work out problems with the House now to avoid a formal conference. But they also need to sell their own senators.

President Donald Trump, whom GOP leaders have nicknamed “the closer,” is otherwise occupied with a major conflict in the Middle East, leaving senators to their own devices for the time being.

“Certainly everything that we’ve put out is out there for consideration, and we’ll see how people react to it,” Senate Finance Committee Chair Mike Crapo (R-Idaho) said Monday night after briefing GOP senators.

And react they did. This shows just how hard Crapo’s job will be these next couple of weeks — and maybe beyond — as Republican leaders race to pass a bill before July 4, a deadline that’s looking increasingly difficult to meet.

Medicaid. Senators were surprised that Finance went further with its limits on Medicaid provider taxes. Along with the House bill’s freeze on new provider taxes, Finance would cap expansion states’ charges at 3.5% by 2031. GOP leaders viewed this as a necessary change to help offset the costs of other priorities.

Sen. Josh Hawley (R-Mo.), who has said Medicaid benefit cuts are a red line for him, told reporters he was “alarmed” at the changes.

“This is gonna defund rural hospitals effectively in order to, what, pay for solar panels in China,” Hawley said, referring to the slower phase-out of clean energy tax credits. “I’ll be really interested to see what the president thinks about this.”

The White House is circulating a new report on Medicaid this morning as top administration officials are working to sell the reconciliation bill. The White House report claims 11% of Medicaid spending last year, or more than $56 billion, went to able-bodied adults who were abusing the system.

CMS Administrator Mehmet Oz will be at the Senate GOP lunch today, too.

Fiscal hawks. Sen. Ron Johnson (R-Wis.) continues to rail against the GOP’s reconciliation package for failing to address “deficit and debt issues.” Leaving the Finance briefing on Monday, Johnson was insistent the bill couldn’t be fixed before the July 4 recess.

Sen. Rick Scott (R-Fla.), another deficit hawk, wouldn’t say on Monday whether he’d support the proposal, noting he still had to review it.

While the Senate GOP package includes deeper Medicaid spending cuts than the House’s version, it goes lighter on repeals of clean energy tax credits from the Inflation Reduction Act. Hardline conservatives in the House have insisted on more aggressive cuts, especially for wind and solar. So that could raise alarms with House Freedom Caucus members.

“Yeah, I will not vote for this,” Rep. Chip Roy (R-Texas) said on X, quoting criticism of the Senate’s gentler IRA repeals.

SALT. There’s a huge gap between the Finance text’s $10,000 SALT cap and the $40,000 limit for most taxpayers in the House GOP-passed bill.

House SALT backers say their deal isn’t up for negotiation, but Republican senators are insisting it has to be.

Sen. Markwayne Mullin (R-Okla.) said he has discussed the Senate bill’s SALT cap with Rep. Mike Lawler (R-N.Y.) and there’s an understanding it’s a “placeholder.”

But Lawler and Rep. Nick LaLota (R-N.Y.) have said they won’t accept a dollar less than a $40,000 cap on deducting state-and-local taxes. Reps. Young Kim (R-Calif.) and Andrew Garbarino (R-N.Y.), the SALT Caucus cochairs, said the House’s cap “must remain in the final bill.” Rep. Nicole Mallikotakis (R-N.Y.) called the Senate’s proposal “insulting.”

Yet GOP senators are happy with the Finance Committee’s posture on SALT.

“There’s just no appetite in our conference at all for this number that five people in the House [want],” Sen. Eric Schmitt (R-Mo.) said.

Public lands. Another problem for both House and Senate Republicans is a Senate Energy and Natural Resources Committee provision allowing millions of acres of public lands to be up for sale.

Sen. Mike Lee’s (R-Utah) proposal lists eleven Western states that would have public land up for sale, excluding Montana. There’s a good reason for that. Montana GOP Sens. Steve Daines and Tim Sheehy oppose public land sales. It’s unclear if they’ll go for Lee’s legislation.

Remember, Rep. Ryan Zinke (R-Mont.) killed off a much narrower version of this measure in the House. If Lee’s bill makes it back to the House, we’ll see if Zinke and his newly formed bipartisan Public Lands Caucus try to strip this one out, too.

The internal GOP negotiations will continue as the Byrd Rule review of the measure unfolds. Senate Republicans will meet today. Remember – This is a short week, with the Senate leaving on Wednesday night due to the Juneteenth holiday.

Here’s news. Five former House Republicans have penned an open letter saying they oppose the reconciliation bill because it doesn’t seriously deal with the nation’s fiscal problems. Former Rep. Matt Salmon (R-Ariz.) led the letter.

— Laura Weiss, Andrew Desiderio, Max Cohen and Samantha Handler

WASHINGTON X THE WORLD

The Senate is monitoring the situation in Israel — and that’s about it

As Israel and Iran continue their deadly conflict, senators in Washington are offering rhetorical support for Israel — but little else.

As Israel and Iran enter a fifth day of fighting, the only legislative push on Capitol Hill has come from Democrats who want to ensure the United States doesn’t get drawn into the conflict without congressional approval.

Lawmakers from both parties told us it’s too early for any discussions about an aid package for Israel. And while the Jewish State deploys a large amount of missiles in the Iron Dome defensive system, the Senate isn’t drafting any plans to help Israel replenish shortfalls just yet.

“I wouldn’t say we have plans in the Senate. I would simply say that we are aware that they are expending munitions,” Sen. Mike Rounds (R-S.D.) said.

Republicans are largely following President Donald Trump’s lead of backing Israel but insisting that American troops stay out of the war.

“We’re not looking for another war in the Middle East,” Sen. Tim Sheehy (R-Mont.) said, before adding he is with Israel “100%.”

Trump abruptly returned from the G7 in Canada early this morning. Trump signed onto a G7 statement criticizing Iran and supporting Israel after the language was modified in response to U.S. complaints. The United States has moved a number of refueling planes to the region, in addition to more ships and combat aircraft.

“Simply stated, IRAN CAN NOT HAVE A NUCLEAR WEAPON,” Trump said in a Truth Social post Monday night, while also calling for the evacuation of Tehran.

Israel and Iran continued air and missile strikes against each other overnight.

Trump said on Air Force One that he isn’t “looking for a ceasefire,” according to the pool report. He also said that he is “not too much in the mood to negotiate” with Iran and is looking for a “complete give-up” by the Islamic Republic.

The Democratic view. Sen. Tim Kaine (D-Va.) is leading the way for Democrats with his resolution forcing the Senate to vote on whether American forces should engage in hostilities with Iran.

The privileged resolution would require a full congressional briefing, public debate and a Senate vote on whether the United States enters into a war with Iran. Because Kaine is bringing up the resolution under the War Powers Resolution, it must be voted on. But the timing of that vote isn’t clear yet.

Some Senate Democratic offices were concerned the resolution could have prevented the United States from sharing intelligence with Israel. Kaine said he was aware of the worries and intends to “flesh out more” the language defining when the United States is considering “engaged in hostilities.”

Kaine said he has no GOP cosponsors so far, but he plans to roll out more Democratic backers soon.

Meanwhile, Rep. Thomas Massie (R-Ky.) announced Monday night that he would introduce a War Powers Resolution to “prohibit our involvement” in Israel’s war with Iran. Rep. Alexandria Ocasio-Cortez (D-N.Y.) said she would sign on.

Sen. Bernie Sanders (I-Vt.) also introduced the “No War Against Iran Act,” which seeks “to prohibit the use of federal funds for any use of military force in or against Iran absent specific Congressional authorization.”

— Max Cohen

The Vault: Just how historic is the GENIUS Act?

Later today, the Senate is going to pass legislation to introduce first-of-their-kind regulations for stablecoins — a digital asset that’s used to conduct other crypto transactions.

This is a big deal! It will be the first time in U.S. history the Senate has passed crypto legislation of any kind.

But it’s not every day that Congress gives its blessing to a relatively small and untested financial market. So we’ve spent the last couple of weeks asking smarter folks than us: Just how historic is the GENIUS Act?

Here’s what we heard.

Clinton era rehash: More than one academic told us that the GENIUS Act’s closest analog is the Commodity Futures Modernization Act of 2000.

Signed into law by former President Bill Clinton, the CFMA rolled back regulations in key parts of the derivatives market and helped the product become mainstream in the years leading up to the 2008 financial crisis.

The Brookings Institution’s Aaron Klein was one expert who compared the GENIUS Act to the CFMA.

“Let’s hope for society’s benefit, crypto isn’t used in the same way under-regulated derivatives were to allow the small subprime mortgage market to destroy the global financial system,” Klein said.

Riegle-Neal redux: Others pointed to a 1994 law that reshaped the national banking landscape. The Riegle-Neal Interstate Banking and Branching Efficiency Act allowed banks to branch across state lines.

We heard this comparison from folks aligned with the crypto sector. That includes Austin Campbell, an adjunct professor at Columbia Business School.

“Stablecoins are already legal and operating at the state level,” Campbell said. “Unifying and modernizing operations to allow things to scale and promote the dollar globally is the stablecoin version of Riegle-Neal.”

Thrift, baby, thrift: Some academics pointed to a series of legislative changes that expanded the types of financial activities that savings and loan associations could partake in.

Again, a financial crisis looms behind this comparison. The Savings and Loan Crisis stretched from the 1980s to the 1990s and followed an easing of restrictions originally instituted by the Federal Home Loan Bank Act of 1932.

Todd Phillips, a former attorney at the Federal Deposit Insurance Corp. who now teaches at Georgia State University, said stablecoins resemble the thrifts that crept into the business of banking.

“We finally have a setup where all depository financial institutions are kind of regulated the same. Thrifts are regulated like banks, are regulated just like credit unions,” Phillips said. “Congress is now saying, ‘Alright, we are introducing a new type of depository institution that is going to do things differently than the others.’”

– Brendan Pedersen

THE CREATOR ECONOMY

ICYMI: The Creator Economy

Last week, we launched our latest special project, The Creator Economy, in partnership with YouTube.

In this four-part video series, we’ll interview top content creators about their economic impact — which is already worth billions and poised to boom even more in the coming years — and how they’re approaching the policy conversation in Washington.

For our first feature, Setting the Stage, we sat down with YouTube star Kent Rollins, aka “Cowboy Kent Rollins.” Rollins and his wife, Shannon, explained how the work of digital content makers extends into the real world, including through the sales of their cookbooks and spice mixes.

We also checked in with Sen. Adam Schiff (D-Calif.), plus Reps. Yvette Clarke (D-N.Y.) and Beth Van Duyne (R-Texas), to hear more about creators’ policy hopes. Clarke and Van Duyne recently founded the bipartisan Congressional Creators Caucus.

And don’t forget to listen to the first podcast episode here.

— Ben Brody

… AND THERE’S MORE

Texas GOP primary switch. The Texas Republican Party is moving to limit its primary participation only to voters that it deems Republican. Currently, the state’s primaries are open.

The State Republican Executive Committee voted overwhelmingly for this rule at its quarterly meeting over the weekend.

This will almost certainly be challenged in court.

If it stands, this will be a big deal for Sen. John Cornyn (R-Texas), who is locked in a bruising primary with Texas Attorney General Ken Paxton. It means that voters who are affiliated with Democrats and independents can’t vote in a GOP primary. They are far more likely to align with Cornyn than Paxton, who is beloved by the state’s right wing.

Beyond Cornyn, this rule change will affect any Republican being challenged from the right. Reps. Tony Gonzales (R-Texas) and Dan Crenshaw (R-Texas) have both faced such opponents recently. Gonzales barely squeaked out a victory in a primary runoff in 2024.

News: Sen. Bernie Sanders (I-Vt.) is endorsing Donavan McKinney, the Michigan state legislator running to unseat Rep. Shri Thanedar (D-Mich.) in a safe Democratic seat.

“‘[McKinney] understands the struggles working class communities are facing in Detroit and across the country because he’s lived those struggles himself,” Sanders said in an endorsement statement.

McKinney is also being backed by progressive Rep. Rashida Tlaib (D-Mich.). Sanders’ endorsement is the latest sign that the left-wing movement is coalescing around McKinney in a bid to knock off Thanedar.

The Campaign. Ford is running a spot talking about its manufacturing cars in the U.S. “Nobody’s committed to America like Ford is,” a worker in the spot says.

— Max Cohen, Ally Mutnick

MOMENTS

CLIPS