We’re going to start this morning on the topic that is consuming Capitol Hill, K Street and some parts of the administration — reconciliation and the future of President Donald Trump’s legislative agenda.
The Senate Budget Committee voted along party lines Wednesday to send a “skinny” budget resolution to the floor. The resolution, which was drafted by Senate Budget Committee Chair Lindsey Graham (R-S.C.), was approved on an 11-10 vote after dozens of Democratic amendments were defeated by Republicans.
Graham’s proposal — which would boost defense and border security funding by more than $300 billion over four years, alongside some energy policy changes — could go to the Senate floor sometime in the next couple of weeks, Senate Majority Leader John Thune told us. It will take several days to process whenever that happens, including a vote-a-rama.
Across the Capitol. After lots of fits and starts, the House Budget Committee is going to begin marking up its spending blueprint today.
We’ll start by noting that the House Republican leadership initially was taken aback when House Budget Committee Chair Jodey Arrington (R-Texas) said he’d mark up a budget resolution today.
But as of late Wednesday night, House GOP leadership feels somewhat confident that they’ll be able to get the resolution out of committee and to the floor sometime in late February.
If this resolution does advance out of the Budget panel, there’s a strong chance it will pass the House. Why do we say that? Because do you want to be the GOP lawmaker standing between Trump and the passage of his agenda when he has a 53% national approval rating?
Also, House Republicans need to pass this budget resolution through the committee or else Senate Republicans are in the driver’s seat on reconciliation. Any delay or signs of struggle by House Republicans will be viewed by the White House as weakness.
Promises are being made. Will they be delivered? The House GOP budget resolution includes a floor of $1.5 trillion in spending cuts, a $4.5 trillion cap on tax cuts and a $4 trillion extension of the debt limit.
This isn’t what hardline conservatives wanted. They have been pushing for at least $2 trillion in spending cuts. GOP leaders are emphasizing right now that they hope they can find another half-trillion dollars in cuts.
Speaker Mike Johnson told reporters the blueprint is a “starting place” for cuts.
“Our objective is to try to save $2 trillion or more because we think that’s necessary to prevent an increase in the deficit,” Johnson said.
Some of the hardliners are also seeking assurances that the House Ways and Means Committee will gut billions of dollars in clean energy tax credits from the Democrats’ Inflation Reduction Act. Rep. Chip Roy (R-Texas) said he wants a commitment “that the vast majority of them are going to be gone.”
But that’s already worrying some Midwestern Republicans and moderates who want a far more limited approach to getting rid of the IRA. Some of the tax credits are very politically sensitive, in particular anything that benefits biofuels or projects already underway.
Arrington and Smith. The House budget chair and top tax writer are being pulled in different directions, and it’s creating some real tension.
Arrington is trying to be sensitive to his panel, which includes House Freedom Caucus members and deficit hawks. Arrington has been making the case for addressing rising U.S. debt via reconciliation for a long time now.
Ways and Means Committee Chair Jason Smith’s (R-Mo.) north star is delivering the big tax bill that Republicans — and the Trump administration — want badly.
Smith argues to colleagues that a number in the $4.5 trillion range wouldn’t give Ways and Means room to deliver Trump’s new tax cut priorities on top of extending the GOP’s 2017 tax law.
A $4.5 trillion cap for Ways and Means makes Smith’s job very difficult. It puts more pressure on tax writers’ options for crafting Trump’s new tax cut priorities. It forces a conversation about finding ways to pay for the tax portion of the reconciliation bill from within Ways and Means’ jurisdiction, such as scrapping credits. It means there’s less room to operate on some of the key tax snags — a compromise on the cap for deducting state and local taxes, or SALT, and IRA credit rollbacks.
Reconciling with the Senate. Remember, this, right now, is the easy part.
Once the House gets its budget resolution through, they need to somehow sync up with the Senate’s blueprint. Then both chambers need to negotiate the actual policies in the reconciliation package. That’s where the rubber meets the road.
When it comes to taxes, the Senate could end up making Smith’s life easier in the end. There’s a lot of Senate support for the “current policy baseline” that would make it realistic to permanently lock in some tax cuts. It would also cut the $4 trillion-plus cost of extending the 2017 tax cuts to zero.
