After some high drama, House Republicans managed to pass their version of the FY25 budget resolution tonight by a vote of 217-215. Only Representative Thomas Massie voted no, while all House Democrats opposed the measure.
The vote was a victory for House Leadership, including Speaker Mike Johnson, Ways and Means Chair Jason Smith, and Budget Chair Jodey Arrington, all of whom put ample political capital behind the “one, big beautiful bill” approach.
Now attention turns to the Senate, where with today’s passage of the budget resolution through the House, we anticipate that the Senate will agree to a one bill reconciliation structure. However, there are still significant differences to be bridged.
Budget Chair Lindsey Graham-fresh off passage of his own “skinny” budget resolution-has already signaled that the House product could face a “major overhaul,” specifically mentioning tax policy permanency as a sticking point. Senator Steve Daines, joined by Majority Leader John Thune and Senate Finance Committee Mike Crapo led a letter on the topic of tax permanency earlier this month, and Senators Daines and Crapo met with President Trump yesterday on the very same issue.
Aside from the question of where to include tax policy and for how long such policy should be extended, other major outstanding items of disagreement include:
- The level of spending reductions and budgetary savings required in the budget instructions ($1.5-2T in the House-passed resolution vs. $300B in the Senate-passed border security/defense spending/energy policy-focused narrow budget resolution)
- How to handle politically sensitive deficit reduction options (major cuts to Medicaid, for example, are emerging as a redline for moderates and potentially President Trump, which would severely limit the $880B in savings directed to come from E&C in the House-passed budget. Also sensitive are likely reductions to SNAP in the Agriculture Committee’s jurisdiction)
- What specific tax policies are likely to be included in reconciliation legislation and with what price tag (i.e., SALT, no tax on tips, no tax on social security, no tax on overtime, changes to or expansions of the Child Tax Credit, “current policy baseline” vs. “current law baseline” and, relatedly, duration of the legislation for all the above)
- Whether to include a debt limit increase or not in reconciliation ($4T debt limit increase in the House-passed resolution vs. none in the Senate-passed resolution)
Importantly, House and Senate committees cannot begin marking up reconciliation legislation until both chambers pass identical budget resolutions-which makes resolving the above questions and more the top priority for Congressional Leadership.
OUTLOOK/ANALYSIS. While today’s vote was an important step forward for the House and critical for maintaining momentum behind the one-bill approach, the process only gets more difficult from here, with every action having an equal and opposite reaction from the various wings of the Republican party.
For example, even House Leadership sources will privately concede that they are unlikely to find the $880B in savings from Energy and Commerce included in the resolution and sought by the Freedom Caucus without losing the dozen or so moderate members who oppose deep cuts to Medicaid. Those moderates voted for today’s budget resolution as a “procedural matter,” but have made clear they will not be there on final passage should a reconciliation bill gut key safety net programs that their constituents rely upon.
Likewise, while heavy hitters in the Senate are leaning in on permanence for key provisions of the Tax Cuts and Jobs Act, those demands will run headlong into the objections of House fiscal hawks, who represented the most strident holdouts on today’s budget resolution and are likely to be only further disappointed as this process moves along.
As such, neither the House-passed nor Senate-passed resolutions are likely to tell the full story when all is said and done-with compromises on all ends all but necessary to cobble together a winning coalition in the narrowly divided chambers. We expect efforts to greatly intensify over the coming weeks to reach a consensus, with GOP leadership and committees in both chambers actively engaging their members and leaning on support from conservative groups and trade associations.
Reports confirm that President Trump was crucial in getting today’s House budget resolution across the finish line, with Trump personally calling the final key holdouts late into the evening and whipping them to vote yes. If the entire Trump Administration apparatus is prepared to engage in favor of a final reconciliation bill, it will be exceedingly difficult for any recalcitrant Congressional Republicans to stand in the way, which is why we remain bullish on the prospects for such a bill to be enacted into law later this year.
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