America's Senate plans big changes for the House's spending bill

Mint

6 days ago

Whipping votes is a hard job in Congress, especially with as narrow a majority as the one overseen by Mike Johnson, the House speaker. But even the most masterful legislators can't account for everything. Andrew Garbarino, a New York Republican, fell asleep early on May 22nd as his colleagues considered H.R.1, also known as the One Big Beautiful Bill Act. He missed the vote. 'I'm going to just strangle him,' Mr Johnson joked to reporters. The bill passed, but that was the easy part. The Senate will now negotiate its own version of the most consequential legislation of Donald Trump's second term.
Mr Trump prefers to govern by executive order, but the bill approved last week addressed administration priorities that couldn't be tackled with his signature alone. Most significantly, it makes permanent his 2017 income-tax cuts, a policy broadly popular with Republicans in both chambers. Yet the multitrillion-dollar legislation will have far-reaching effects on immigration, energy production, social insurance and the military. And the august Senate has very different ideas on many of these issues than the rowdier lower chamber.
Tax-reform discussions in the Senate picked up in recent weeks, with senators debating amongst themselves even as they watched House negotiations. Fiscal hawks are upset that the House bill would add more than $3trn to the deficit over the next decade. Moderates, meanwhile, have been critical about changes to climate-change and safety-net programmes. Still, it is already possible to discern broad changes coming in the Senate bill.
Top of the list is an expansion of the state-and-local-tax (SALT) deduction, a policy traditionally supported by Democrats that reduces the income-tax burden for high-earners. A handful of House Republicans from high-tax states won an increase of the cap to $40,000, up from $10,000. Yet there is virtually no constituency for the pricey policy among Senate Republicans, who would rather prioritise making permanent the few pro-growth business provisions in the bill.
Then there are Mr Trump's tax handouts, which in the House's bill would add about $500bn to the deficit. The Senate, recognising political reality, is expected to include some version of Mr Trump's campaign promises, but is likely to craft less ambitious tax relief on tips, on overtime pay and on car loans (all Trump campaign pledges). Their version would add about half as much to the deficit as the House bill does.
The House bill contains about $1.5trn in spending cuts over a decade. Most of this comes from government-funded health care and food-assistance programmes. Ron Johnson, a Wisconsin senator and leading Republican tax wonk, would prefer about $6trn in cuts. That would return America to pre-pandemic spending levels, but he knows this maximalist position is unattainable in an ideologically diverse party. So the Senate will aim for more like $2trn in cuts so that the deficit numbers look a bit less alarming.
The House bill speeds up sunset provisions to clean-energy tax credits included in Joe Biden's 2022 climate bill, saving billions but alienating moderates and politically vulnerable senators. Cuts to food assistance and Medicaid, a government health programme for poor and disabled Americans, are unpopular with some senators, including economic populists. These differences are unresolved in the Senate and could be the trickiest point when the House and Senate bills are merged in reconciliation, which could still be months away.
That won't be easy. But the alternative to compromise will be allowing tax cuts to expire and therefore taxes to rise. Avoiding that may be the single policy choice all Republicans agree on. For now both chambers are steeling themselves for a bicameral brawl. 'The number that we care most about is 218,' Kevin Cramer, a North Dakota senator, told Politico, referencing the size of the House Republican majority. 'Depending on how many we can get to fall asleep.'