House Republicans failed to pass the Senate’s budget reconciliation instructions last night, setting up the possibility of Congress adjourning for two weeks without any progress on avoiding a crippling tax hike at the end of this year. The Senate Republican legislation is far from perfect, lacking the serious spending cuts needed to avoid adding to the existing $38 trillion federal debt.
But there will be an opportunity to prevent that from happening later, and internecine fights among Republicans are not the best approach. So, House budget hawks should compromise and use a future opportunity to cut spending when they write tax and spending legislation.
If Democrats get their way, no tax cuts would pass, causing a $4.6 trillion tax hike over the next 10 years, including a $1,300 higher tax burden each year for the bottom 60% of households.
To prevent this, Republicans have had to use the budget reconciliation process created by the Budget Control Act of 1974, allowing them to dispense with Democrats’ profligate input. The first step is the passage of reconciliation instructions sent to each committee to set spending and tax targets.
The instructions passed by the House earlier this year include $4.5 trillion in tax cuts, $300 billion in new spending for border security and national defense, and $2 trillion in spending cuts. The instructions also include language that reduces the amount of tax cuts allowed for every dollar of spending cuts that are not made, with a minimum of $1.5 trillion in cuts.
The Senate instructions include bigger tax cuts, $5.3 trillion plus $520 billion in new spending and just $4 billion in spending cuts. This would add almost $7 trillion in debt over the next 10 years, surpassing even former President Joe Biden’s inflation-stoking 2021 American Rescue Plan.
Senate leadership claims the derisory $4 billion in cuts is just a floor and that the bill did not include bigger cuts because of arcane Senate rules. But past Senates have set proper spending cut targets, and there is no reason this time should differ. The reality is that a group of centrist GOP senators wants to avoid cutting spending, and the party’s leadership has let this group set policy for the conference.
It is true that, in theory, Senate committees could come back and write reconciliation text that significantly cuts spending. But it would be naive and ignorant of history to expect such a thing. Cutting spending is hard. That is why the House budget instructions made tax cuts dependent on spending cuts — no tax cut gain without spending cut pain. The Senate wants to avoid this pain, which is why it removed that provision.
In an ideal world, House budget hawks would make a stand now without imperiling reconciliation and making it likely that Democrats would inflict further damage on the nation’s finances. However, current tax rates expire at the end of this year, and President Donald Trump’s tariffs have caused massive economic uncertainty, which, by the administration’s own admission, is causing economic pain. Failing to prevent a massive and imminent tax hike would greatly worsen America’s economic pain.
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If House budget hawks want to pass spending cuts into law, they will need Trump’s political muscle to twist arms in the Senate. Alienating the president now by rejecting what amounts to a first draft will not make Trump amenable to working with them later.
House budget hawks’ worry that Senate Republicans will renege on their promise of spending cuts is valid. We share it. But now is not the best time to have this intraparty fight. Pass the Senate legislation.
