WASHINGTON (Reuters) — The U.S. House of Representatives passed a budget plan this week that lays the groundwork for extending President Donald Trump‘s 2017 tax cuts, overcoming opposition from Republican hardliners who worried that it does not cut spending sufficiently.
The 216-214 House vote is a preliminary step that would enable Republicans to bypass Democratic opposition in the Senate and pass tax cut legislation along party lines later this year.
The legislation is a broad budget blueprint, which includes few details, and Republicans will fashion their tax cuts over the coming months. The bill will also accomplish other parts of the Trump agenda, including tightening border security and seeking to boost U.S. energy production.
It would cut taxes by about $5 trillion and add approximately $5.7 trillion to the federal government’s debt over the next decade.
House Speaker Mike Johnson had hoped to pass it on Wednesday, but postponed action when some of his Republicans objected that it does not cut spending enough. Two House Republicans voted against it on Thursday.
The legislation, which passed the Senate on Saturday, calls for a minimum of $4 billion in spending cuts. That is far less than a previous version approved by the House that mandates $1.5 trillion in cuts.
Senate Republicans say the $4 billion figure is simply a minimum that does not prevent Congress from passing much larger spending cuts in the months to come.
Trump urged House Republicans to vote yes, and after passage, declared on social media that the vote “sets the stage for one of the Greatest and Most Important Signings in the History of our Country.”
People look the U.S. Capitol on Capitol Hill in Washington, U.S., November 23, 2024. (REUTERS photo by: Benoit Tessier)
Fiscal fight ahead
The intra-party fight comes amid chaos in financial markets set off by Trump’s imposition of tariffs on imported goods. Prospects of a shrinking U.S. economy as a result of a world trade war, as some economists have projected, spilled over into Congress’ budget debates because of the possibility of falling revenue in an economic downturn.
The Treasury on Thursday reported that gross customs duties in March totaled $8.75 billion, up by about $2 billion from a year earlier and the highest since September 2022. The increase is partly due to Trump’s tariff increases since February, a Treasury official said.
But the figures suggest that tariff revenue is running far short of what would be needed to offset the effects of the extended tax cuts.
The bill would extend the 2017 tax cuts that were Trump’s primary first-term legislative achievement. Johnson said this legislative step forward is a “very strong signal to the markets, to investors, job creators, entrepreneurs and the people that make the economy run.”
Republican leaders said that if the tax cuts are not renewed, Americans will face a tax hike of trillions of dollars. It is unclear how much additional stimulus could result from extending already-in-place cuts.
Republicans are also working to pass additional tax breaks for overtime wages, tipped income and Social Security benefits, that Trump promised on the campaign trail. Nonpartisan analysts say that could drive the bill’s cost north of $11 trillion.
Even with this Republican legislative detente for now, the hardline tactics of the fiscal hawks in the House Republican conference this week were spurned by some of their colleagues.
“I don’t care how philosophically principled you are, I don’t care how bold and dramatic the legislation is, if it never makes it to the president’s desk, it’s never going to become a law,” Republican Representative Frank Lucas of Oklahoma said in a Thursday interview.
Before Thursday’s vote, Senate Majority Leader John Thune tried to sway the concerns of the House hardliners, pledging, “we’ll certainly do everything we can to be as aggressive as possible” with spending cuts.
Johnson, twice in the past 24 hours, held hour-meetings with the hardliners near the House chamber, signaling he took their concerns seriously.
Looking ahead, higher spending cuts could put key Senate votes in jeopardy. House Democratic Leader Hakeem Jeffries argued the Republicans’ budget “will set in motion some of the most extreme cuts to health care, nutritional assistance and the things that matter to everyday Americans in our nation’s 250-year history.”
Some moderate Republican senators have said they also worry about deep cuts to the Medicaid healthcare system for low-income, elderly and disabled Americans.
Johnson on Thursday pushed for work requirements for able-bodied young men who “play video games all day” and said the rest of the cuts would come from a clearing away of waste, fraud, and abuse in the system.
Senator Susan Collins, a moderate Republican from Maine, expressed skepticism about that idea.
“I’m sure there’s some fraud, and we certainly should go after that, but I don’t see how you get to $880 billion,” Collins said, referencing the top-line spending cuts number for the House committee that oversees the healthcare program.
Congressional Republicans also intend to use the budget blueprint to raise the federal government’s debt ceiling, which they must do by sometime this summer or risk default on the nation’s $36.6 trillion in debt.
“What they’re doing in reality is giving billionaires the national credit card and telling them to go hog wild,” said Representative Angie Craig, a Minnesota Democrat, during the legislative debate.
By REUTERS
Reporting by Bo Erickson and Richard Cowan, additonal reporting by David Lawder, writing by Andy Sullivan; Editing by Scott Malone, Mark Porter and Alistair Bell
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