Aaron Schwartz/Sipa USA via AP Images
Congress is back in action. OK, that might be overstating it. In Donald Trump’s first 98 days in office, only five bills have been signed into law, amid a flurry of presidentially directed actions. Outside of shouting matches at hearings, Congress has gone into hibernation so far in 2025.
That theoretically ends this week, as markups begin for the “one big beautiful bill” in the House of Representatives. That’s the vehicle to permanently extend the 2017 Trump tax cuts, layer on a bunch of other tax cuts Trump proposed in the 2024 campaign, boost spending on border operations and the military, and offset at least some of this with potentially trillions of dollars in cuts to Medicaid, food aid, student loan programs, clean-energy incentives, and more. DOGE was the unfunny opening act; this is the main event, the entire Trump legislative agenda rolled into one bill. And the long-term effects of the Trump presidency, at least on domestic policy, will all be contingent on the success or failure of this effort.
It would be accurate to say that Republicans are closer to enacting this bill than they were on January 1, but they are not really that much closer. Yes, both the House and Senate passed a budget resolution to kick off the reconciliation process, whereby on-budget items can be bundled into one bill that cannot be filibustered in the Senate. But that budget resolution didn’t resolve the disagreements that threaten the effort.
For example, instructions given to House committees call for $2 trillion in deep spending cuts, while the Senate committees weren’t told to cut much spending at all. That’s OK for now—budget resolution instructions are a floor, not a ceiling, so senators can add in things later. But it’s an unprecedented scenario, and eventually a consensus must be reached between the chambers. While Senate Majority Leader John Thune (R-SD) made some vague promises about spending cuts to get the budget resolution over the line, it’s clear that consensus doesn’t exist yet. “They punted on the hard decisions but they can’t punt indefinitely,” said Brendan Duke, senior director of federal budget policy for the Center on Budget and Policy Priorities, who previously served on the National Economic Council under President Biden.
The fault lines have been present all year. Freedom Caucus hard-liners want to maximize spending cuts; senators and moderate House members are wary. The disagreement is most acute with respect to Medicaid. House Speaker Mike Johnson (R-LA) initially said that no benefits would be taken away from the poor, and Trump has parroted this. But their actual strategy seems to be to avoid blame for the impacts their massive cuts will have on health coverage and outcomes. “What we’re going to see is a lot of dissembling and gaslighting about how a cut to Medicaid is not a cut to Medicaid,” Duke said.
What began as the imposition of work requirements (a nonsensical scenario considering that a large chunk of Medicaid recipients are disabled, elderly Medicare dual-eligibles who use Medicaid to pay for nursing home care) or targeting “waste, fraud, and abuse” has metamorphosed in recent weeks into targeting the Medicaid expansion in Obamacare, which has added around ten million Americans to the rolls. The government currently picks up 90 percent of the expansion cost, a higher figure than the federal-state share for the rest of Medicaid. Republicans could reduce the expansion share, or even eliminate it entirely. This would be a huge problem in the three states where Medicaid expansion was achieved through a constitutional amendment (South Dakota, Missouri, and Oklahoma), and where expansion simply cannot be easily ditched.
Getting to a bill Republicans agree on is a tall task substantively. It’s an even bigger lift politically.
Meanwhile, a dozen House Republicans in swing districts have vowed to vote against “any reduction in Medicaid coverage for vulnerable populations.” That seems to be irreconcilable with the hard-liner demands for reducing the size of government. But that letter does not identify specific cuts that those swing Republicans would be opposed to, apparently because of demands from the Republican leadership. A more specific letter has not yet been sent.
The apparent goal here is to pin any horror stories from loss of coverage on hospitals or states. Duke noted that many swing Republicans come from blue states, and support a giant tax cut for their constituents by lifting the cap on state and local tax (SALT) deductions. For them, the SALT changes could be a reasonable trade for hobbling Medicaid. “I think it’s clear when they talk, they make clear those cuts in taxes for high-income constituents are their highest priority,” he said.
Other proposed cuts have been less contested but just as damaging. Student loan repayment options will likely be rolled back to make the program punitive and inescapable, “saving” money by immiserating borrowers. Lawmakers could for the first time force states to pay a share of the Supplemental Nutrition Assistance Program (SNAP), creating a dynamic much like the federal-state partnership in Medicaid. Usually in recessions, Congress increases the federal share to create a countercyclical stabilizer for the economy. But with a recession potentially looming, this idea would worsen the downturn by making it impossible for states to keep up with rising demand for assistance.
Inflation Reduction Act tax credits for clean-energy manufacturing are also under threat, though the extent is uncertain. The prospect of destroying a climate-related effort that was the signature achievement of a Democratic president is surely attractive, but many of the IRA’s investments are in red areas, including nearly a majority of the districts represented by Republicans on the House Ways and Means Committee, the key tax-writing panel. As Duke explained, production tax credits pay out based on how much energy a project produces in the next ten years, and much of that money will have to be grandfathered in for existing projects. This means that you wouldn’t even get much savings from canceling the IRA credits, while destroying jobs in red districts.
The decisions on the tax side will be no easier for Republicans. Budget hawks don’t want to break the U.S. Treasury, but Trump wants his 2017 tax cuts made permanent. Senate Republicans hit on a solution of magic math, using a “current policy baseline” standard. The argument is that, since the Trump tax cuts are already in place, extending them actually costs zero dollars, even though they expire as a matter of law at the end of the year. That wipes away the extension’s $4 trillion price tag over a decade as a procedural matter, but will still require that much borrowing or cuts to compensate.
The Senate parliamentarian will get to weigh in on whether a current policy baseline is acceptable for a reconciliation bill. But at the budget resolution stage, Senate Republicans simply bypassed the parliamentarian, suggesting that this will not be an obstacle. If Republicans are determined to make the 2017 tax cuts “free” to make the math go down easier, they’re going to do it.
But that requires some more consensus, as the idea makes some Republicans queasy. It sits uncomfortably with their other plan to tame the cost of Trump’s other tax wishes—no tax on tips, Social Security benefits, overtime, etc.—by limiting their length to four years. Given the developing Republican strategy of entrenching tax cuts for a few years and then making them permanent for free, you can see how this sets a precedent for unlimited tax cuts long into the future.
There are other tax offsets that could be included. The idea briefly floated of a millionaire’s tax was never going to become reality. But Trump and some Republicans have endorsed ending loopholes for sports team owners, limiting business tax deductions, boosting the tax on stock buybacks, and increasing the endowment tax on colleges and universities, an extension of the war Trump is having with Harvard and others. (One thing colleges may do in response is tax-shelter their endowment investments by locking them up in long-term private equity plays that don’t show immediate returns.)
But businesses want to extend their research and development tax credit and other perks, and may get them. Add on Child Tax Credit changes and the price tag could get to $5 trillion. Plus, there are also spending increases in the bill, for the type of things Republicans think government is for: blowing up other countries and deporting immigrants. Defense hawks got a boost of military spending increases to $150 billion, up from $100 billion in the initial House offer.
Getting to a bill Republicans agree on is a tall task substantively. It’s an even bigger lift politically: tax cuts that on net benefit the wealthy, paid for by social safety net cuts to the poor. Reverse Robin Hood schemes are never popular, and Democrats have been primed for this attack since the beginning of the year. Expect Trump, at least, to argue that increased tariff revenue allows him to send more money back to individuals. But even the current level of tariff collection doesn’t begin to fill the gap caused by this tax cut plan; in fact, the current rate on China is so high that it will choke off most trade, resulting in no revenue, and in any case those economy-destroying tariffs are likely to be reduced quite soon. Plus, obliterating the economy to deliver tax cuts to the rich isn’t exactly a better rhetorical stand for Republicans to take.
This week, the House Armed Services, Education and Workforce, Judiciary, Homeland Security, Oversight, and Transportation and Infrastructure Committees will begin their markups on their contributions to the legislation. Any hiccups there would portend doom, because these are the easy committees. (Energy and Commerce handles Medicaid, Agriculture does SNAP, and Ways and Means all the taxes.)
The rule of thumb with Republicans is that they’ll do Trump’s bidding. But as he grows more unpopular, that sway may weaken. I don’t believe that the big beautiful bill is guaranteed to become a big beautiful law. Republicans have advanced to this point by carefully choosing to not make any decisions. Now, they must, and I’m not sure they have it in them.
