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Recently, the U.S. House of Representatives approved a budget resolution, which represents a monumental step forward for then-President Donald Trump, as it aligns with his ambitious fiscal policy objectives. This resolution features significant tax and spending cuts totaling trillions of dollars.
The resolution narrowly passed by 217 to 215 votes. House Speaker Mike Johnson played a key role in this triumph by rallying Republican holdouts to support what’s been dubbed Trump’s “big beautiful bill.”
As the Senate prepares for yet another round of budget discussions, this bill outlines reductions amounting to $4.5 trillion in taxes alongside $2 trillion in spending cuts. Additionally, it sets aside significant funds for military enhancements and border security over the next decade.
“Today, House Republicans brought Congress a step closer to fulfilling President Trump’s comprehensive America First agenda, not just select portions of it,” stated House Republican leaders.
Considering the Republicans’ slim majority, just a few defections could have derailed the bill’s passage. Initially, House Republicans Tim Burchett, Victoria Spartz, and Warren Davidson posed potential hurdles by threatening to vote against the bill; however, they ultimately aligned with Speaker Johnson. Thomas Massie stood as the sole Republican voting against it, noting beforehand on X, “If the Republican budget passes, the deficit gets worse, not better.”
Budgets act as non-binding resolutions setting fiscal targets, serving as directives to congressional committees about potential areas for spending adjustments. However, they do not target specific programs for funding cuts.
Once the Senate approves the budget, Republicans in Congress can commence a process known as “reconciliation,” enabling them to enact legislation without Democratic approval, potentially extending tax cuts first implemented in Trump’s 2017 term.
Notably, the bill tasks the House energy and commerce committee with cutting $880 billion, which many interpret as an indirect aim at Medicaid, a key health insurance program for low-income individuals. Similarly, a directive for the agriculture committee to slash $230 billion appears focused on the Supplemental Nutrition Assistance Program, a vital food aid initiative.
The non-partisan Committee for a Responsible Federal Budget forecasts that these measures could inflate the deficit by at least $2.8 trillion by 2034.
Maya MacGuineas, the committee’s president, expressed disbelief, stating, “It’s truly unfathomable that amid multitrillion-dollar deficits and escalating debt reaching unprecedented levels, lawmakers opt to pass a budget exacerbating an already towering debt over the next decade.”
In contrast, Joshua Bolten, CEO of the Business Roundtable lobby group, commended the House, saying, “The passage of the FY 2025 budget resolution is a critical milestone in congressional efforts to bolster the economic gains tax reform has delivered for American businesses, workers, and families.”
In addition, the House budget proposes raising the debt ceiling by $4 trillion, temporarily alleviating concerns of a potential debt default.
Democrats vehemently opposed the budget, labeling it a “disgrace.” Leaders of the New Democrat Coalition, comprising moderate Democratic lawmakers, remarked, “It betrays working families by cutting vital programs they depend on to manage expenses and sustain daily living, all the while granting trillions in deficit-amplifying tax cuts to Republican billionaire donors like Elon Musk.”
Johnson encountered opposition not just from Republicans worried about the potential Medicaid fallout, but also from those who believed further spending restraints were necessary.
Party leaders, defending the cuts, claim they will spur economic growth, contending that alongside other Trump-era measures like tariffs, these cuts will limit deficit increases. However, independent analysts challenge the notion that economic growth will compensate for the expanding deficit.
In the midst of these developments, congressional leaders are racing against the clock to pass legislation to prevent a government shutdown slated for March 14.
In trading news, the dollar and stock index futures saw an uptick during morning sessions in Asia. Futures for the S&P 500 and Nasdaq 100 gained 0.3% and 0.5%, respectively. The dollar appreciated 0.1% against a currency basket of trading partners, while 10-year Treasury yields edged up by 0.03 percentage points—recalling that bond yields move inversely to prices.
This report included additional insights from James Politi in Washington.
