The News
The tax and spending megabill that House Republicans celebrated passing early Thursday is estimated to add more than $3 trillion to the country’s debt over the next 10 years.
Yet after years of railing against deficits as economically and politically toxic, Republicans are losing their appetite for the topic this time around.
Even as Treasury bond yields soared in a sign of investor queasiness about their bill’s front-loaded debt, some Republicans insist their plan would boost revenues enough that deficits eventually shrink. Only a crop of the House GOP’s biggest fiscal hawks raised deficit worries before the all-night session where their leaders muscled the bill through — and all but three swallowed their fears to vote “yes.”
Republicans have an impressive statistic to help distract from their deficit denial: President Donald Trump’s economic team argues that cutting taxes for manufacturers, tipped workers, car owners, retirees, high-tax-state residents, and others who benefit from their bill will bump the GDP by as much as 3.5 percent over the next decade (much more than third-party estimates).
The truth, however, is that some of the House’s cuts to Medicaid and energy projects may not survive the Senate. And broadly speaking, the GOP’s anti-debt orthodoxy lost ground in Trump’s “big, beautiful bill” to his brand of economic populism.
“Isn’t it amazing that the reality hasn’t broken through the rhetoric yet?” Sen. Ron Johnson, R-Wis., told Semafor. “Nobody’s talking about it.”
Before Trump finished helping to push the House bill to passage, some conservatives were prepared to talk about its high cost. Members of the House Freedom Caucus raised concerns over spiking bond yields that signal low investor confidence in US debt during their Wednesday huddle with Trump at the White House, said Rep. Eric Burlison, R-Mo.
“I don’t know that this bill is going to be, or [is] even capable of being, the fix to what’s going on with the bond market,” Burlison said. “The Senate may have an opportunity to make some new movement there.”
Rep. Tim Burchett, R-Tenn., another Freedom Caucus holdout, told Semafor after midnight on Wednesday that “I’m not surprised nobody in this town doesn’t talk about [the deficit] more. Everybody just ignores it.”
Hours later, Burlison and Burchett voted for the megabill they previously resisted.
On Tuesday, when Trump came to the Capitol to lobby Republicans on the tax and spending package, multiple lawmakers said the president did not talk about deficits at all. Instead, he underscored the importance that they raise the debt ceiling so the US can borrow more money.
That didn’t work for Rep. Warren Davidson, R-Ohio, who voted no.
“Back home, people know that they want less spending,’” said Davidson. “They’re paying attention to the bond market, the downgrade of our credit. They know deficits do matter.”
Only one other House Republican opposed the bill: Rep. Thomas Massie of Kentucky. A longtime foil of the president who frequently wears a self-made debt-clock lapel pin, Massie delivered scathing floor remarks shortly before 2 a.m. Thursday and compared passing the bill to being on the Titanic, “putting coal in the boiler, and setting a course for the iceberg.”
“Congress can do funny math — fantasy math, if it wants — but bond investors don’t. And this week, they sent us a message,” Massie said to applause from Democrats.
Know More
Fiscal hawks in the Senate now get a crack at the megabill. They don’t like what we see.
“When people talk about, ‘Well, the bill is going to cut $800 billion’ … that kind of sounds good. But what does it mean if you add it up against what comes in?” said Sen. Rand Paul, R-Ky., who plans to vote no as long as the debt ceiling remains included.
Persistently high interest rates could strengthen their hand.
Sen. Rick Scott, R-Fla., said he will push to make the bill deficit-neutral. He teamed up with Johnson for a presentation to colleagues Wednesday about the yawning deficit.
“We’ve got to balance the budget; we don’t have a choice. You see what’s happening; rates are going up, the American public is paying more for mortgages, car payments, for credit cards,” Scott said.
Johnson said if Republicans don’t address the situation, they will eventually have to do something even more at odds with their identity than padding the deficit: boosting revenues.
“If we’re not willing to address spending at some point in time, we’re going to have to pay for this. And do we start paying for it by having a tax increase? Nobody wants that.”
The View From Democrats
The Congressional Budget Office predicts the US is already on track for its debt to exceed the size of its economy by 2032 — a marker it’s only hit in the wake of World War II and the Great Recession — as interest payments alone exceed defense spending.
Former President Joe Biden’s administration played its own role in that higher debt — but after years of absorbing deficit-spending criticism from Republicans, Democrats are eager to dish it out.
“They complain about the debt on Monday, and then they add $4 trillion to it on Tuesday,” Rep. Richard Neal of Massachusetts, the top Democrat on the tax-writing House Ways and Means Committee, told Semafor. “I’m astounded.”
Still, Democrats are careful not to focus on the debt too much. House Majority Forward, a nonprofit organization associated with House Democrats’ super PAC, on Wednesday urged members to steer away from primarily talking about deficit increases when discussing the megabill.
The View From GOP Leaders
When asked about the legislation’s impact on the deficit, GOP officials cast doubt on official scorekeepers. House Ways and Means Chair Jason Smith, R-Mo., said this month that the party’s 2017 tax cuts raised more in revenue than projected.
“Part of the reason why there’s a lot of confusion in analysis of this stuff is because folks tend to, I would say, overly credit CBO forecasts,” White House Council of Economic Advisers Chair Stephen Miran told reporters.
Eleanor and Burgess’ View
The House’s deficit hawks tried to raise concerns this week, but they proved no match for Trump’s force of will. We think Paul will stand strong against the bill in the Senate, but the president has proved that almost every other Republican is malleable.
The biggest issue for Senate Republicans is that cutting more spending means losing votes from the center of their conference. So the “big beautiful bill” seems likely to increase deficits to some degree, if and when it becomes law.
One X factor remains: the bond markets. We’ve seen them change Trump’s mind on tariffs. That formula may not work on legislation.
Room for Disagreement
Hardline conservatives who voted to pass the bill out of the House say they still agree with Davidson and Massie.
“History may bear out that Warren and Thomas were the wise men in this course,” Rep. Chip Roy, R-Texas, said.
But they also argue that the changes they secured made the bill more fiscally responsible than it was — and that they had to vote yes to maintain momentum, particularly since the Senate will change it anyway.
“There are going to be significant negotiations,” Sen. Bill Hagerty, R-Tenn., said.
Notable
- Republican economists told the Wall Street Journal they’re skeptical of the White House’s projection that revenue raised by tax cuts will cover their costs.
- Bloomberg reports that long-term borrowing costs are up around the world as investors question several governments’ ability to cope with deficits.