Does anyone remember when incoming Speaker Mike Johnson promised to restore the congressional budget process to “regular order”? Yeah, well, neither does he.
“In theory,” noted Reason’s Jack Nicastro last September, “Congress is supposed to pass 12 appropriations bills by the end of each fiscal year to fund discretionary spending on defense, as well as non-defense programs like veterans’ benefits, education, transportation, and health. In practice, that hasn’t happened in more than a quarter century. This year will be no different.”
Neither will 2025, it seems. Speaker Johnson has the unenviable task of managing the GOP’s divergent factions with a razor-thin majority, and I’ve been willing to give him a lot of slack in the past. Yet it seems that the more things change, the more they stay the same.
After multiple continuing resolutions (CRs), Republicans are celebrating the House finally passing Donald Trump’s much-touted One Big Beautiful Bill Act (OBBBA) at 7:00 a.m. this morning. “It quite literally is morning again in America,” Johnson said. “What we’re achieving today is nothing short of historic.”
The OBBBA isn’t a ‘70s Swedish band, and it’s not another CR, either. But it is a budget reconciliation bill tied to the last CR. Republicans intended to make it too big to fail in the House, and the reconciliation process allows Senate Republicans to bypass the filibuster.
Even so, passing it in the House was an all-nighter and a 215-214 squeaker, with two Republicans — Kentucky’s Thomas Massie, of course, and Ohio’s Warren Davidson — voting “no,” and Maryland’s Andy Harris, the chair of the House Freedom Caucus, voting “present.” But is it worth celebrating?
Yes and no.
Texas Congressman August Pfluger, chair of the 189-member Republican Study Committee, said, “This transformational legislation permanently extends President Trump’s historic tax cuts, provides unprecedented funding for border security, and obliterates the last four years of catastrophic Democratic policies.” That latter part includes blocking funding for things like “transgender” medical care, tightening up work requirements for Medicaid, and reining in wasteful spending on Democrat energy boondoggles. The border portion reimburses states for spending to combat Joe Biden’s open border.
Those are all good things.
The bad news is that all three Republican dissenters are right: The bill goes in the wrong direction on the deficit and the national debt.
The supposedly bipartisan Congressional Budget Office is actually largely run by left-wingers, so you have to take its estimates with a grain of salt. For example, the CBO’s estimate that the bill will add $2.3 trillion to the debt over the next decade is based on static assumptions about the “cost” of tax cuts. Extending current tax rates will spur economic growth, which will yield greater revenue. The CBO, however, assumes a big deficit.
Even so, this bill will not reduce the national debt, which seems like a pipe dream at this point. Instead, it raises the debt ceiling by $4 trillion. Why do we have a debt ceiling again? And why wouldn’t Moody’s Ratings downgrade the U.S.’s AAA rating?
Another problem is that blue-state Republicans successfully won a huge expansion to the state and local tax (SALT) deduction. The $10,000 cap put in place by Trump’s 2017 tax cuts has been quadrupled to $40,000 for people earning less than $500,000 a year.
Everyone who itemizes loves to deduct their state taxes from their federal taxes, but this forces low- or no-tax Republican-controlled states to subsidize the massive tax burden placed on people in blue states who keep electing tax-and-spend Democrats. The editors of National Review lay out a succinct case against SALT:
Because it creates a system in which some Americans pay more than others for the same federal government, SALT is unfair. Because it rewards the citizens of irresponsible states and punishes those in responsible jurisdictions, SALT is perverse. And, because it shields taxpayers in progressive areas from the consequences of their political preferences, SALT incentivizes profligacy, dysfunction, and free riding. … Without SALT, the voters of New York, New Jersey, California, and elsewhere would be on the hook for the taxes they had approved. With SALT, they will not only be inoculated against that pain; they will get to send the bill to everyone else.
Meanwhile, the bill follows through on a Trump campaign promise to eliminate taxes on tips. That’s welcome news for waitresses struggling to raise a family, but don’t be surprised when people and businesses figure out new and creative ways to categorize their income as “tips.” As National Review’s Jim Geraghty quipped, “If you thought there were tip jars everywhere now, just wait until tips become untaxable income.”
As with any bill that requires compromise in Congress, there will be things for everyone to dislike. The OBBBA’s big accomplishment — and perhaps it’s worth the price in other areas — is extending the Trump tax cuts. In fact, it makes the rates (10%, 12%, 22%, 24%, 32%, 35%, and 37%) permanent, which is indeed an incredible and welcome feat. Whether that remains true after the Senate gets hold of it remains to be seen.
