America’s Senate plans big changes for the House’s spending bill

WHIPPING VOTES is a hard job in Congress, especially with as narrow a majority as the one overseen by Mike Johnson, the House speaker. But even the most masterful legislators can’t account for everything. Andrew Garbarino, a New York Republican, fell asleep early on May 22nd as his colleagues considered HR 1, also known as the One, Big, Beautiful Bill Act. He missed the vote. “I’m going to just strangle him,” Mr Johnson joked to reporters. The bill passed, but that was the easy part. The Senate will now negotiate its own version of the most consequential legislation of Donald Trump’s second term.

Mr Trump prefers to govern by executive order, but the House bill addressed administration priorities that couldn’t be tackled with his signature alone. Most significantly, it makes permanent his 2017 income-tax cuts, a policy broadly popular with Republicans in both chambers. Yet the multitrillion-dollar legislation will also have far-reaching effects on immigration, energy production, social insurance and defence spending. And the august Senate has very different ideas on many of these issues from the rowdier lower chamber.

Tax-reform discussions in the Senate picked up in recent weeks, with senators debating among themselves even as they watched House negotiations. Fiscal hawks in the Senate are upset that the House bill would add more than $3trn to the deficit over the next decade. Moderates, meanwhile, have been critical about changes to safety-net programmes. Still, it is already possible to discern the changes coming from the Senate.

Top of the list is killing the expansion of the state-and-local-tax (SALT) deduction, a policy traditionally supported by Democrats that reduces the income-tax burden for high-earners. A handful of House Republicans from high-tax states won an increase of the cap to $40,000, up from $10,000. Yet there is virtually no constituency for the pricey policy among Senate Republicans, who would rather prioritise making permanent the few pro-growth business provisions in the bill.

Then there are Mr Trump’s tax handouts, which in the House’s bill would add about $500bn to the deficit. The Senate, recognising political reality, is expected to include some version of these campaign promises, but is likely to craft less ambitious tax relief on tips, on overtime pay and on car loans (all Trump campaign pledges). Its version would add about half as much to the deficit as the House bill.

The House bill contains about $1.5trn in spending cuts over a decade. Most of this comes from government-funded health-care and food-assistance programmes. Ron Johnson, a Wisconsin senator and leading Republican fiscal hawk, would prefer about $6trn in cuts. That would return America to pre-pandemic spending levels, but he knows this maximalist position is unattainable in an ideologically diverse party. The Senate will probably aim for more like $2trn in cuts.

Cuts to food assistance and Medicaid, a government health programme for poor and disabled Americans, are unpopular with some senators, including economic populists. These differences are unresolved in the Senate and could be the trickiest point when the House and Senate bills are merged in reconciliation, which could still be months away.

That won’t be easy. But the alternative is allowing tax cuts to expire and therefore taxes to rise. Avoiding that may be the single policy all Republicans agree on. There also seems to be consensus around using the tax system to make life harder for foreigners working, investing and doing business in America.

The most likely outcome is that the Senate passes a bill that is slightly less bad for the deficit than the House version, and which strips out the SALT deduction. But that would just be the starting-point for high-stakes negotiations between the two chambers, with the president standing by with a smartphone and a war chest of campaign finance to cajole holdouts.

For now both chambers are steeling themselves for a bicameral brawl. “The number that we care most about is 218,” Kevin Cramer, a North Dakota senator, told Politico, referring to the size of the House Republican majority. “Depending on how many we can get to fall asleep.” At least the Republican Party can count on help from Democrats: some of its more elderly House members have died since the last election and their seats are vacant. ■