House budget blueprint calls for $2 trillion of cuts over 10 years

Bloomberg News

The House released its long-awaited budget resolution Wednesday, a key step toward crafting a massive tax package that's being closely watched by the municipal bond market.

The budget blueprint calls for $1.5 trillion in cuts over the next 10 years and sets a goal of reducing mandatory federal spending by $2 trillion over the same period.

The proposal allows the House Ways and Means Committee up to $4.5 trillion to cover the cost of extending the Tax Cuts and Jobs Act. The number could be trimmed if other spending cuts are not identified.

The Congressional Budget Office has pegged the cost of the TCJA extension at $4.7 trillion. Ways and Means Chair Rep. Jason Smith, R-Mo., said Tuesday that the committee would need more than $4.7 trillion to accomplish all of Trump's tax goals, including lifting or eliminating the state and local tax deduction cap.

The debt ceiling would be lifted by $4 trillion under the 45-page plan, which also assumes macroeconomic growth will generate $2.6 trillion in revenue through 2034.

"This budget resolution is a key step to start the process in delivering President Trump's America First agenda," House Speaker Mike Johnson, R-La., said in an X post. "There will be ongoing debates and discussions in the coming weeks, and we remain focused on working through the process to deliver on our promises made to the American people. There's still much work to be done, but we are starting on the right path."

The resolution marks the first step toward a filibuster-proof reconciliation bill and follows weeks of intraparty debate among Republicans about the best way to advance Trump's agenda.

The larger the cuts, the more lawmakers will need to hunt for revenue raisers, which the municipal bond market fears could lead to cuts to the municipal bond tax exemption.

The resolution calls for key committees to make billions in cuts through 2034. That includes $880 billion from the House Energy and Commerce Committee, much of which could come from Medicaid; $330 billion from the education committee; and $230 billion from the agriculture committee. The House Transportation and Infrastructure Committee needs to cut at least $10 billion.

The overall "goal" is to reduce mandatory federal spending by $2 trillion over the ten-year budget window, the resolution said. If the committees are not able to hit the $2 trillion target, "it is the policy" of the budget committee "that the instruction provided to the Committee on Ways and Means of the House should be reduced by a commensurate amount to offset the difference," the document said.

The various committees need to make their recommended cuts by March 27.

The House Budget Committee is expected to mark up and vote on the resolution Thursday morning. Johnson told reporters Wednesday that he believes the House could pass the resolution by the end of February to stick to his ambitious timeline.

The Senate Budget Committee Wednesday morning began to mark up its own budget resolution, a smaller package that addresses only the border, energy and defense, and leaves the thornier tax issues for later in the year.

"To my Republican colleagues in the House, I'm pulling for one big, beautiful bill, but there's a sense of urgency," budget committee chair Sen. Lindsey Graham, R-S.C., said Wednesday. "I hope you will consider what we do if you cannot produce the one big, beautiful bill quickly."