House passes joint budget blueprint

Bloomberg News

President Donald Trump's "big beautiful bill" narrowly passed the House of Representatives Thursday after Republican leaders persuaded a group of holdouts to support the legislation despite their criticism that the bill does not include deep spending cuts.

The vote sets the stage for sweeping legislation that extends the Tax Cuts and Jobs Act, which carries an estimated $5 trillion price tag, and features at least $1.5 trillion in cuts, as promised to House conservatives.

The deeper the cuts, the more municipal market participants fear that lawmakers will target the municipal bond tax exemption as a revenue raiser.

The 216-214 vote marks a victory for House Speaker Mike Johnson, R-La., Speaker Majority Leader John Thune, R-S.D., and Trump, who have pushed hard for the budget resolution to maintain momentum toward a bill that enacts Trump's agenda. Leaders convinced conservative GOP lawmakers that they would have time to push for their deeper cuts when the two chambers hash out language in the reconciliation bill.

Passing the budget resolution is the "next big step" toward a reconciliation bill that extends the TCJA and slashes at least $1.5 trillion in federal spending, Johnson said Thursday before the vote at a press conference with Thune.

"And I can tell you that many of us are going to aim much higher," Johnson said. "We want to make the government more efficient, effective and leaner for the American people."

To win over skeptical House conservatives, Thune said the Senate would also aim toward $1.5 trillion of cuts, despite passing a resolution last week that calls for only about $4 billion in cuts.

"We're certainly going to do everything we can to be as aggressive as possible," Thune said. 

The House plan calls for the $1.5 trillion in spending cuts over a decade and allows for $4 trillion in tax cuts or up to $4.5 trillion if committees can cut $2 trillion. The Senate-crafted budget resolution, passed by the House Thursday, call for $4 billion of spending cuts and allows more than $5 trillion in tax cuts. Unlike the House, the Senate relies on so-called current policy baseline model, which would zero out the costs of extending the TCJA and allows them to avoid offsets.

The two no votes were Rep. Thomas Massie, R-Ky., and Rep. Victoria Spartz, R-Ind.

"I appreciate efforts of my colleagues, but the instructions we voted on today are still setting us up for the largest deficit increase in the history of our Republic, & opening up a "pandora's box" by changing accounting rules to hide it. In good conscience, I couldn't vote YES," Spartz posted on X after the vote.