The House Budget Committee narrowly approved President Trump’s sweeping tax-cut bill late Sunday, advancing it by a 17-16 vote after four hardline Republicans voted “present” to break a prior impasse. The measure now moves to the full House, where Speaker Mike Johnson aims for passage before Memorial Day.
Republican infighting over Medicaid cuts and the repeal of green energy tax credits had stalled the legislation, but intense negotiations with White House officials persuaded holdouts to relent. All Democrats opposed the bill, underscoring the partisan divide.
Market Overview:- The bill would extend 2017 cuts, adding $3–$5 trillion to debt over a decade.
- Moody’s downgraded U.S. debt on Friday, citing rising deficits.
- Treasury Secretary Scott Bessent dismissed the downgrade as insignificant.
- Hardliners pressed for deeper Medicaid cuts to offset tax losses.
- Democrats warn higher deficits could trigger recession and rate hikes.
- The Congressional Budget Office estimates a $1.9 trillion deficit increase even with growth effects.
- House floor vote expected this week ahead of the May 26 holiday.
- Senate approval remains uncertain amid moderate Republican resistance.
- Debt ceiling showdown looms as lawmakers must avert default this summer.
- The tax bill's passage through the House Budget Committee, despite initial Republican infighting, signals momentum for President Trump's legislative agenda and could be seen as a win for the administration.
- Supporters argue that extending the 2017 tax cuts will stimulate economic growth, encourage investment, and ultimately help balance the budget in the long term by increasing overall tax revenues.
- The bill includes provisions like eliminating taxes on workers' overtime pay and tips, and a more generous standard deduction, which proponents claim will benefit working-class and middle-income Americans.
- Increased defense funding and resources for border enforcement, also part of the package, align with key Republican priorities and could bolster national security.
- Treasury Secretary Scott Bessent has dismissed the significance of Moody's recent U.S. debt downgrade, suggesting that the administration is not overly concerned about the immediate market impact of rising deficits.
- Some analyses, like one from the Joint Committee on Taxation, estimate that the average tax bill would decline for many income groups under the GOP legislation.
- Nonpartisan analysts estimate the bill would add $3 trillion to $5 trillion to the national debt over the next decade, exacerbating fiscal pressures at a time when the debt is already at $36.2 trillion.
- Moody's downgraded the U.S. credit rating, citing rising deficits and the escalating national debt, which could reach 134% of GDP by 2035. This downgrade could lead to higher borrowing costs for the U.S. government.
- Critics, including many Democrats, warn that the bill disproportionately benefits high-income earners and corporations, while offering minimal relief to lower and middle-income families, especially when factoring in the potential impact of tariffs on consumer goods.
- The proposed cuts to Medicaid, SNAP (food stamps), and clean energy tax credits to offset the tax cuts could harm vulnerable populations and hinder efforts to combat climate change.
- The bill's passage in the full House is not guaranteed, and it faces significant challenges in the Senate, where moderate Republicans may resist the deep spending cuts or the overall fiscal impact.
- Increased deficits and national debt could trigger higher interest rates, stoke inflation, and potentially lead to a recession, as warned by some economists and Democratic lawmakers.
- A looming debt ceiling showdown this summer adds another layer of fiscal uncertainty, and the tax cuts could complicate negotiations to avert a default.
Critics argue the bill’s massive cost will exacerbate fiscal pressures and haunt the economy with higher borrowing costs. Supporters counter that extending the cuts will spur growth and help balance the budget long term.
As the House braces for a floor showdown, investors will watch for signs of a credit-market reaction and assess whether the tax cuts can deliver the promised economic lift without undercutting financial stability.
