It’s not getting anywhere near the attention it probably should be getting, but the congressional negotiations over the whole reconciliation package are pretty damn important. It’s not just about continuing the tax cuts from the Trump era, though that’s huge. There’s a whole bunch of stuff in there. You’ve got a debt ceiling, spending changes, and new tax cuts for overtime and Social Security. This is a unique opportunity where certain funding and spending provisions can get past the 60-vote filibuster in the Senate, so this is probably the only real legislative achievement Donald Trump’s going to have this year. The problem is that our margins are so tight that it will be hard to thread the needle to get everybody on board to vote for it.
It must all comes down to a final bill that everybody can swallow. On the plus side, it’s to everybody’s benefit to get this passed. But it’s going to be painful as everybody jockeys for position and tries to get their own personal prerogatives into the final product.
A lot of dumb people are very mad because Congress hasn’t passed much legislation lately, conveniently forgetting the whole filibuster thing. The existence of the filibuster, which will be dead the second the Democrats can kill it, is the only thing driving the desperate negotiations to get this done. The new deadline for action is July 4, and, frankly, that’s way too late. We need to get those tax cuts and spending cuts – I wish – on the books as soon as possible so the economy can have time before November 2026 to get cooking again. We have a great opportunity if the Republicans don’t blow it.
Of course, being Republicans, they’re perfectly capable of blowing it.
But it doesn’t have to be that way. Speaker Mike Johnson, who has a wafer-thin margin in the House of Representatives, has done an amazing job getting the preliminary votes through. A lot of people said it couldn’t happen. However, it did happen. John Thune also got the initial votes through the Senate, which was also close to a miracle. That bodes well, but there’s a lot of other boding going on.
Another advantage is the Trump factor. If Donald Trump picks up the phone, he tends to get the guy on the other end to do what he wants. At some point, he’s going to have to start dialing. He’s standing back now and letting both houses figure out what they’re going to do. Some of his contributions have been less than helpful. His idea of tolerating a small marginal rate increase for very high earners is a terrible one. Republicans don’t raise taxes. Remember George HW Bush? Read his lips, and if that doesn’t work, read history. There are a lot of traditional Republican positions we need to revisit. Not raising taxes is not one of those.
It doesn’t help that there are competing blocs within the caucus. The House is schizophrenic in that some members want to cut very deeply, and others don’t want to cut anything at all. The Senate seems reluctant to cut as much as the House is inclined to. Trump’s strategy of letting both sides get as far as they can go before weighing in is probably the best strategy. You want to knock heads at the end of a negotiation, not at the beginning.
The big factor is that everybody in this has an interest in getting this done. Everybody has something they want. If nothing passes, the tax cuts go away, and everybody’s going to get slammed. The Trump 1.0 tax cuts were aimed at the kind of people who vote for Donald Trump. Among other things, they put small businesses on par with big corporations in taxing their income – for a long time, big corporations had an edge. If those tax reforms sunset, it’s going to screw Trump’s voters. So, Republicans have a huge incentive to get this done.
With the stakes this high, there is a lot of jockeying going on. Some hard-core folks want massive cuts, including cuts that seem obvious, like slicing away the Biden era, boondoggles and giveaways. But in some Republican districts, constituents are cashing in on them, so that those pseudo-Republicans are reluctant to cut. It’s very tiresome. Most people in Congress don’t want to cut spending. Nobody ever got a donation for a spending cut. But if we don’t cut spending, the country will eventually go bankrupt, and then it will get really, really medieval. But many of our glorious legislators are calculating that this will be someone else’s problem. That’s the kind of courageous leadership we’ve come to expect from America’s political class.
There’s also the state/local tax deduction, aka SALT. That lets you write off what you pay your state and city. I live in California. California is a communist hellhole. The current deduction limitation under the Trump tax reforms was $10,000. Let’s just say I send considerably more than $10,000 a year to my useless state. Other big blue states, like New York and New Jersey, similarly treat their productive citizens like the prettiest boy on the cell block. Republicans of those states are always on the edge, and they’re always soft. They’re holding out for a massive SALT deduction increase. They need to get an increase, but not an infinite one.
Now, some of these SALT people think they have nothing to lose, that the sunset of the Trump 1.0 tax cuts would simply remove any SALT limit. But the sunset would also reactivate the alternative minimum tax and get around the SALT deduction. Moreover, there aren’t many folks who spend more than $30,000 a year on state and local taxes. This is truly a tax giveaway to the rich, and the Democrats are all for it.
The bottom line is that legislation is compromise. They’re going to have to compromise, and so are the purists who think we ought not to be subsidizing blue state spending this way. I agree, and that’s irrelevant. You need the votes. Mike Johnson and John Thune can lose about three or four votes. That’s it. So, there will be a deal where everybody gets something and everybody gives something. There’s no other way.
Now, the Democrats and the regime media are very eager to see this bill fail. If it goes down to defeat, Trump is screwed. Remember, only the economy matters. If the economy is humming, we win the midterms. If the economy tanks, and they want it tanked, we’ll get creamed. Republicans need to not be stupid. They need to understand that no one will get everything they want. Everybody’s going to get some of what they want. And that’s how the deal gets done.
But I have faith. Johnson and Thune have done well so far, as frustrated as we are with them over various gripes and complaints about how they run things. Considering their margins, they’ve done far better than we have any right to expect. Trump has also shown the ability to break these bucks to his will with his telephone calls and his tweets. His pressure will be key to bringing it over the finish line. But the thing that’s most likely to force all these people to get together is the reality that they can either hang together or hang separately in the midterms. This must get done. And for that reason, I think it will get done.
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