(Bloomberg) -- The budget plan the Senate passed before dawn on Friday leaves large hurdles for President Donald Trump’s tax cut agenda and for raising the debt ceiling before a possible payments default in the summer.
The Senate voted 52 to 48 to adopt a budget that would permit $340 billion in new spending focused on boosting the military and border security funds. Senate Republicans paint it as a backup proposal because the GOP-led House has struggled with its own more ambitious plan to enact trillions in tax and spending cuts while raising the nation’s debt ceiling.
Earlier this week, Trump posted that he backed the rival House budget outline. That bill would allow at least $4.5 trillion in tax cuts in exchange for at least $2 trillion in spending cuts and a $4 trillion increase in the debt ceiling. The House plan also boosts defense and border funding.
Despite Trump’s backing of the House plan, Senate Majority Leader John Thune of South Dakota and his lieutenants went ahead with all-night votes on their more narrow proposal, arguing that debates over tax policy will take months and funds are urgently needed to stop illegal immigration into the US. Thune has said he prefers a bipartisan approach to raising the debt ceiling before the deadline, but has not sketched out a plan to do so.
“To my House colleagues: I prefer one big beautiful bill that makes the tax cuts permanent, that does the things we need to do on the border and with our military, and cuts spending,” said South Carolina Republican Lindsey Graham, who authored the Senate budget. “But we have to have a Plan B if you can’t get it done soon.”
House Republican leaders are working to corral support for their draft budget plans, with moderates in the party balking at proposals to cut anti-poverty programs and a handful of conservatives pushing for even deeper spending cuts. Leaders can only afford a single defection given their narrow majority.
Congressional Hispanic Conference Chairman Tony Gonzales, a Texas Republican, led seven other conference members in a letter opposing deep cuts to Medicaid, food stamps and Pell Grants. The moderates did not explicitly say they would vote against the budget however but the implied warning was clear. Even if they vote for the budget plan, they could still block the actual bill making the spending cuts after it is drafted in the coming months.
The benefits cuts were called for in the House budget in order to secure the support of the conservative House Freedom Caucus which is opposed to a purely deficit-finance tax cut. The plan seeks $880 billion in cuts from the committee that oversees Medicaid, a figure that cannot be reached simply by requiring able-bodied adults to work for the benefit. Nonetheless, the House plan would still add nearly $3 trillion in deficits over ten years despite Trump’s statements this week that he wants to immediately balance the federal budget which is already running $2 trillion annual deficits.
If the House does pass its budget that would lead to talks with the Senate on a compromise that could pass both chambers. Senate Republicans have already signaled they want larger, more permanent tax cuts than the House budget would allow in the absence of even deeper spending cuts.
House Speaker Mike Johnson on Thursday vowed that at the end of the day tactical disputes with Senate Republicans would be resolved and Trump’s priorities would be enacted.
“You are going to see no daylight between Republicans in the House and Senate,” Johnson told an audience at the Conservative Political Action Conference.
A marathon, all-night series of Senate amendment votes allowed minority Democrats, locked out of all positions on power since Trump’s inauguration, to highlight the overall GOP plans that would cut tax rates for the very wealthy while likely cutting low income programs like Medicaid. Republicans adopted an amendment calling for strengthening the program for the most vulnerable, a further sign of unease within the party over a program many Republican voters use.
“Republicans are going down this partisan path because they know Democrats are not going to join them in throwing Medicaid, nutrition assistance, and veterans’ benefits into the wood chipper so they can throw more tax cuts at billionaires and the biggest corporations,” Democrat Patty Murray of Washington said on the Senate floor.
Republicans are using a two-step budget reconciliation process to bypass any minority Senate Democratic filibuster. The same procedure was used by President Barack Obama and Democrats to enact Obamacare and was used under President Joe Biden to enact the renewable energy subsidies and health benefits in the Inflation Reduction Act.
Reconciliation is separate from the annual appropriations process which actually funds government operations. An appropriations spending bill, which can be filibustered by Democrats, will be needed by March 14 to keep the government open. Murray told reporters that talks are “extremely” close on a spending level for that bill but Democrats need assurances that Trump will spend the money Congress allocates. Top Republican appropriator Susan Collins of Maine said she worries about a government shutdown with talks stalled over the assurances issue.
