'The Most Expensive Legislation Since the 1960s'

Happy Tuesday! It's a big day for the Republican budget bill, so let's get to it.

Republicans Plow Ahead on Trump's Big Bill

House Republicans are entering what they hope is the final stretch of their race to pass their massive bill containing much of President Trump's agenda, including tax changes that would cost a net $3.7 trillion over the next decade, according to the congressional Joint Committee on Taxation.

Three House committees - Energy and Commerce, which oversees Medicaid; Ways and Means, which handles taxes; and Agriculture, responsible for food stamps - have started or will soon begin marathon hearings today on their portions of the legislation, all of which are still subject to GOP infighting. More moderate Republicans worry about their party's proposed cuts to Medicaid. Conservatives want steeper spending cuts, including to Medicaid. And blue-state Republicans aren't satisfied with a proposed $30,000 cap on the deductibility of state and local taxes, though House Speaker Mike Johnson reportedly said he expects to settle that issue tonight.

Democrats, meanwhile, continue to slam the entire package as a sop to the rich, paid for by cuts to vital programs for the poor and middle class.

Big cuts to Medicaid: Republicans have proposed some sweeping changes to Medicaid, including new work requirements and tighter eligibility checks, though they did not include some significant changes that met with substantial pushback.

Rep. Brett Guthrie, the Republican chairman of the committee, defended the GOP plan, calling the changes "commonsense policies that will return taxpayer dollars to middle-class families." The changes, he argued, would strengthen the program for people who need it most. "We make no apologies for prioritizing Americans in need over illegal immigrants and those who are capable but choose not to work," he said.

Protestors interrupted the session early on, chanting, "No cuts to Medicaid" and "waste, fraud and abuse, my ass." Capitol Police reportedly arrested 25 people.

The Congressional Budget Office estimated that the Medicaid changes in the GOP bill would cut deficits by $625 billion over 10 years. The work requirements in the bill would account for about $301 billion in savings over a decade. "That suggests a lot of people would lose coverage, either because they're not working or get caught in red tape," Larry Levitt of the nonpartisan KFF healthcare foundation wrote in a post on X.

Indeed, CBO projected that the GOP plan would lead to 10.3 million people losing Medicaid or CHIP coverage by 2034 and 7.6 million going uninsured.

Rep. Frank Pallone, the top Democrat on the Energy and Commerce panel, said Republicans have broken a promise not to cut Medicaid benefits.

The costs of the GOP tax plan: The Joint Committee on Taxation analysis found that tax breaks in the bill, including an extension of expiring elements of the 2017 Republican tax cuts, would add about $5.7 trillion to the deficit. Nearly $2.2 trillion of that is the result of keeping in place the lower tax rates introduced eight years ago. The tax cuts would be partially offset by $1.9 trillion gained from other changes, including the rollback of a host of clean energy incentives.

The plan also includes new tax cuts proposed on the campaign trail by President Donald Trump:

• The elimination of taxes on overtime pay would cost about $124 billion;
• Ending taxes on tip income would add about $40 billion to the deficit;
• The elimination of taxes on car loan interest for vehicles assembled in the United States would add about $58 billion to the deficit;
• A new tax deduction for seniors would cost about $72 billion.

In all, those Trump promises would cost about $292 billion - and they are all set to expire at the end of 2028 to keep their cost from running higher. If those changes were made permanent, their cost would be far higher.

If the Ways and Means plan is made permanent, it would add $5.3 trillion to the deficit over 10 years, or $6.2 trillion including interest costs. "This would be (by far) the most expensive legislation since the 1960s," budget analyst Jessica Riedl noted in a social media thread, adding, "Congressional Republicans are already on the record (in this bill) ensuring that tax cut expiration dates are all fake."

The bottom line: Republicans still have some very significant differences to hash out. House Speaker Mike Johnson remains intent on passing the budget bill by Memorial Day or soon after, and he can afford to lose no more than three votes from his party. There's a long way to go - and then the Senate will take its turn.

Inflation Rate Eases to 2.3% in April

Defying concerns about tariff-driven price increases, the 12-month inflation rate fell to 2.3% in April, the Labor Department announced Tuesday. The results were better than expected by a tenth of a point, and the lowest 12-month inflation rate since February 2021.

From month to month, the consumer price index rose 0.2%, reversing the surprise 0.1% drop in March but matching expectations. The core inflation rate, which ignores volatile food and fuel prices, was also up 0.2% on a monthly basis, and the 12-month core rate was up 2.8%.

The cost of shelter was the main driver of inflation in April, with prices rising 0.3% from March, accounting for more than half of the overall number. Energy prices were up, too, rising 0.7%. Food prices fell slightly, down 0.1% monthly.

What experts are saying: Despite the relatively good numbers, many analysts remain concerned about the threat of inflation. "Bottom line, this was a good inflation report," said Peter Boockvar, the chief investment officer of Bleakley Financial Group, per The Wall Street Journal. "But this does not really capture yet the response to tariffs."

Andy Schneider, U.S. economist at BNP Paribas, said he didn't take much comfort in the report. "There are a lot of worrying factors telling us inflation will strengthen going forward," he added.

Last week, analysts at Goldman Sachs said the rush to preorder goods ahead of the tariffs may delay price increases, but only for a little while. Unless and until the tariffs are eliminated or sharply reduced, price hikes seem inevitable.

Joseph Brusuelas, chief economist at RSM, said there was nothing in the report to persuade him that the threat of inflation has dissipated. "We expect the rollercoaster ride to lead to inflation of 4% or greater by the end of the year because of trade policy and what appears to be a baseline 10% increase in tariffs for almost all goods," he said in a research note.

Number of the Day: $5.12

The average price of a dozen Grade A eggs fell from a record $6.23 in March to $5.12 last month, according to the Consumer Price Index report from the Bureau of Labor Statistics. It was the first month-to-month drop in egg prices since October 2024. Still, egg prices are significantly higher than the $2.86 cent average in April 2024 or the $4.14 cent average as of December.

Deficit as of April Was 13% Higher Than Last Year

Thanks to the annual surge in receipts as Americans pay their tax bills, the U.S. recorded a budget surplus of $258 billion in April. The surplus was about $48 billion larger than the monthly surplus recorded a year ago.

Rising tariff revenues contributed to the surplus, as customs duties totaled $16.3 billion - 86% more than was collected in March, and more than twice the $7.1 billion that was collected in April 2024. Per CNBC, customs duties totaled $63.3 billion this year through April, an 18% increase compared to the same period last year.

Still, the surplus was not nearly large enough to cover the deficit so far this fiscal year, which dipped to $1.05 trillion in April - a 13% increase over the fiscal-year-to-date deficit recorded in April 2024.

Outlays for interest on the national debt continue to run high. Net interest totaled $89 billion in April, the largest category of spending other than Social Security.

Quote of the Day: Where Is DOGE Headed?

"The DOGE caucus is dead. It's defunct. We haven't met in months. We only had two total meetings in five months. And we weren't involved at all in anything [at DOGE], which Elon was in charge of. Zero. Zilch. Nada. [Musk] did it all on his own.

"DOGE was a complete failure. Complete failure. Nothing has been made more efficient. Ask the people in Newark [Liberty International Airport, which has suffered delays and cancellations] how efficiency is going."

− Rep. Jared Moskowitz, the Florida lawmaker who was the first Democrat to join the DOGE Caucus in the House, speaking to Politico.

Even before Inauguration Day, lawmakers scrambled to get involved as advisers in what was sold as a cost-cutting and efficiency initiative, headed by Elon Musk and Vivek Ramaswamy, two of President Trump's biggest supporters in tech. But Ramaswamy abandoned the project before it even began, and Musk is now reportedly leaving town to tend to his tech companies, including Tesla, which suffered greatly in his absence - in part due to his relentless aggression toward federal programs and employees, a stance that, combined with Musk's vocal support of far-right political groups in Germany and elsewhere, has tainted the once respected car company.

Still, some say the spirit of DOGE - whatever that may be - lives on. "Congress can enact long-term change, and our 100 committed members and eight specialized working groups are working to codify critical reforms and preparing legislation that will unlock savings for the American people," Rep. Aaron Bean, the Republican from Florida who serves as co-chair of the DOGE Caucus, said in a statement.

Fiscal News Roundup

• House Republicans Plow Ahead on Hundreds of Billions in Medicaid Cuts Despite Infighting – ABC News
• Trump's $4.9 Trillion Tax Plan Targets Medicaid to Offset Costs – Associated Press
• CBO: 7.6 Million Would Go Uninsured Under GOP Medicaid Bill – Politico
• Republican Tax Bill Would Add $3.7 Trillion to the National Deficit: JCT – The Hill
• GOP Leaders Snubbed the Hard Right on Medicaid. They're Vowing to Fight Back – Politico
• House Republicans' Pension Changes Will Save Nearly $51B, CBO Says – Politico
• House Republicans Look to Help Trump Strip Tax-Exempt Status of Nonprofits He Says Support Terrorism – Associated Press
• Chuck Schumer Says He Is Placing a Hold on Trump DOJ Nominees Amid Questions on Qatar's Luxury Jet Gift – NBC News
• 'It's a Bribe': MAGA Media Stars Bash Trump's Reported Qatar Plane Gift – CNN
• Inflation Cooled Again Even as Some Tariffs Took Effect. But Economists Don't Expect That to Last – Associated Press
• Trump Slashes 'De Minimis' Tariffs on Small Shipments From China – Wall Street Journal
• Student Loan Delinquencies Surge as Credit Reporting Restarts – Axios
• Twenty States Sue Over Trump's Push to Link Grants to Immigration Enforcement – Reuters
• Trump Administration Cuts Another $450 Million in Grants to Harvard, on Top of $2.2 Billion Already Frozen – CNN
• Trump Admin Cancels Layoffs for Some Health Workers Ahead of Kennedy Hearing – Politico

Views and Analysis

• House GOP Tax Plan Would Cut Taxes Across the Board, but Mostly Benefit High-Income Filers – Howard Gleckman, Tax Policy Center
• Now Might Be Exactly the Worst Time to Cut Medicaid and Food Stamps – Catherine Rampell, Washington Post
• The Great Trump Tariff Rollback – Wall Street Journal Editorial Board
• How Policymakers Could Use the Tax Code to Better Serve Children – Elaine Maag, C. Eugene Steuerle and Margot Crandall-Hollick , Tax Policy Center
• Proposed SALT Cap Increase Is an Expensive Boost for Few Communities – Nikhita Airi, Tax Policy Center
• The Ugly Truth About the 'Big Beautiful Bill' – Sen. Ron Johnson (R-WI), Wall Street Journal
• Are Medicaid and SNAP Cutters Cruel or Out of Touch? – E.J. Dionne Jr., Washington Post
• House Republicans Take on Medicaid – Laura McGann, Washington Post
• As White House Steers Justice Dept., Bondi Embraces Role of TV Messenger – Glenn Thrush, New York Times