Trump’s Big Bill Suffers Major Setback in the Senate

ZUMA Press Wire
ZUMA Press Wire
By Yuval Rosenberg and Michael Rainey

Good evening. The Senate's rules referee sent Republicans scrambling today by determining that critical elements of their big bill don't meet the strict rules surrounding the reconciliation process GOP leaders want to use. We've got what you need to know.

Trump's Big Bill Suffers Major Setback in the Senate

Senate Republicans suffered a major blow on Thursday as the chamber's parliamentarian ruled that a slew of their planned Medicaid cuts - key elements of their package of tax and spending cuts - do not meet the rigorous criteria for inclusion in a bill using the special reconciliation process to avoid a Democratic filibuster.

Republicans had been counting on cuts to Medicaid to help offset the cost of their plan for trillions of dollars in tax cuts. The ruling by parliamentarian Elizabeth MacDonough would strip some $250 billion in Medicaid cuts from the Republican plan. It leaves Senate GOP leaders scrambling to make difficult choices, and it may upend their plans to push ahead with votes on the overall package over the coming days as they aim to deliver the legislation to President Donald Trump's desk by July 4.

Moving ahead: Republicans are reportedly expected to try to rewrite the latest provisions that were struck down, but that process could delay GOP leaders' plans to start voting on the package on Friday. The ruling may also make it harder for GOP leaders to assuage the concerns of some conservatives who are demanding more spending cuts.

Senate Majority Leader John Thune, a Republican from South Dakota, downplayed the disruption. "These are speed bumps along the way; we anticipated those and so we have contingency plans," he told reporters. "Obviously, you have to adjust the timing and schedule a little bit, but we're moving forward."

But Republican Sen. Ron Johnson acknowledged that this was more than just a minor setback: "I'll say that was a big old grenade thrown into the process."

Medicaid limits: Among the latest provisions to be struck down was a divisive proposal to limit a Medicaid provider tax that states use to boost the federal funding they receive for the healthcare program. Some Republicans and hospital groups have raised concerns about that proposal, warning that it could force rural hospitals to close. The parliamentarian also ruled against a provision that would prohibit federal funding to states that allow undocumented immigrants on Medicaid and another that would place new limits on premium healthcare tax credits for immigrants who aren't citizens.

MacDonough had previously rejected an initial GOP proposal to cut the Supplemental Nutrition Assistance Program, commonly known as food stamps, as well as a plan to sell federal land, an effort to gut the Consumer Financial Protection Bureau and a move to restrict the power of federal judges to issue nationwide injunctions.

MacDonough has yet to rule on all portions of the GOP plan, with decisions on the Senate Finance Committee's proposed tax changes still to come.

Overall, MacDonough has ruled out nearly $600 billion in cuts from the Senate Republican legislation, according to a post on X by Bobby Kogan, the senior director of federal budget policy at the left-leaning Center for American Progress and a former budget staffer in the Senate and at the White House. Republicans reportedly expect to be able to salvage some of the provisions that MacDonough has ruled against, but Kogan wrote that $240 billion or more in planned GOP cuts will remain out of the legislation.

What's next: While some irate conservative lawmakers called for ignoring or firing the parliamentarian, Thune on Thursday reiterated his opposition to the idea, which would eat away at the Senate filibuster. "No, that would not be a good option for getting a bill done," he said.

Some senators opposed to the provider tax provision said the parliamentarian's ruling provided an opportunity to fix the bill. "This is a chance to get it right," Republican Sen. Josh Hawley of Missouri told reporters. "This is a chance for the Senate to fix this problem they created and not defund rural hospitals."

The White House insisted that it is sticking to the Independence Day deadline. "We expect that bill to be on the president's desk for signature by July Fourth," Press Secretary Karoline Leavitt told reporters.

At an afternoon event at the White House to promote the legislation, Trump falsely claimed that the bill, while slashing spending, won't cut Medicaid. "We're cutting $1.7 trillion in this bill and you're not gonna feel any of it," he said. "Your Medicaid is left alone. It's left the same."

The Congressional Budget Office has estimated that 10.3 million people would lose Medicaid or Children's Health Insurance Program coverage by 2034 and nearly 8 million more people would be left uninsured due to policies in the House-passed version of the bill. The Senate version included steeper Medicaid cuts.

Economy Shrank More in Early 2025 Than First Estimated

The U.S. economy shrank at an 0.5% annual pace in the first three months of 2025, a more rapid decline than previously estimated, the Commerce Department announced Thursday in its third and final GDP report for the first quarter.

Earlier estimates put the growth rate of gross domestic product at -0.3% and -0.2%. The Commerce Department said the downward revision was driven primarily by consumer spending, which was weaker than first estimated, and imports, which increased even more than initially reported as firms and households rushed to secure goods from foreign suppliers ahead of higher tariffs put in place by President Trump. Imports surged 37.9% during the quarter, dragging down GDP growth by nearly 4.7 percentage points.

The growth numbers provide a sharp contrast with previous data, which show GDP growing at a 2.4% annual rate during the fourth quarter of 2024. Consumer spending growth hit a 4% rate in late 2024 but grew by a much weaker 0.5% to start 2025.

Daniel Hornung, who served on the National Economic Council during the Biden administration, told Semafor that the data "suggests consumers were likely more on edge than previously thought."

Consumers cut back on entertainment and dining in particular, noted Gregory Daco, chief economist at EY-Parthenon, suggesting they are waiting to see how the tariff increases play out. That final result is still unknown, generating uncertainty that could continue to weigh on growth in the coming months.

"What we're witnessing is an economy temporarily buffered from the tariff shock by smart logistics maneuvers, proactive pricing strategies and some foreign exporter concessions," Daco said.

House Passes First Funding Bill for 2026

The House passed its first funding bill for the 2026 fiscal year on Wednesday evening, as lawmakers approved more than $453 billion for veterans, military construction and other programs. The 218-206 vote was largely along party lines, with two Democrats (Reps. Jared Golden of Maine and Marie Gluesenkamp Perez of Washington) joining Republicans in the majority.

The Military Construction, Veterans Affairs, and Related Agencies Appropriations bill provides $435 billion in budget authority for the Department of Veterans Affairs, a $67 billion increase from 2025. About $301 billion of the VA total is for mandatory benefit programs, with the remaining $134 billion going toward discretionary programs.

Budget authority for military construction totals $17.9 billion, a slight increase over 2025 levels.

Republicans hailed the bill for fully funding veterans' health care and benefits programs while supporting President Trump's agenda by denying funding for DEI, gender affirming care and healthcare for undocumented immigrants.

Democrats charged that the bill falls short and could harm veterans by promoting the privatization of services. Saying the bill would shift "billions of taxpayer dollars to private hospitals and clinics," Connecticut Rep. Rosa DeLauro, the senior Democrat on the Appropriations Committee, warned that it would lead to "longer wait times, poor communication and coordination, a diminished quality of care for our veterans, and higher costs for taxpayers."

Shutting Down USAID to Cost More Than $6 Billion: Report

The Trump administration's effort to close the U.S. Agency for International Development will cost more than $6 billion, according to a preliminary estimate from the State Department disclosed by Bloomberg Thursday.

The tally includes hundreds of millions of dollars for legal fees required to respond to lawsuits challenging the abrupt closure and the dismissal of thousands of employees.

"There are large numbers of pending and projected litigation matters and grievances to be resolved," a nine-page State Department memo says. As a result, the agency will need to maintain a team of attorneys and human resources personnel, as well as an outside team of experts.

The agency must also close out numerous existing contracts and dispose of more than 100 properties that are owned or rented around the world.

The cost analysis was reportedly written by Jeremy Lewin, who led a three-member team from the Department of Government Efficiency responsible for budget cuts at USAID. Billionaire Elon Musk, who spearheaded the DOGE effort, targeted the agency in the earliest days of the Trump administration, writing on February 3 that "We spent the weekend feeding USAID into the wood chipper."

The DOGE cost-cutting effort has been popular among conservatives who laud its political goals, but it has fallen far short of its trillion-dollar-plus savings targets, and the USAID report highlights how uncertain some of DOGE's savings claims appear to be.

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