The House passed Trump’s big beautiful bill in the early hours of Thursday morning, boosting the odds of its passage in the House by June to certainty.
The big beautiful bill that will enact Trump’s major policy goals has hit a snag. Some Republicans concerned about the bill’s impact on the United States’ budget deficit have refused to support it. Speaker Mike Johnson (R-LA) began his crisis management on Tuesday night.
The tension comes partially from the deficit increase that fiscal hawks expect from the bill’s passage. Independent budget organizations have estimated Trump’s big beautiful bill of continued Medicaid spending, Social Security spending, and tax cuts for wealthy Americans would add $3.3 to $4 trillion to the deficit over the next decade.
Commercial prediction market platform Kalshi gives the bill a 99% chance of passing by June, up from 76% on Wednesday. Kalshi traders were convinced that in the tug-of-war between budget concerns and Trump’s wishes, Republican holdouts would follow Trump’s wishes.
Fighting over SALT
One of the major sticking points among Republicans is the state and local tax (SALT) deduction. SALT deductions allow tax filers to deduct state and local taxes from their tax filings, and it is used often in high-tax states like New York and California. Kalshi traders think the SALT cap will be $40,000, consistent with Mike Lawler’s (R-NY) announcement on Wednesday.
The $40,000 SALT deduction is an increase from the previous $10,000 cap that Trump signed into law in his 2017 tax bill. Those deductions reduce tax revenue, which is great for individual filers but bad for a budget with more expenses than revenue.
As of Wednesday evening, the fight over this provision seems to be drawing to a close, but tensions will remain for deficit hawks who had to surrender their principles to President Trump.
Deficit expected to increase this year
Trump may get to sign his big beautiful bill quite soon, but he’s not going to be able to pitch himself as a deficit hawk. Kalshi traders only forecast a 19% chance of the deficit being smaller this year than last year.
Tax cuts are a superficial way to convince voters that the economy is doing well. Many voters will be happy with a little more money in their pockets. However, as Fareed Zakaria pointed out, some of the largest expenses are programs like Medicare, Medicaid, and Social Security.
Zakaria also notes that DOGE failed to make the dramatic cuts in government “waste” that Elon Musk purported to make. As of May 11, DOGE made $65 billion in verifiable government spending cuts, less than half of the $165 billion it claimed to have saved, and a fraction of the $2 trillion Musk promised to cut in October 2024.
The solution is unpopular and painful: raise taxes and cut spending in defense and entitlements like Medicare and Social Security. Any Republican or Democrat who runs on that platform in 2028 will face an uphill battle to make it past the primary, let alone make it into the White House in January 2029.
