Senate Passes New Reconciliation Plan
April 8, 2025
On April 5, the Senate passed another reconciliation budget to advance tax legislation and other spending priorities. The bill passed 51-48 with two GOP Senators joining all Democrats in opposition.
Why it matters: The Senate action gets closer to the House resolution and President Donald Trump’s “one big, beautiful bill,” but key differences remain.
By the numbers: The Senate resolution would allow for an extension of the 2017 Tax Cuts and Jobs Act (TCJA) as well as new tax priorities. Other provisions raise the debt ceiling by $5 trillion, allow for additional spending cuts, and provide for new spending on defense, border, and energy.
Tax: Senate GOP leadership opted to use the “
current policy” baseline for calculating the expiring tax cuts, which will allow the Senate to renew TCJA provisions without counting them as adding to the deficit.
- Reconciliation requires instructions on specific floors and ceilings for raising and lowering the deficit. Procedurally this is done either through spending cuts/increases or tax cuts/increases.
- Thus, the Senate Finance Committee was instructed to raise deficits by no more than $1.5 trillion—though critics point out it is really $5.3 trillion with TCJA renewal.
Spending Cuts: Unlike the House bill that mandated at least $1.5 trillion in spending cuts, the Senate bill implements a floor of $4 billion in cuts.
- The resolution gives substantial flexibility to Senate Committees in cutting spending, which may help persuade Republicans wary of Medicare cuts but has frustrated some deficit hawks.
- A “deficit neutral reserve fund” also serves as a placeholder for $2 trillion in cuts that “include policy changes that reduce the deficit through reconciliation, executive action, or rescissions by Congress and the President.” It is unclear how this will function or if deficit hardliners will accept these cuts as sufficient.
Debt Ceiling: The $5 trillion increase to the debt limit may add extra urgency to the whole timeline.
- Treasury Secretary Scott Bessent said in an interview last week that the government could hit the “X date” as early as May or June.
- As we covered last week, the Congressional Budget Office predicted a late summer “X date” but cautioned federal tax collection levels could accelerate the date. Bessent expects to provide a formal update to Congress in mid-May.
What’s next: With the Senate bill passed, the House must enact the same resolution to begin the next step of reconciliation, which will include specific tax proposals, cuts, and spending. GOP leaders intend to bring the bill to the House floor on Wednesday and will likely lean on the President to convince hardliners that spending cuts will be sufficient, as he did with the previous House bill.
Contact
David McCarthy (
dmccarthy@crefc.org) with any questions.