On February 25, 2025, the U.S. House of Representatives passed its Budget Reconciliation proposal, 217-215.

The Senate previously passed its reconciliation proposal 52-48 on February 18, 2025. The Senate proposal is limited to increased spending over the next decade of $175 million for immigration enforcement and $150 billion for defense, while cutting other federal programs. They planned on passing additional guidelines for revenue and other cuts later.

The House proposal fulfills President Trump’s requirement for a “big, beautiful bill” by providing the expected guidelines for federal revenue and spending for the next 10 years. It seems likely the Senate will also approve the House proposal and send it to President Trump for signature.

The House proposal includes extending about $4.5 trillion in tax cuts adopted in the Tax Cuts and Jobs Act of 2017 that are expiring.

It also lists increased spending of up to $110 billion for the Judiciary Committee, $100 billion for the Armed Services Committee and $90 billion for the Homeland Security Committee (immigration enforcement.)

To reduce the resulting increase in the national debt, the proposal includes cuts of at least $880 billion by the Energy and Commerce Committee, $330 billion by the Education and Workforce Committee, $230 billion by the Agriculture Committee and other smaller cuts, leaving a net deficit of about $3.5 trillion, or $4 billion, including interest.

The proposal consists of broad guidelines and not specific details, but it appears the largest cuts would come from Medicaid and food assistance programs, like food stamps and school lunches.

Although President Trump has said “there will be no Medicaid cuts”, the House blueprint instructs the Energy and Commerce Committee, which oversees Medicaid, to come up with at least $880 billion in cuts, accounting for more than half of the reduction in the budget outline. There is no other item big enough for $880 billion in cuts.

Medicaid pays medical bills for more than 70 million low-income Americans. Medicaid covers nearly half of all births in the U.S., and about two-thirds of nursing home stays.

Adding a work requirement to the program would only save about $100 billion.

Note interest expense is one of the largest items in the deficit, about $ 1/2 trillion. Interest continues to grow with higher interest rates and the ballooning federal debt.

Since low-income taxpayers pay very little income taxes, the overwhelming beneficiaries of $4.5 trillion in tax cuts are high-income taxpayers, so Congress is financing their tax cuts by taking benefits from the poor and adding the rest to the national debt, which sucks up more funds to pay interest expense and leaves payment to future generations.

These medical and food assistance cuts will hit voters hard in many “red” states. Moderate Republicans have expressed concerns about how their constituents will be affected.

“The devil is in the details.” Congress will still have to work through the details of the tax cuts and the expenses outlined in the proposal.

President Trump has also requested additional tax cuts, including exempting tips, Social Security benefits and overtime pay from income taxes, creating an itemized deduction for auto loan interest, and reducing the maximum corporate income tax rate from 21% to 15%. Adopting these changes would further increase the deficit.

I expect Congress will be arguing about these matters for the rest of the year.