Update 870 – House OKs Trump OBBB:
On to the Senate for Tweak or Overhaul?
The House passed the One Big Beautiful Bill Act (OBBB) yesterday in a 215-214 vote after a week of seemingly fraught negotiations. The bill, which consists of trillions of dollars in tax cuts that are skewed towards the ultra-wealthy and paid for by historic cuts to federal assistance programs like Medicaid and SNAP, now heads to the Senate, where it is expected to receive a significant overhaul. Republican leadership and the administration have been able to keep the bill alive thus far despite objections from GOP fiscal hawks and moderates alike, but this will only get more challenging as the Senate makes its mark on the reconciliation process.
In other news, the Senate moved forward on the GENIUS Act after the failure of its first cloture vote, bringing the 119th Congress’s first crypto legislation closer to law. The House Financial Services Committee also sent 25 bills, the majority of which seek to weaken financial regulation and investor protection, to the floor in a massive, two-day markup session. Additionally, Billy Long gave a rather poor showing in his confirmation hearing for IRS Commissioner. We cover these developments below.
Good weekends all,
Dana
Headline
OBBB Clears House, Faces Steep Climb in Senate
The House passed its reconciliation package (OBBB), which pairs more than $4 trillion in tax cuts skewed towards the ultra-wealthy with over $1 trillion in cuts to Medicaid and SNAP, early yesterday morning in a 215-214 vote (for more on the details of the bill, see last week’s Update).
Democrats stood united in opposition and were joined by GOP hardliners, Representatives Thomas Massie (R-KY) and Warren Davidson (R-OH), who wanted more significant spending cuts. House Freedom Caucus Chair Andy Harris voted “present” on the measure, saying he wanted to “move along” the process despite his desire for more significant Medicaid cuts. Representatives Andrew Garbarino (R-NY) and David Schweikert (R-AZ) curiously missed the final vote, though both have stated they would have supported it.
The OBBB’s passage will go down as a major victory for Speaker of the House Mike Johnson, who made up a lot of ground on negotiations throughout the week. Just last weekend, the bill was stalled in the House Budget Committee over objections from fiscal conservatives. Following an unconventional 10 P.M. hearing on Sunday night, the bill was advanced to the Rules Committee as negotiations on the final details continued behind the scenes.
To help corral the final GOP holdouts, which consisted of both moderates and hardliners, President Trump took to the Hill to demand swift passage on Tuesday. In his remarks, Trump warned of political consequences for members who oppose the measure. These comments were primarily directed at SALT Republicans (those from high-tax blue states who want a larger State and Local Tax Deduction) and HFC members:
- Trump demanded that SALT republicans “let it go,” referencing their push to increase the cap on the SALT deduction from the original Ways and Means proposal of $30,000 (the deduction was capped at $10,000 through the 2017 Tax Cuts and Jobs Act, though the cap is scheduled to expire at the end of the year without congressional action).
- Trump warned hardliners pushing for deeper spending cuts, saying, “Don’t f— around with Medicaid.”
Ultimately, the Rules Committee proceeded with its consideration of the reconciliation measure on Wednesday morning, with Republicans again trying to obscure the harmful effects of their bill by starting the hearing in the middle of the night (1 A.M. in this case). However, much of the Rules Committee meeting, which stretched late into the night on Wednesday, was conducted before the release of a manager’s amendment detailing the many changes that had been made to the underlying legislation throughout the week. The changes, which were accepted by Rules ahead of the final floor vote, include:
- an increase in the SALT deduction cap from $30,000 to $40,000 (the credit will begin to phase out at $500,000 in income as opposed to $400,000),
- an acceleration of Medicaid work requirements from January 1, 2029, to December 31, 2026 (states can institute work requirements sooner if they so choose),
- and an acceleration of the IRA green energy tax credit phase-outs and rescissions (with carve-outs for nuclear energy to appease moderates).
Additionally, the manager’s amendment included smaller changes like removing a provision that would reduce pensions of federal employees and eliminating the $200 tax on gun silencers – targeted efforts to make the package more appealing to specific GOP holdouts.
Now that the reconciliation measure has cleared the House with the help of the above revisions, it heads to the Senate, where it is poised for a major rewrite and faces an uncertain future. Some of the rewrites will be necessitated by the fact that the House and Senate received different reconciliation instructions in the budget resolution that was adopted in April, but Senate Majority Leader John Thune (R-SD) is also facing similar challenges to Speaker Johnson from within his conference that may require deeper changes to the more controversial aspects of the bill:
- Fiscal hawks like Senators Rand Paul (R-KY) and Ron Johnson (R-WI) have voiced opposition to the House-passed version of the OBBB, asserting that spending cuts do not go far enough to secure their support.
- Moderates, namely Senators Josh Hawley (R-MO), Susan Collins (R-ME), and Lisa Murkowski (R-AK), want to lessen the bill’s impact on Medicaid. They may be open to some reforms like work requirements and more robust eligibility verifications, but will take issue with additional reforms like curtailing provider taxes.
Thune only has three votes to spare on the measure, and even if he can enjoy similar success to Speaker Johnson on the negotiation front, the package is likely to look very different when it is ultimately sent back to the House for its approval. Given that the original proposal barely cleared the House (despite negotiations largely focusing on its members’ concerns), there could be more holdouts if the Senate moves in its own direction.
Republican leadership hopes to send a final package to the President’s desk by July 4. However, the more consequential deadline will be the August recess, as Republicans are hoping to raise the debt limit through the reconciliation process. Treasury Secretary Scott Bessent has noted that these changes should be made before the summer recess to avoid a disastrous default on the U.S.’s obligations, placing added pressure on the bill’s swift passage.
Meanwhile, the bill’s passage in the House has sparked concerns among investors worried that the bill is expected to add trillions of dollars to the national debt. The yield on the 30-year Treasury bond reached 5.15 percent on Thursday morning before falling to 5.05 percent later in the day. The increased yield reflects the increased risk investors perceive of investing in U.S. government debt. Treasury markets will continue to react as the bill moves to the Senate, but a larger spike in yields would likely be necessary to influence negotiations.
Other Developments
GENIUS Act Moves Forward
On Monday, the Senate voted 65-32 to move forward with debate on the GENIUS Act. This comes after a sizable shift among Democrats, with 18 voting to advance the bill after all of them had voted against the bill when it came up for cloture previously. While Senate Democrats had united against the GENIUS Act on a number of grounds, such as the need for guardrails against money laundering and protections against crypto speculation by politicians, specifically Trump, several pro-crypto Democrats changed their tune after negotiations last week. Senate Democrats such as Mark Warner (D-VA), Kirsten Gillibrand (D-NY), and Ruben Gallego (D-AZ) touted what they called “major victories,” such as stronger provisions on money laundering and national security, in an attempt to win over other Democrats. As proven by the vote count, their charm offensive, as well as pressure from the crypto industry itself, succeeded in winning over several of their colleagues.
Not all Democrats were convinced, however. Senator Elizabeth Warren (D-MA) released her own rebuttal to the pro-crypto Democrats’ claims of “major victories,” pointing to how the adjustments do nothing to prevent Trump or members of his family from illicitly profiting off of cryptocurrencies as well as insufficient protections against the exploitation of stablecoins to benefit criminal enterprises and terrorist organizations. Notably, Senate Minority Leader Chuck Schumer (D-NY) joined Warren in her opposition to moving the GENIUS Act forward, and now supports her proposed anti-corruption amendment to the bill, meaning the amendment will likely receive a vote on the Senate floor when the bill is debated. As it stands, GENIUS is slated to head to the Senate floor after the Memorial Day recess.
House Passes CRA Overturning OCC Bank Merger Rule
House Republicans voted to overturn a rule strengthening America’s outdated bank merger approval process in a 220-207 vote on Tuesday, with every Democrat except Representative Henry Cuellar (D-TX) voting no.
S.J. Res. 13 – a Congressional Review Act (CRA) resolution introduced by Representative Andy Barr (R-KY) – would overturn a rule finalized by the Office of the Comptroller of Currency (OCC) last September which prevents proposed bank mergers from being automatically approved after the 15th day following the close of the public comment period, if the agency failed to approve the merger or otherwise act. The rule ended the flawed OCC policy of effectively rubber-stamping certain bank mergers.
The CRA resolution was approved by the Senate in a 52-47 vote earlier this month, with every Democrat voting in opposition. The resolution now heads to President Trump’s desk to be signed. The rule has already been rescinded by the OCC, but Barr pushed for the resolution to be passed to block any similar rule from being finalized in the future.
Senate OKs No Tax on Tips
In an unexpected move for tax legislation, which usually takes a long path to the floor and is rarely standalone, the Senate approved the No Tax on Tips Act (S.129) on Tuesday. Senator Jacky Rosen (D-NV) brought the bill to the floor and requested unanimous consent, an action that was expected to be blocked by at least one Senate Republican. However, no objection was brought.
The bill, which is largely similar to a proposal included in the reconciliation measure that passed the House yesterday, would allow workers in certain tipped occupations to deduct up to $25,000 in qualified tips per year from their federal taxable income. Trump made this a key campaign priority last year, and Senator Ted Cruz (R-TX) unveiled the No Tax on Tips Act in turn.
Senator Rosen’s request for unanimous consent was an attempt to force Republicans to stall a Trump priority that helps working-class Americans by blocking the bill, something that could have tricky optics for Republicans.
Though the bill is unlikely to move through the House, which has already approved a version of the underlying policy, action on it does underscore the potential for bipartisan tax reform as the GOP uses a partisan process to pass its tax priorities in reconciliation. Democrats are rightfully trying to make the point that, if Republicans truly want to pass policies that help working Americans instead of the wealthiest, they could work together to do without the need for massive cuts to federal programs like Medicaid and SNAP that are included in their reconciliation package. For now, though, Republicans are expected to continue with their partisan approach to tax reform, with 25 percent of the resulting benefits of the package expected to flow to the top one percent of earners instead of those who need it the most.
Nominations
Billy Long Struggles at Confirmation Hearing for IRS Commissioner
On Tuesday, the Senate Finance Committee held a confirmation hearing for Billy Long, who is nominated to be the Commissioner of the IRS. Billy Long is a former Missouri congressman who ran for Senate in 2022 but lost in the primary to Eric Schmitt (R-MO). During the hearing, even as Republicans – led by Chairman Mike Crapo (R-ID) – worked to defend him, Long struggled to answer basic questions about his background and his plans for the IRS.
For starters, Senator Elizabeth Warren (D-MA) grilled Long about whether Trump should be allowed to use the IRS to strip the tax-exempt status from nonprofit entities that he does not like, as he has threatened to do to Harvard University. Even as Warren read out loud the statute that makes doing so explicitly illegal, Long failed to give a straight answer on the legality of such a move.
Ranking Member Ron Wyden (D-OR) questioned Long about his history with Capitol Edge Strategies, a tax consulting firm from which Long received $65,000 after his time in Congress. During Long’s time there, he referred people to tax promoters selling “tribal tax credits,” a tax credit that does not exist, which suggests that Long was an accessory to fraud. When pressed on the issue, Long insisted that his work was limited to providing referrals and that he didn’t know the tax credits were fake. When asked, he failed to provide a straight answer as to whether or not those tax credits were real. If that were not enough, Wyden also claimed that committee staff investigators had obtained a tape with a tax promoter stating that Long had met with him at the presidential inauguration and promised him a “favorable private letter ruling.”
The committee vote for Long’s confirmation has not been scheduled yet, but it is safe to say that Long will receive no support from Democrats. As for Republicans, Long serves as another blatantly unqualified and conflicted Trump appointee that the GOP seems inclined to support regardless.
Hearings
HFSC Approves Bills to Deregulate Financial Industry and Weaken Investor Protections
The House Financial Services Committee convened for a markup on Tuesday and Wednesday, during which 25 bills were passed out of committee. The vast majority of these bills would further deregulate the financial industry and weaken investor protections.
The markup included votes on bills to weaken the regulation and supervision of the banking sector, notably:
- H.R. 940, the Fair Audits and Inspections for Regulators’ (FAIR) Exams Act – The bill introduced by HFSC Chair French Hill (R-AK) would allow banks to appeal supervisory determinations, including those in which supervisors raise concerns about their operational risk management, to a new independent Office of Independent Examination Review, which would conduct its own review. The bill would create an avenue through which banks could seek to overturn determinations by financial regulators seeking to improve the institutions’ safety and soundness. The bill passed in a 35-17 vote.
- H.R. 2702, the Financial Integrity and Regulation Management (FIRM) Act – The bill, led by Representatives Andy Barr (R-KY) and Ritchie Torres (D-NY), would eliminate reputational risk as a component of supervision and require each federal banking regulator to report on its implementation within 180 days of the bill’s enactment. The bill passed in a 33-19 vote.
As per capital markets legislation, the most notable legislation would expand the definition of an “accredited investor,” which refers to investors who can legally invest in a unique form of investment company for privately-held stocks known as closed-end funds. As it stands, accredited investors must meet fairly stringent net wealth and income standards to qualify, meaning that accredited investors tend to be fairly affluent.
The policy debate over the definition of accredited investors boils down to whether the focus should be on lowering the barriers to lower-income and net worth individuals accessing these investments or on limiting the exposure of investors and markets to greater risk. Republicans are pretty firmly on the side of deregulation for closed-end funds, whereas Democrats have been more divided. The following three bills are arguably the most important on this issue: they would all expand the definition of an accredited investor:
- H.R. 3348 – The Accredited Investor Definition Review Act, which would allow the SEC to periodically review who may be considered an accredited investor. It was introduced by Rep. Bill Huizenga (R-MI) and passed 34-16.
- H.R. 3339 – The Equal Opportunity for All Investors Act of 2025, which would expand the definition of “accredited investor” to encompass those certified through an examination system established by the SEC and administered by the Financial Industry Regulatory Authority. It was introduced by Rep. Mike Flood (R-NE) and passed 49-2.
- H.R. 3394 – The Fair Investment Opportunities for Professional Experts Act, which would expand the definition of “accredited investor” to include individuals with certain licenses, qualifying education, or job experience. It was introduced by Rep. French Hill (R-AR) and passed 45-1.
The bills could now move to the House floor. The over two dozen bills are part of the Trump administration and Congressional Republicans’ broader push to deregulate the financial industry to benefit big banks and the crypto industry. This deregulation unwinds the hard-fought regulatory and supervisory strengthening implemented in the aftermath of the 2008 financial crisis and sows the seeds of the next financial downturn.
Look Ahead
Thursday, May 29
- GDP Q1 second estimate
Friday, May 30
- April PCE report