Update 875: Senate’s OBBB Obstacle Course

June 23, 2025 | CLARITY Act, GDP, Genius Act, Immigration, Inflation, Medicaid, One Big Beautiful Bill, Reconciliation, SALT, SNAP, Tariffs, Taxes, The Fed, Trade, Update, Weekly Round Up | By

Update 875 – OBBB Senate Obstacles,
Fed Freeze, Genius Act Vote Lead Week

With the Senate Finance Committee’s text for the GOP One Big Beautiful Bill (OBBB) released this week, we now have a full picture of the Senate’s approach to reconciliation. Though expected to be a more moderate version of the House bill that passed last month, the Senate doubled down on harmful cuts to Medicaid while expanding and making permanent tax breaks for the ultra-wealthy and corporations. Polling released this week showed that a majority of Americans – 53 percent – oppose OBBB while only 27 percent support it. Furthermore, the CBO issued a dynamic score for the House-passed OBBB showing that, due to higher interest rates driven by increased borrowing, the bill actually costs over $400 billion more when incorporating economic growth — a rare outcome for a tax cutting bill’s dynamic score.

In other developments, the Federal Reserve held interest rates steady at its June meeting this week and projected that inflation and unemployment will rise, while growth will slow this year by more than it had projected in March. The Senate passed the long-awaited crypto bill, the GENIUS Act, and the U.S. and U.K. finalized a narrow trade deal this week. ICE’s targeting of restaurants, hotels, and farms was briefly paused but quickly resumed this week in another yet another flip-flop from the Trump administration. 

Good weekends all…

Best,

Dana

Headline

Reconciliation Fight Continues in Senate

This week, Congressional Republicans continued with their effort to pass a reconciliation bill encompassing the bulk of Trump’s domestic legislative agenda, including mandatory funding for immigration enforcement and defense and trillions in tax cuts for the ultra-wealthy. These tax cuts are partially offset by historic cuts to crucial government assistance programs – most notably Medicaid and SNAP – which could result in over 16 million Americans losing health care and 3.2 million Americans losing food assistance. The House passed its version of the bill, coined the “One Big Beautiful Bill Act (OBBB),” at the end of last month. The Senate is currently considering a different version that doubles down on Medicaid cuts and expands tax breaks for the wealthy and corporations. The administration requested that the bill be sent to the President by July 4.

CBO, Polling Add Fuel to OBBB Opposition

As details of the OBBB come to light, Republicans are facing growing opposition from both outside and within Congress. Republicans have fought off concerns from the left about cuts to government spending, claiming that the over $1 trillion in cuts to Medicaid and SNAP target “waste, fraud, and abuse,” though a significant amount of the savings would come from kicking eligible people off the programs. Republican leadership has argued that the bill will generate trillions of dollars of economic growth to counter skepticism from fiscal conservatives. This is highly unrealistic.

On the latter point, CBO released a dynamic score of the House-passed OBBB this week, which incorporates the bill’s effect on the overall economy. The analysis found that the OBBB would actually add $432 billion more than expected to the deficit under a conventional analysis ($3.4 trillion vs. $3 trillion). This finding directly contradicts the Republican argument that the bill will generate trillions of dollars in economic growth, showing that it will not even be significant enough to offset higher interest costs driven by increased borrowing, let alone reduce deficits over the longer term (Republicans are assuming the bill will generate $2.6 trillion in growth/10 years under a dynamic estimate, a far cry from the $432 billion in dynamic losses estimated by CBO). 

To make matters worse for Republicans, who risk losing votes from fiscal hawks due to the bill’s high impact on the deficit, recent polling shows that the public’s perception of the bill is underwater, with a majority of Americans opposing it (53 percent): 

  • Democrats – 89 percent oppose the bill, with 2 percent supporting the bill and 10 percent not offering an opinion.
  • Republicans – 67 percent support the bill, with 10 percent opposing the bill and 22 percent not offering an opinion.
  • Independents – 57 percent oppose the bill, with 20 percent supporting the bill and 23 percent not offering an opinion.

Polling also shows that only 10 percent of Americans believe funding for Medicaid should be decreased. Medicaid is the bill’s biggest target, at over $800 billion in cuts. 

The polling and CBO findings underscore how out of touch Republicans are with both public sentiment and their own goal of fiscal responsibility. In an attempt to obscure the bill’s contents and avoid public outcry, Republicans jammed much of the contents through the procedural process in the dead of the night. The longer Congress takes to pass the bill, the more information we can expect to come to light, furthering public opposition.

Senate Changes to House Bill

Now that all relevant Senate committees have released preliminary reconciliation text, we have a better sense of the chamber’s overall approach to reconciliation. While the Senate was initially expected to produce a more moderate version than the House-passed bill, the release of the Finance Committee’s text on Monday defied those expectations. 

Instead of paring back cuts to Medicaid, for example, Finance chose to expand on reform to the program by: 

  • Tightening provider tax restrictions – The House-passed OBBB would freeze current provider tax rates at or below the six percent safe harbor limit. The Senate proposal goes further by gradually reducing the top allowable provider tax rate from 6 percent to 3.5 percent between 2027 and 2031. 
  • Expanding work requirements – The Senate proposal would extend work requirements to parents with children over the age of 14. Currently, parents with children under the age of 18 are exempt. 
  • Strengthening limits on State Directed Payments (SDPs) – The House proposal capped SDPs but grandfathered in current agreements that are above the cap. The Senate proposal reduces existing SDPs by 10 percent each year until they reach a cap of 100 percent of Medicare rates in expansion states and 110 percent of Medicare rates in non-expansion states. 
  • Restricting Medicaid access for immigrants – The Senate version excludes certain groups of non-citizens (e.g., refugees) from Medicaid eligibility. 

The Senate Finance Committee also opted to make three business tax provisions permanent (100 percent bonus depreciation, immediate expensing of R&D, and a looser limit on interest deductibility), adding to the cost of the bill by increasing tax savings for large corporations. The Finance text puts limits on Trump’s populist, “no tax on …” proposals, wipes out the deal struck with House SALT Republicans to increase the SALT cap from $10,000 to $40,000, and softens phaseouts of IRA green energy tax credits. These changes risk endangering the delicate balance crucial to the bill’s passage in both chambers.

Byrd Bath Begins

For now, the bill will continue to move through a process often referred to as the “Byrd bath,” in which the Senate parliamentarian decides whether or not specific provisions are compliant with the rules of reconciliation and can pass with a simple majority. If not, the provisions will require 60 votes to make it into the final legislation. 

The Senate parliamentarian ruled on one key portion of the Senate’s reconciliation bill yesterday, deciding that several dangerous provisions included by Senate Banking Committee Republicans in their provisions of the bill violated the Byrd Rule and, therefore, must be stripped from the package. These include proposals to:

  • zero out funding for the Consumer Financial Protection Bureau, 
  • reduce salary levels for some Federal Reserve staff,
  • cut the Office of Financial Research within the Treasury Department, 
  • and dissolve the Public Company Accounting Oversight Board.

The Committee must now restructure its contribution to the reconciliation package and is required to cut $1 billion over the next ten years.

As this process continues, congressional Republican leadership will continue to negotiate sticking points like the size of Medicaid cuts and the SALT cap in the hopes that both chambers can approve an identical package to send to the president’s desk by July 4. This self-imposed deadline seems highly unrealistic given the outstanding issues and opposition within the Republican party. Every change or agreement that is made will have an opposite effect, both within each chamber and across the Capitol, meaning the balance will need to be meticulous for Congress to pass the key components of Trump’s policy agenda.

Other Developments

Fed Holds Interest Rates, Projects Two Cuts for This Year

The Federal Reserve announced on Wednesday that it will hold interest rates steady at the 4.25 to 4.5 percent range. This is the fourth consecutive occasion on which the Federal Open Market Committee (FOMC) has opted to leave rates unchanged after initiating rate cuts late last year. The highly expected pause came at the conclusion of the FOMC’s meeting this week.

Committee officials project that if economic trends continue, they will cut rates by 50 basis points down to the 3.75 to 4.0 percent range by the end of this year. These projections are in line with those made by the FOMC in March and suggest two rate cuts of 25 basis points each over the course of the FOMC’s four remaining meetings this year, in July, September, October, and December. FOMC officials further project that they will cut rates to the 3.5 to 3.75 percent range by the end of 2026 — a slightly slower rate of cuts than previously projected by Committee officials in March. 

The slower projected pace of cuts comes amid uncertainty around the Trump administration’s changes to trade, immigration, fiscal, and regulatory policy, which continues to evolve. Increased tariffs, in particular, are expected to lead to increased inflation in the coming months. In his press conference following the FOMC’s meeting, Federal Reserve Chair Jerome Powell said the effect of tariffs on inflation could be short-lived or more persistent and will depend on the size of tariffs, the lag with which tariffs affect prices, and whether inflation expectations remain well-anchored. 

The FOMC additionally released projections on:

  • Inflation – FOMC officials project that inflation will rise from 2.3 percent last month to 3.0 percent by the end of this year. This is slightly higher than previously projected. In March, the FOMC projected that inflation would rise to 2.7 percent by the end of this year. FOMC officials also project inflation will then fall to 2.4 percent by the end of 2026. In March, FOMC officials projected that inflation would fall to 2.2 percent by the end of 2026. 
  • Unemployment – The median FOMC official also projects that the unemployment rate – which has remained historically low and fairly consistent between 4.0 and 4.2 percent over the past several months – will rise to 4.5 percent at the end of this year, higher than the 4.4 percent level they had projected in March. 
  • Growth – The median FOMC member also projects that, following growth of 2.5 percent last year and a contraction of GDP during the first quarter of this year, GDP will grow by 1.4 percent overall in 2025. This is a lower growth rate than previously projected by the FOMC. In March, the median FOMC official projected that GDP would grow by 1.7 percent overall in 2025.

As the Trump administration’s tariffs and broader economic policies continue to settle into the economy, the risk of stagflation – conditions where inflation and unemployment rise while growth remains stagnant – persists. Powell did not mention “stagflation” by name in his remarks, but discussed the FOMC’s projections of increased inflation and unemployment, and lower growth in the coming months. 

The Fed’s pause also faced criticism from President Trump, who has been calling on the Fed to cut rates since he entered office, while periodically threatening to illegally fire Powell before his term ends next year. Trump said, “We should be 2.5 Points lower…” while failing to acknowledge the heightened inflation his administration’s tariffs will likely cause in the coming months. Federal Housing Finance Agency Director Bill Pulte went further, calling on Powell to resign. Protecting the Fed’s independence is necessary for the stability of markets and the broader financial system. The FOMC meets next to determine the fate of interest rates on July 30 and 31. 

GENIUS Act Finally Makes it Through the Senate

On Tuesday, the Senate passed its first major piece of crypto legislation, the GENIUS Act (S. 394), after about a month’s delay. The bill would establish a light-touch regulatory framework for stablecoins and their issuers, including the following features:

  • issuers would have to maintain 1:1 reserves for the specific asset used to back up their stablecoins, 
  • issuers with a market capitalization exceeding $10 billion would need to register with the federal government, while those with a smaller market cap would have to register with the state, and
  • issuers would have to obey some reporting requirements.

The bill passed 68-30 with 18 Democrats joining all but two Republicans — Senator Rand Paul (R-KY) and Senator Josh Hawley (R-MO) — in voting yes, which is roughly in line with the cloture vote held last week. The bill will now go to the House, where it will likely have to contend with the House’s own CLARITY Act (H.R. 3633) for priority in the Hill GOP’s push to pass pro-crypto legislation. 

The passage of the GENIUS Act is a major victory for the crypto industry, which viewed stablecoin legislation as low-hanging fruit in the effort to enact broader pro-crypto reforms in the 119th Congress. It also marks a win for Senate Majority Leader John Thune (R-SD), rebounding after a failed cloture vote last month, and for pro-crypto Democrats like Senators Angela Alsobrooks (D-MD) and Kyrsten Gillibrand (D-NY), who helped secure enough support by negotiating key changes.

The bill represents a setback for consumer protection. Critics, including Senator Elizabeth Warren (D-MA), argue it is too lax to safeguard consumers or the financial system, and warn it opens the door for big tech to offer unregulated financial services. Others fear it could enable political corruption via crypto, referencing Trump specifically. The bill is expected to advance in the House, though potential GOP efforts to bundle it with the CLARITY Act could send it back to the Senate. Trump is urging swift passage, posting “No delays, no add ons” on Truth Social.

U.S.-U.K. Trade Deal Stands Alone 

What could have been a productive few days for the President to make headway on trade deals with the G7 heads of state in Canada this week instead turned into a quick trip with only the finalization of a previously agreed-upon trade framework with the United Kingdom to show for it. With tensions boiling over in the Middle East, the President quickly returned to Washington with just this deal signed. 

The U.K. deal is the only trade deal signed since the onset of the Trump administration’s tariffs and is relatively limited to a few industries. Specifically, the United States will remove tariffs on British aerospace products, and the current tariff rate of 27.5 percent on British autos will be cut to 10 percent for up to 100,000 vehicles per year. 

Much of this signed deal was agreed upon last month, while steel and aluminum tariffs remain unsettled. As negotiations continue, Secretary of Commerce Howard Lutnick is working on a quota system for steel and aluminum tariffs to be announced later. The deal also guaranteed 13,000 metric tons of beef exports to be received from both countries. Lastly, down from facing a previous 19 percent tariff rate, the U.K. also agreed to import 1.4 billion liters of U.S. ethanol tariff-free. 

As we know, Trump and his team are nowhere near reaching their 90 deals in 90 days promise, and productive negotiations seem to be few and far between. Even when asked about future U.K. trade talks, the President revealed, “The U.K. is very well protected. You know why? Because I like them.” This may signal a sort of “floor” for other countries to expect for how low Trump is willing to go when negotiating, in this case, a very narrow and sectoral-based trade deal. 

Confusion on ICE Workplace Raids 

Late last week, the restaurant, hotel and agriculture industries enjoyed what turned out to be a short-lived exemption from the Trump administration’s workplace raids. The President posted on social media an acknowledgment of the harm done to these critical sectors: “We must protect our Farmers, but get the CRIMINALS OUT OF THE USA. Changes are coming!”

ICE then directed its officers to largely pause the raids after Trump’s post. The directive also signaled that ICE would refocus its efforts on criminals – a central tenet of Trump’s presidential campaign message. Mere days later, the Department of Homeland Security announced it would be reversing this decision and continuing these workplace raids.

A stark division is coming to light within the Trump administration as to how Trump’s mass deportation policy should be implemented. Hard-liners like Border Czar Tom Homan and Deputy Chief of Staff Stephen Miller are barreling towards their self-imposed 3,000 daily arrests quota through any means possible. These figures clash with Secretary of Agriculture Brooke Rollins, who has had to relay how disruptive these policies will be to the agriculture sector to the President. Secretary Rollins seemingly swayed the President’s rhetoric over the last week but was quickly overruled by those aids close to Trump this week. 

Undocumented immigrants represent 4.6 percent of the country’s employed labor force, according to the American Immigration Council. The hospitality and agricultural industries rely heavily on the undocumented workforce – with an estimated one million undocumented workers in hospitality and around 225,000 in the agriculture sector. The Joint Economic Committee’s projections cite that for every half-million workers who are removed from the labor force, 44,000 American-born workers would lose their jobs.

Time and time again, we see the President contradict himself or change his mind on a consequential policy conundrum on trade, foreign policy, and now immigration on a whim. What remains to be certain, unfortunately, is Trump-led uncertainty.

Nippon Steel Seals the Deal

On Wednesday, Nippon Steel closed the deal in its $14.1 billion purchase of US Steel shortly after Trump gave his approval for the deal to go forward. The deal brings to a close 18 months of controversy, as union leaders were up in arms about the deal potentially putting working-class jobs at risk, economic nationalists decried the purchase of a once-prominent symbol of American industrial might by a Japanese steel manufacturer, and two presidents delayed making a final decision on the deal.

The deal made it through after Nippon Steel made major concessions to the Trump administration. Trump had threatened to block the deal using a process known as CFIUS review, which essentially allows the President to block deals made between American companies and foreign companies if they raise national security concerns. Trump’s concerns likely had nothing to do with national security. The notion that a company from such a close US ally as Japan would harm America’s ability to defend itself by buying a steel manufacturer is dubious. Trump likely had his eye on his image among blue-collar voters, the loss of American jobs and the symbolic significance of US Steel, once the largest company in the world, being bought out by a foreign competitor.

The deal in question gives the US government a “golden share” in US Steel, which will remain as a separate entity even though it is owned by Nippon. The golden share gives the US government an unusual level of control over US Steel, as Trump and future presidents can now veto moves to move jobs overseas, idle plants, and appoint members of the board. For a company that is not asking for a bailout and is no longer hugely significant to the US economy, this level of control is unprecedented. It could help protect US jobs, but it could also drive foreign investors away from doing business in the US in the future. Either way, Nippon Steel is glad to have this long saga over with, and the US steel industry can expect an influx of investment from Nippon as a result.

Look Ahead

Tuesday, June 24

Wednesday, June 25

Thursday, June 26

Friday, June 27

  • May PCE report

Other Related Articles