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Most Americans might be rightly focused on President Donald Trump’s trade war and the tariff drama that has devalued retirement accounts and nest eggs and has Americans sweating higher prices.
But then something notable happened in the wee hours of Saturday morning when Senate Republicans advanced a budget blueprint that could make $3.8 trillion disappear.
Math is notoriously fuzzy in Washington, DC.
For instance, the White House has made some conflicting arguments about reciprocal tariffs, simultaneously arguing they could raise $6 trillion over 10 years and that tariffs are a negotiating tactic to force concessions from other countries.
If the threat of tariffs leads to new trade deals, they won’t bring in trillions of new revenue to offset income tax cuts. Appearing at the White House Monday, Trump said countries are ready to negotiate and he threatened to add another 50% tariff to China after the communist country said it would match the 34% tariff Trump announced against China last week.
The trade war is part of the “medicine” Trump says is necessary to force companies to bring manufacturing back to the US.
But tariffs are only one leg of Trump’s economic plan. Trump also needs to extend tax cuts enacted during his first term and he also wants to add in some new ones.
For that, he’ll need Republicans on Capitol Hill to pass a law to make the tax cuts happen.
Which brings us to Saturday morning, when senators sent the House their version of a budget plan on a 51-48 vote. It envisions $1.5 trillion in spending cuts – smaller than the more than $4 trillion in a House version.
Related: Senate GOP adopts budget blueprint to advance Trump agenda as spending fight consumes Capitol Hill
But Senate Republicans got creative with their budgeting and broke with a 40-year precedent. Instead of counting the $3.8 trillion it will cost to extend Trump’s first-term tax cuts, they sidestepped the Senate parliamentarian.
Sen. Lindsey Graham, the South Carolina Republican, exerted power as the Budget Committee chairman and simply reinterpreted budget rules. He set the baseline for the budget at “current policy,” with the tax cuts, instead of current law, which assumes the tax cuts expire. By doing so, Graham erased trillions from the ledger for the purposes of moving the measure.
Those individual tax cuts were originally passed on a temporary basis in so that they could be enacted through the budget process. Now Republicans are trying to make them permanent by tweaking the way the budget is calculated.
This changing of the budget rules, along with spending cuts, is meant to free up room in the budget, both to extend expiring tax cuts and make room for new ones Trump promised during the presidential campaign, like ending taxes on income earned from tips and social security benefits.
If prices rise as a result of tariffs, as most economists predict, Trump will want to point to tax cuts as offsetting that inflation.
Sen. Ron Wyden of Oregon, the ranking Democrat on the Senate Finance Committee described the redrawn budget baseline as “gaslighting from Republicans about the true cost of their tax plan.” But because budget bills are exempt from the normal 60-votes needed to break a filibuster, there’s little Democrats can do.
There are still many steps to go. House Republicans do not particularly like the Senate’s blueprint but both chambers must pass the same thing in order to begin the budget reconciliation process and drafting legislation for Trump’s agenda.
Some Republicans grumbled about the budget plan and the new accounting trick before voting for it.
Sen. Bill Cassidy of Louisiana said changing the budget rules would set a “dangerous” precedent.
“To be a conservative is to know that sometimes you don’t open Pandora’s box, even if you can,” Cassidy said on the Senate floor before voting for the bill.
And $5 trillion for the debt ceiling
In addition to wiping away that $3.8 trillion, senators also want to raise the debt limit by $5 trillion.
Sen. Rand Paul of Kentucky, one of two Republicans to vote against the Senate budget resolution, said Republicans were trying to have it both ways by cutting programs through the Department of Government Efficiency, but then authorizing $5 trillion in new debt.
“What worries me is that so many things in Washington are smoke and mirrors,” Paul said on the Senate floor. “On the one hand it appears as if all this great savings is happening. But on the other hand the resolution will increase the debt by $5 trillion. So which is it? Are we cutting spending or are we expanding the debt?”
