While all eyes are on tariff negotiations, House '26 budget plans solidified last week suggest a Republican commitment to blow out the deficit in coming years. The Ways and Means bill would not only extend the TCJA, but add 1.5-2tln in deficits over the next decade. Thread.
So far the new admin has done little to reign in spending despite all the discussion about DOGE in the first few months. Not all that surprising given congress extended '25 spending at current law.
And the rolling deficit remaining pretty stable at 2tln, largely in contrast to most folks who expected at least some immediate deficit reduction from the admin's efforts.
Given the admin is doing little on the margin when it comes to spending, Congressional agreements on '26 spending and taxes will likely determine how the deficit will play out ahead. And it increasingly looks like most are committed to big deficits. The Senate certainly is:
The President's exact budget proposals have been a little unclear so far, but look like they are pointing to bigger deficits due to lower taxes.
These efforts + TCJA extension will far outweigh the modest cuts to non-defense discretionary spending proposed a couple weeks ago.
The real sticking point then has been the house which by its structure has a suite of more fiscally conservative members. The original budget by the House contemplated 2tln in cuts to in part offset TCJA and other increases in spending on defense & security.
But there are signs that position has shifted considerably in recent weeks. First with the acceptance of the Senate budget outline and now with the W&M bill which proposes 1.5tln in *additional* deficit expansion on top of just the direct TCJA extension. That's a 2.3tln shift!
This kind of budget would not just extend the TCJA but turbo charge the deficit ahead. The only open question is whether there is significant and prolonged tariff revenue that offset this path, but deficit expansion looks pretty clear.
Proposed law by the House - the most restrictive of the 3 groups that are required for agreement - represents a 2.5tln flip in views on the future deficit from just a few weeks ago. If it passes, it locks the US on a path to see >8% of GDP deficits even with a solid economy.
Quite a flip in positioning from the start of the admin which stated a priority to put the US on a more solid fiscal footing. And likely another indication that when the tradeoff is between the broad populist base vs prudence & pain, the admin is choosing the easier path ahead.
Another example in the details of the bill today of efforts that will juice growth in the short-term: https://x.com/DallasAptGP/stat...