What’s at Stake in the Budget Battle

For the first time in years, the U.S. Congress is considering budget bills that could seriously rein in government spending growth.

The big-budget news came out of the House of Representatives last week. The House passed its budget blueprint by a two-vote margin. House Concurrent Resolution 14 covers proposed spending for the entire U.S. government for the remainder of its 2025 fiscal year through its 2034 fiscal year.

What’s in the House’s Budget Blueprint

The House bill allows for up to $4.5 trillion in tax cuts. These cuts include extending current income tax rates at their current levels, which are set to rise after this year. Without this action, 62% of income tax filers will be forced to pay higher income taxes starting in 2026. This tax increase would have a negative impact on the growth of the U.S. economy.

The cost of avoiding these tax hikes will partly be offset by cuts to the federal government’s overall discretionary and mandatory spending. The House budget bill aims to reduce mandatory spending by up to $2 trillion. That’s a big opportunity for fiscal reform because this spending increases by autopilot and is off-limits in annual budget negotiations.

At the same time, the House bill proposes large reductions to nondefense discretionary spending, totaling $1.8 trillion from 2025 through 2034. This spending exploded during the Biden-Harris administration, creating the need to bring it back down to more sustainable levels.

The House bill proposes to cut this portion of discretionary spending by a lot over the next two years. After which, it will resume growing at a slower rate. Meanwhile, the rate of defense spending growth would be reduced to about 2.4% annually, slower than the rate recorded during the Biden-Harris administration.

Not a Sure Thing

The passage of the House bill wasn’t guaranteed. The Senate had crafted a less expansive budget bill, Senate Concurrent Resolution 7, which likewise passed by a narrow margin several days before the House bill. The Senate’s version of the spending bill was adopted as a “fallback budget” in case the House’s more ambitious budget blueprint couldn’t get the votes to pass.

What One Big Budget Bill Means

The successful passage of the House bill, however, now means the entire scope of the U.S. government’s fiscal policies for spending and taxes is on the negotiating table. That process is called reconciliation, and if truly successful, it will improve the U.S. government’s fiscal policies by making them more sustainable.

The action now shifts to House and Senate budget negotiators, who will work to create one big budget bill on which both bodies will vote. Whether that effort will be successful remains to be seen. If it is unsuccessful, Congress will resort to its “continuing resolution” budget game, which is becoming increasingly unsustainable.

The one thing you can count on however is hearing a lot of screaming in the media about the budget bill. Especially from those who benefitted the most from the Biden-Harris administration’s excessive and wasteful spending.

Their free ride on the federal government’s gravy train needs to end. The budget battle of 2025, while only just getting started, is a long-needed reckoning.