President Donald Trump has secured a major political victory after the House of Representatives passed a massive $3.4 trillion fiscal package that cuts taxes, reduces spending on programmes for the poor, and reverses much of Joe Biden’s clean energy policies.
The House approved the legislation by a narrow margin of 218-214 votes on Thursday, sending it to Trump just in time for his 4 July deadline. House leaders had to keep earlier procedural votes open for hours to convince a small group of reluctant Republicans to support the bill.
Trump used his influence over the Republican party through threats of primary challenges, White House lobbying sessions, and golf-course meetings to overcome resistance from both conservative hardliners worried about the debt impact and moderate Republicans concerned about cuts to Medicaid healthcare.
In the end, only two Republicans – Thomas Massie of Kentucky and Brian Fitzpatrick of Pennsylvania – joined with Democrats to vote against the bill.
Earlier in the week, Vice President JD Vance had to break a tie vote to get the massive tax and spending package through the Senate, highlighting how divided lawmakers were over the legislation.
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Trump’s victory came after an all-night voting session in the House, with numerous delays as the president criticised Republican lawmakers on social media who were slow to back the legislation.
Howbeit, the fierce battle between the parties to shape public opinion about the measure is likely to intensify in the coming months, with Democrats hoping voter anger will help them regain power in next year’s midterm elections. They describe the president’s signature legislation as a reverse Robin Hood scheme that takes benefits away from the poor to pay for tax cuts that favour the rich.
“This legislation will end Medicaid as we know it,” House Democratic Leader Hakeem Jeffries said Thursday during a marathon speech right before the bill passed. “Rural hospitals will close, nursing homes will close.”
The bill will “provide tax breaks for the wealthy, well-off, well-connected,” he added, during a speech that ran for more than eight hours and broke the record for the longest House floor address in history.
Trump and his Republican allies are counting on the measure’s $4.5 trillion in tax cuts to boost economic growth. The legislation delays many of the spending cuts whilst front-loading tax reductions with popular appeal, including a permanent increase in the child tax credit and temporary four-year tax breaks for the elderly and for tip and overtime pay that Trump promised during his presidential campaign.
The nonpartisan Congressional Budget Office projects the legislation will add $3.4 trillion to US deficits over the next decade, adding to investors’ concerns about America’s fiscal health.
However, a $5 trillion increase in the US debt limit in the package eliminates the risk of a market-rattling payment default the Treasury had forecast could come as soon as mid-August without congressional action.
The final legislation is more expensive than an earlier version the House passed primarily because Senate Republicans decided to make permanent a series of business tax breaks covering interest expensing, research and development spending, and bonus depreciation of certain assets, including machinery and factories. The tax breaks had been temporary in the earlier version.
The Senate also imposed deeper cuts in Medicaid health insurance for the poor and disabled, reducing spending on the programme by nearly $1 trillion over the next decade, according to the Congressional Budget Office. That includes restraints on federal funding matches for state Medicaid programmes, new work requirements for able-bodied recipients without children under 14 years old, and new cost-sharing requirements for beneficiaries who received coverage through President Barack Obama’s Affordable Care Act.
The package also cuts spending for federal food stamps and college student loans.
Most clean-energy tax breaks passed under Biden are phased out, and a popular $7,500 consumer tax credit for electric vehicles is eliminated for purchases made after 30 September.
The core of the bill is an extension of the 2017 Trump tax cuts for individuals and pass-through businesses that were set to expire at the end of 2025. It also provides new resources for Trump’s crackdown on illegal immigration and for military spending, including the president’s “Golden Dome” missile defence plan.
A group of House Republicans from high-tax states such as New York, New Jersey and California won a temporary increase in the limit on the state and local tax deduction to $40,000. After five years, the cap will snap back to the current $10,000 limit originally imposed under Trump’s 2017 tax law.
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