GOP Nears Deal On Tax Cut Extension And Debt Ceiling Increase

Republican leaders in Congress are nearing an agreement on a plan that would extend President Donald Trump’s 2017 tax cuts and raise the debt ceiling, aiming for passage of an economic package by the end of May. House Speaker Mike Johnson expressed optimism about the negotiations, stating that while he did not want to preempt Senate action, it appeared the parties were not far apart and progress was being made.

Johnson also noted that the Senate was “coming around” to supporting a debt ceiling increase as part of the legislation. Senate Majority Leader John Thune echoed this sentiment, suggesting that a consensus was forming on the debt ceiling issue, which had previously been a major point of contention between the House and Senate.

A House-approved plan, which was passed earlier this month, proposes lifting the debt ceiling by $4 trillion as part of the tax legislation. However, this proposal has faced resistance in the Senate, with some Republicans hesitant to embrace such a large increase.

Divisions within the Republican Party remain significant, particularly over provisions that could affect health programs like Medicaid. Senators Josh Hawley of Missouri and Tommy Tuberville of Alabama have expressed opposition to the House plan, citing concerns about cuts to health programs that would impact their constituents. Senator Rand Paul, a Kentucky Republican, has also stated that he would not vote for the tax package if it included a debt ceiling increase.

The inclusion of the debt ceiling increase in the tax bill has created pressure on the party to move quickly, with economists warning that the government may run out of room to meet its financial obligations by this summer or early fall without legislative action. To meet the looming deadline, House Republicans aim to pass the tax cut legislation before Memorial Day weekend. However, this goal faces significant challenges, given the ongoing divisions within the party and narrow majorities in both the House and Senate.

Republican leaders are eager to secure a legislative victory to reassure markets, which have been unsettled by the tumultuous rollout of Trump’s tariff policies. Party leaders have emphasized the importance of extending the 2017 tax cuts, which are set to expire at the end of the year for individuals and privately held businesses. Failing to do so, they warn, could destabilize markets and undermine economic expectations.

“We have to bring stability to the market,” Johnson said, emphasizing the need for certainty so businesses and individuals can make informed decisions about expansion and job creation.

The meeting at the Treasury Department, which involved Treasury Secretary Scott Bessent, National Economic Council Director Kevin Hassett, and other key negotiators, was described as productive. Bessent expressed confidence that a swift timeframe for passage was achievable, based on the discussions.

However, concerns over rising U.S. deficits have continued to grow. Bridgewater Associates founder Ray Dalio cautioned House Republicans about the dangers of increasing deficits, urging them to offset any new tax cuts with spending reductions. Some GOP senators have expressed unease over potential cuts to Medicaid and other social programs, fearing the impact on their constituents.

Within the House, Republicans hold a slim majority, and the issue of fiscal responsibility remains contentious. Representative David Schweikert of Arizona has repeatedly called for the tax bill to be balanced with spending cuts or other revenue-raising measures to avoid exacerbating the federal debt. However, this viewpoint is not widely supported among GOP leadership.

To meet the goal of passing the tax package by the end of May, negotiators will need to reach a compromise. Thune has set April 7 as the deadline for the Senate to pass a budget resolution outlining the tax cuts. Meanwhile, House Republicans have proposed a tax blueprint that includes $4.5 trillion in cuts, along with $2 trillion in spending reductions. However, Senate Republicans are seeking to increase the size of the tax cuts without corresponding spending reductions.

The Republican Party must also align on the scope of the package, the specific tax measures to include, and how to offset the costs of the proposed cuts. These issues are likely to continue to spark debate between fiscal conservatives and those advocating for greater tax relief.