The Senate Passes Donald Trump’s 'Big Beautiful Bill'
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From the opinion pages of The Wall Street Journal, this is Potomac Watch. After an all-nighter, the Senate passes the GOP's big tax and budget bill with a tie-breaking vote by Vice President J.D. Vance. What's in the final package? What has changed? And amid grumbling by fiscal conservatives, can this version now get through the House and maybe even by July 4th?

plus one Republican senator who opposed the bill says he won't run for reelection in 2026, complicating the party's ability to hold its governing majority. Welcome, I'm Kyle Peterson with The Wall Street Journal. We're joined today by my colleagues, columnist Kim Strassel and editorial board member Kate Batchelder-Odell. The Senate's version of the big, beautiful bill, as President Trump dubbed it, finally passed at around noon on Tuesday,

A vote of 51 to 50, including that vice presidential tiebreaker, Republicans Tom Tillis of North Carolina, Susan Collins of Maine, and Rand Paul of Kentucky in the no column, along with every Democrat. Let's listen to President Trump reacting during an immigration roundtable in Florida. Well, I just heard that about the Senate and the bill just passed and

It tells you there's something for everyone. I mean, we have it's a great bill. There is something for everyone. And I think it's going to go very nicely in the House. Actually, I think it will be easier in the House than it was in the Senate. And here at the U.S. Capitol is Senate Minority Leader Chuck Schumer. When people start losing their Medicaid.

when they start losing their jobs, when their electric bills go up, when their premiums go up, when kids and parents lose SNAP funding, the people of America will remember this vote. The American people will remember the Republican betrayal. And Americans will pay the price for this perfidy for generations.

Kim, what's the latest on what's changed in the Senate's version of this bill and anything interesting that might have happened during the late-night Voterama? And maybe remind us what a Voterama is. Yeah, and by the way, just on Chuck Schumer, one thing he always manages to forget is that the central feature of this bill, and that has not changed, is that it will maintain current tax rates for most Americans at every income level.

something that even Democrats agreed needed to happen other than, for instance, maybe the very top rate on the highest income earners. So they're not giving any praise for that. But look, there was some final changes in the bill. There was also a lot of drama of things that people said they were going to change.

and then didn't happen in the end. But I think one of the big things is that we saw a whole bunch of scurrying around to essentially buy the vote of Lisa Murkowski of Alaska, because she was necessary. Tom Tillis and Rand Paul had made very clear they were not going to vote yes. Susan Collins from Maine was also very apprehensive. And I think leadership was a bit

reluctant to twist her arm given that she has a very hard re-election race coming up next year in the midterms. So Alaska's Murkowski was the main target to get on board and she knew it and boy did she extract concessions. One of these is a big change to the food aid portion of the bill. There are still some good reforms in there including requiring able-bodied adults to work, raising the age limit of those that have to.

But there was a proposal in the bill to require states that have very high error rates in those that they pay to pitch in a bit with the federal government. And the higher your error rate, the more you needed to contribute to the federal fund. There was an attempt to simply carve out some of the worst states like Alaska that ran afoul of.

of the parliamentarian. So we now have this new program. We're still working through the details, but the concern of it is that it's actually a program that is going to give additional time to the worst performing states, thereby maybe inspiring other states to also do a terrible job on their error rate. So this could be a bit of a misfire in the end.

There were also some changes in Medicaid. I'll let Kate look at some of that. There was an attempt to actually get a little tougher on Medicaid, but that ended up being pulled in the end. We never got an amendment in the end. Fundamentally, the main portions of this remain, but to the point about Donald Trump,

You know, he said there's a little bit of something for everyone. That is true. And it's not necessarily a good thing. There's a lot of money sloshing around in this bill. And that, I disagree with him, is actually going to cause him a problem in the House because the big issue Republicans now face after this has passed the Senate is a House conservative freedom caucus that is

really unhappy with the bill's failure to cut more in deficits and the debt. As a reminder of the basic framework, which to my eye is similar to the bill that passed the House still, the first thing is these extension of the 2017 tax cuts. That's the real impetus, the driver for Republicans to act.

and get all of their majority on board because those tax cuts are expiring at the end of this year. Nobody wants that to happen. A second category of items in this bill is increased spending for Republican priorities, a bump for defense, a bump for border, border control, and border security. And then maybe a third category would be savings, reforms to Medicaid, reforms to the food stamp program,

that fiscal conservatives want. They're worried about the long-term debt and deficit trajectory. And then a fourth bucket, I would say, is other random sort of priorities, including the things that President Trump promised on the campaign trail, the tax-free overtime, tax-free tips,

And Kate, if you add that all together, along with all this stuff for Alaska and so forth, it gets to be a pretty big bill. And one of the overarching debates that we are having seeing play out of the press and some misconceptions about it is the cost of this bill. Kate, what's your read of those arguments? I mean, there's been differing suggestions about the baseline that should be used to score this bill. Explain what that argument is.

Well, I think the best way to think about how to score the tax bill is, you know, Kyle, do you think you're getting a $4.5 trillion tax increase next year? Are you planning for that for your tax rates to go up for many of the credits that you take to disappear for the standard deduction to go in half? Are you planning for that? Because most Americans aren't. Most Americans assume roughly that the 2017 tax cuts, even though they expire on paper, that Congress is not going to let them expire. Congress is going to continue them. And that's exactly what we see Congress doing.

So all we're talking about here is what assumptions do we use when we count how much the bill costs? And what Republicans have decided is what I call assuming reality. They are assuming that the tax cuts are going to continue and be extended. And that's called a current policy baseline. And so basically that they're being accused of waving a magic wand.

and trying to conceal the cost of this bill, but they're actually paying for the things that cost money for the new tax breaks that Trump wants on overtime, on taxes, on tips. Those are scored as a cost because they don't currently exist. And many other times during tax extension discussions, for instance, Democrats have suggested using the same scoring method because it's the most realistic. And so this is

I think an arcane debate, but an important one. And really, the difference that the bill is going to make to the deficit is about getting the entitlement program like Medicaid on the right trajectory. You're not going to fix our fiscal problem, even if you were to let all of these tax cuts expire, and you could potentially get the US into a recession, that's not going to improve the US fiscal trajectory. So I think the savings discussion and the

better trajectory for the U.S. really belongs in the Medicaid portfolio. That program is growing, you know, 5% a year as the economy grows, you know, closer to 2%, 3%. That's not sustainable. And Medicaid is tracking, I think, twice the enrollment, twice the official poverty rate. So these are really the core questions about spending. And in that

Since I think the bill is one of the better things to come out of Washington, and I think that is just far more salient than what did the budget scorekeeper conventions, what should they use when they look at the bill? Hang tight. We'll be right back in a moment. Welcome back. The difference in this baseline, Kim, is the difference between thinking that this bill costs $3.3 trillion or thinking that it saves $500 billion.

And that's what Kate is talking about if you are assuming the reality that nobody in Washington wants those 2017 tax cuts to expire. And the reason is those 2017 tax cuts were across the board. I know the Democrats after that Trump tax law passed spent a lot of time calling it the tax scam tax.

But the Tax Foundation has done an analysis. If that 2017 law expires, it would be an immediate tax hike for 62% of tax filers. The average tax increase would be $2,853. So almost $2,900 is the average tax

tax increase. And just to go a little bit deeper here, the 2017 tax law cut the second income tax bracket, for example, from 15% to 12%. And that is the bracket that applies to people making about $12,000 to about $50,000. You can go up a little bit more. The next bracket up, the 2017 law cut that bracket from 25% to 22%.

And that is the bracket that applies from about $50,000 to about $105,000 for single filers. And there is no way that Republicans, Democrats, independents were talking about letting those tax cuts on people making 50 or 80 or $150,000 expire at the end of this year. So that is crazy.

Kim, I think what makes the conversation about the cost confusing for a lot of people is that that basic score, that $3.3 trillion cost, is assuming the tax cuts expire, which nobody expects to happen. Correct.

And it's totally possible that if Democrats had actually won this last election and were in charge of the Senate right now, and they were attempting to write their own reconciliation bill that dealt with the coming tax bomb in which they would indeed be moving to extend most of those tax brackets and many of the provisions because they actually agree with them. Again, they would

bring the hammer down more on higher income earners. But for the majority of those income brackets, they would work to expand them. Were they to do that, it's entirely possible they would be the ones right now arguing that we should be using current policy baseline so that they weren't on the hook for these claims that somehow you're spending trillions of additional dollars. I think it's been a bit lost amid all

all of the headlines about what's happening in Medicaid and what's happening in food stamps and what's happening with federal land sales, by the way, something that came out of the bill. But the tax thing was always the motivator behind this. And it's so important. It's not just the locking in of those rates, which people really depend upon. The child tax credit, not one of my favorite items in the tax bill, but it was set to

rubber band back to $1,000 a kid. It's now being made permanent at $2,200 going forward, at least in the Senate bill. You have this doubling of the standard deduction that came along in 2017 that is being retained and even added to a little bit. All of those brackets you mentioned, and then

Also, the business side. I do not even want to contemplate what would have happened to this economy if the tax reform from 2017's business provisions had not been extended. And in particular, the Senate, to its everlasting credit, did one of the most important things in terms of growth that anyone has done in this process of reconciliation, which was to make permanent

some of the more important of those business tax provisions, including the research and development tax credit and expensing. And if this bill does get over the line here in July, I just also think this is really important because finally the business community and Americans are going to have some confidence of the tax regime going forward that should make an enormous difference to a certain extent in business investment and confidence. And it's

absolutely necessary, I think, as a way to combat or counteract a little bit the uncertainty we continue to have from the Trump tariff regime. A second overarching debate, Kate, you're hearing play out now, involves the changes that this bill would make to entitlement programs, particularly the Medicaid program. And notably, this is what Republican Senator North Carolinian Tom Tillis cited in

when he decided and announced that he was going to vote against the bill. What's your view of what the Senate bill does on this Medicaid changes? The Senate actually, I think, made some improvements to the House draft on Medicaid. I mean, one thing we've talked about a couple times here on the podcast is called provider taxes. And it's very wonky. But the basics is states use these schemes to draw down more money from the federal government. And if I tax you five cents, Kyle, because I'm going to give you 10 cents...

that's not a tax, that's just a scam. And if you were doing that, you might want to get a lawyer, right? So there are these taxes that states use to get more federal Medicaid dollars. And the Senate tries to wind down those rackets over time and lower what states can levy. And the House just said, hey, no more of this. Let's just freeze it. Let's be done with it. And the Senate really tries to get after that dysfunction. This put the hospital lobby in full tilt

And unfortunately, I think some Republican senators, including Tillis, did damage to the bill by running with their claims about what Republicans were trying to do here. And so that is, I think, unfortunate. So I think the Senate bill does have some, like I said, some improvements over the House. There's also provisions about work requirements and Medicaid, which don't currently exist. They exist in other safety net programs. But both the House and Senate would establish basically a 20-hour-a-week program.

work requirement for those who receive Medicaid includes a lot of exemptions for pregnant women, for those receiving substance abuse treatment, for anyone who volunteers for 20 hours a week, that counts. I mean, so it's really there to try to make sure that the country's social safety net is connected with work.

And the original Democratic argument against that was that everyone on Medicaid is already working, but that is simply not accurate when you go through and look at administrative level data of these state programs. There are a lot of folks on these programs who are very attenuated to the labor force.

But now Democrats are saying people are going to lose coverage because they won't be able to prove that they're working. And again, there's many different types of work that can count here. Arkansas, when it did an experiment, when it tried to use work requirements in Medicaid before it was disallowed, they sent out letters and calls and made sure people understood what the work requirement was and how to comply with it. So I think these are really weak arguments against a program like that, but they get at

the kind of larger discussion we're having because everyone is focused on millions of people are going to lose coverage is what the headlines all say. And CBO said, for instance, 7.8 million will lose Medicaid coverage because of

changes in the House bill. I'm just using one estimate in the House bill. And then you look at the details of that. And half of that is because folks don't comply with the Medicaid work requirement I was just describing. And so I think we've really gotten loose of what the bill actually does here when we talk about coverage losses. And Republicans have had a hard time defending that as they try to get the bill passed. Hang tight. We'll be right back in a moment.

Don't forget, you can reach the latest episode of Potomac Watch anytime. Just ask your smart speaker. Play the Opinion Potomac Watch podcast. From the opinion pages of The Wall Street Journal, this is Potomac Watch.

Welcome back. Kim, is there anything else that you would pick out as elements of this Senate bill that are worth noting? One that I would save some ammunition for is the increase in the state and local tax deduction. My understanding is the Senate bill matches the House bill in taking it up to $40,000. Last week, we had a letter from a listener, Peter, who said,

who wrote in this, he said, I wanted to point out that the prospect of a self-described socialist like Zoran Mamdani leading New York City should heighten the urgency of Senate Republicans to lower the cap on salt deductions if red states continue to subsidize blue state mismanagement through generous salt reimbursements. The hard lessons about socialism that many conservatives are shot in Freudianly expecting New York City to learn may be significantly softened.

And I thought that was a great point, Kim, if Mom Donnie comes in and is able to raise some taxes with an increased SALT deduction. Some of those increased taxes being paid by New York City residents will end up being subsidized and backfilled by federal deductions and money that is paid in by other federal taxpayers elsewhere. And

And you, unfortunately... Oh no, wait, you live in one of those states. Yes, unfortunately, the Senate seems to have thought that $40K was the minimum that they were required to include in order to make sure this bill could get through the House. Yeah, this is a real, to me, a real disappointment of the Senate bill because obviously the House completely extorted this handful of members from New Jersey, New York, and California to

They went to the mats, they demanded this $40,000 number in the house as a price for passage.

And Mike Johnson didn't have a great deal of flexibility there because his majority is just so tiny. There was a lot of hope that when this came to the Senate that this was going to get modified in some way for the simple reason that there is not a single Republican member in the Senate who has any interest in the SALT because none of them represent blue states. None of them represent the states for whom this really, really matters.

And it costs a great deal of money. It adds about $150 billion to this bill. I think that number is correct. And so the goal had been, we're going to go in there and we're going to tell those House guys, the SALT caucus, that they're going to have to make some changes. And in the end, they just kept continuing to say, we will not change. The sheer bloody mindedness of the SALT caucus forced the Senate to blink.

And we are essentially not getting any real changes. So I unfortunately feel as though that might be an issue that is now done and dusted. There's nothing more that anyone can do about it, unfortunately. The other thing that I would mention in this bill, and I opened by saying this, is that

I do not know where this lands in the House. And the big issue for people, I agree with everything Kate said. I think there's some really important reforms in here. Obviously, the tax continuation is so important as well, too. The money that we are putting into the military is really important in this bill. We didn't talk about that much.

But let's not forget that the big deal when they passed the House version of this is everybody had their little conditions. It was a very delicate balance. The salt guys got what they want. What the House conservatives got, and there's a block of 30 or 40 of them, was a promise that they were going to get at least $1.5 trillion in deficit reduction over 10 years.

They managed to do that in their House bill. Kind of. I mean, it's a little gimmicky in some places, right? But technically on paper, they did. The Senate does not do that. And by some estimates, this bill is about $600 billion short from that demand.

So they are already saying they're unhappy that they're not going to budge on this. We will see what happens when Donald Trump gets on true social and starts beating people up or inviting them in to go golfing or who knows, maybe they will find an accommodation, notably golf.

Senate fiscal hawks had started in the same position and said, over our dead bodies, will we move this bill without significant deficit cuts? They didn't necessarily get that in the end, and the bill still passed the Senate. So we'll see how it goes in the House. But that is going to be the number one sticking point. I think most of the rest of the planks I hear it

broadly adhere to what the House wanted. You know, there might be a little bit of angst and wincing, but they could probably tolerate the broad spending piece, though. And the question of how much it cuts is resonating as a concern. Speaking of bunker busters dropped on Truth Social, Tom Tillis was on the receiving end of some by President Trump in recent days.

after he announced he wasn't going to support the bill. Trump called him a talker and a complainer, said that he was going to be soon interviewing potential Republican primary challengers to North Carolina Senator Tillis, who now says he's not going to run for reelection in 2026.

And Kate, I wonder what you make of this as a matter of political strategy. I understand the frustration with Republicans that it is difficult to get all 50 or 53 of these people on the same page in some cases for some pieces of this legislation. On the other hand, if you are pushing out of politics people who look like they are a pretty good shot at reelection –

and losing that incumbency advantage, throwing open swing states potentially to Democratic control in the next election if Democrats can get their act together and get a candidate who looks like they can be maybe Tom Tillis' successor. Well, there's a lot to go around here. I mean, first, your point, keeping control of the Senate, it was essential to success in Donald Trump's presidency. And he can forget about, you know, confirming a Supreme Court justice if he doesn't hold the Senate in a few years.

So I do think it is never a good play to alienate members of your fellow party. And some of them in this bill, you know, Collins would be an example. Some of them who are in tight races were going to have issues with parts of the bill and need to be able to carve out some independent profile as a result of that.

At the same time, this is a really dispiriting last stand from Tom Tillis on this particular Medicaid portfolio. I think Tillis has been a very productive member of the Senate Finance Committee on tax permanence, on spending issues. And I thought he did a public service by putting a particularly close eye on the Secretary of Defense during his confirmation process and thinking about whether he was suited for that job. And so I found Tillis to be a very productive member.

But at the same time, now he's damaging a bill that is going to pass and he's confusing the public about what Republicans are doing on Medicaid, which I think is unfortunate. But on the flip side, Donald Trump is also not talking about what the Republicans are doing on Medicaid. And there has been an inability to discuss that. So all around, it's not an impressive showing. But last thing, Kyle, I want to put a quick bow on something we were talking about, which was the crazy world of Washington math. And Kim was talking about how

the SALT deduction, there's going to be this huge blowout for the state and local tax deduction to mollify these few Republican members in the House. Well, if you want to know how seriously to take these budget predictions, that blowout counts in part as a savings, because right now it's just going to go fully uncapped if Congress does nothing. So on paper, Congress is saving

money by giving this great tax break to rich people in New York. I mean, what a crazy, crazy world we live in. So I just want everyone to bear that in mind as they're reading these headlines about these official projections that there is a Washington funhouse and should be taken with a grain of salt. Thank you, Kate and Kim. Thank you all for listening. You can send your own big, beautiful emails to pwpodcast at wsj.com.

If you like the show, please hit that subscribe button. And we'll be back tomorrow with another edition of Potomac Watch.