- Congress returns
- Reconciliation Bill task No. 1
- Tariffs remain at center stage
- Trump and Zelensky talk
Congress returns
The House and Senate return to Washington after their two-week Easter and Passover break. Most members of Congress have sessions with constituents during these breaks and return to the Capitol with a fresh awareness of what is on their constituents’ minds.
The action will largely be in the House, where work will start on the “one big, beautiful” bill that is part of the Budget Reconciliation process. That is one of the few legislative tools that allows Congress to act without the threat of a Senate filibuster, which gives the minority (Democratic) party additional leverage as it takes 60 votes to stop a filibuster, and Republicans only have 53 senators. The one limitation of issues incorporated into the Reconciliation Bill is that each provision must have a direct impact on the budget.
This year’s Reconciliation Bill is going to be used by Republicans to implement President Donald Trump’s program, both on the revenue and spending fronts. The centerpiece of the legislation is a renewal of the 2017 Trump tax cuts that expire at year end. Failure to pass the tax program would cause a tax increase for most Americans; hence it is a top priority.
In addition to the Trump tax plan, Republicans in Congress want to increase funding for defense, provide resources for expanded border protection, and open federal lands for expanded drilling. These are eligible for inclusion in the Reconciliation Bill.
The main challenge for Republicans is that the extension of the Trump tax program costs the government substantial revenue in future years. To balance off the reduced revenue, Congressional Republicans are looking for substantial program cuts. Part of Republican support for the Musk-led DOGE cuts is to incorporate the DOGE ideas into the 2026 fiscal year budget as part of the reconciliation process.
A tough fight may lay ahead as elements of the Republican Party have targeted Medicaid as an area for substantial cuts. But studies have shown that in some of the poorer parts of the country, which gave strong support to Trump and other Republicans, Medicaid is widely used to provide medical care. With only a six-seat House majority, the Republican leadership will need to proceed carefully as a group of House Republicans have already threatened to vote against the bill if Medicaid cuts are part of the package.
Another area of potential difficulty for Republicans is the insistence by Republicans from high tax states such as California and New York that 2017’s $10,000 limit on deductions for State and Local taxes (SALT) be increased. Again, Republicans from these states have said that they will oppose the bill without a SALT increase. There are 16 Republican House members from California and New York. If they stick to their position, they have the votes to kill the Trump agenda. A tough step to take but increasing the SALT deduction is critical to many of their constituents.
Tariffs
During the Sunday talk shows, Treasury Secretary Scott Bessent indicated that progress has been made in talks with several of U.S. trading partners. While attention has been focused on the back and forth with China, it appears that South Korea, India, E.U., or some other friendly nations may supply the first agreements announced. There is an expectation that once a few agreements are reached they could become the template for others.
However, the focus of attention will remain on China where many U.S. companies have large investments. Last week, Washington indicated that the two governments have been in communication, but China shot down the idea. At some point, the two largest global economies will sit down, and it could take the form of direct talks between Trump and China’s Xi Jinping.
Ukraine-Russia ceasefire
On Friday, I and others wrote that there can be side meetings around events such as the Pope’s funeral when world leaders gather. Both sides reported that this bilateral conversation between Trump and Ukrainian President Volodymyr Zelensky was constructive and could become historic. Trump chastised Russian President Vladimir Putin over the bombing of civilian areas over the past week. Next steps by Trump could set the stage for ceasefire talks.