Congress

Debt cloud suddenly hangs over megabill talks

Published

1 year ago

May 20, 2025

Republicans knew they’d have to overcome fierce internal divisions, thorny policy trade-offs and rock-solid Democratic resistance to pass their massive domestic policy bill.

They didn’t count on a Wall Street backlash, too.

A softening Treasury bond market and surprise downgrade Friday of U.S. creditworthiness are the latest forces weighing on the GOP megabill — an unmistakable nudge to lawmakers that investors are growing increasingly concerned about legislation that could pile trillions of dollars more onto an already staggering national debt.

That message is being seen as vindication by some Republicans who have long warned about the nation’s unsustainable fiscal trajectory and who have vowed to seek massive spending cuts as part of the pending legislation.

“If we don’t have a wake-up call now — all of us, Democrat, Republicans — I don’t know what it’s going to take,” said Rep. Ralph Norman (R-S.C.), one of a handful of conservative hard-liners who delayed a key House Budget Committee vote this weekend over spending concerns.

But many other Republicans appear fully prepared to brush off the warnings — including the downgrade of U.S. debt from Moody’s Ratings, which directly referenced the pending legislation: “We do not believe that material multi-year reductions in mandatory spending and deficits will result from current fiscal proposals under consideration.”

Trump’s National Economic Council director, Kevin Hassett, said in a Fox Business appearance Monday that the downgrade reflected former President Joe Biden’s fiscal policies and argued that the tax cuts in the megabill would position the U.S. for further growth. He also cited increasing tariff revenue that “should affect the credit rating in the end if you’ve got all this extra tax revenue coming in.”

Later Monday, Sen. Markwayne Mullin (R-Okla.) told reporters that the ratings agency “has done this every time we run up against a debt limit or we run up against a spending bill” and would “bounce it right back as soon as we pass a bill.”

In fact, this is Moody’s first-ever downgrade of U.S. sovereign debt; two other ratings agencies, S&P and Fitch, previously downgraded Treasury offerings citing similar concerns about out-of-control borrowing costs and have not restored the tip-top ratings they previously enjoyed.

But market watchers say it’s the pricing of Treasury debt that lawmakers should be paying close attention to as they put together President Donald Trump’s “big, beautiful bill” that is set to extend 2017 tax cuts and pile on more goodies for individuals and corporations without fully offsetting their cost.

“I hope the Republican majority in Congress realize that the bond market is watching,” said economist Ed Yardeni, who coined the term “bond vigilantes” in the 1980s to describe how investors can exert fierce pressure on economic policymakers.

For now, bond investors haven’t really revolted over the latest credit downgrade or the budget bill, Yardeni said, but if Republicans deliver “excessive” fiscal policy, they “could react adversely and try to force the Republicans to come up with a better program.”

The Moody’s downgrade sent a shiver across Wall Street on Monday morning. Yields on longer-dated Treasury securities climbed, with the 30-year Treasury briefly jumping above 5 percent, while rates on 10-year notes — which are used to price everything from home mortgages to credit card loans — at one point rose above 4.5 percent, up about a half point on the month.

While Treasury securities pared back some of those losses over the course of Monday’s trading session, Wall Street economists and market analysts said that the abrupt spike reflected a renewed focus on the U.S.’ gloomy fiscal outlook — and raised fears of a spiral of rising borrowing costs fueling more debt.

Prominent business leaders with close ties to Republicans, like Citadel’s Ken Griffin and Ray Dalio of Bridgewater Associates, have dialed up warnings of the deep risks posed by excessive deficit spending. This echoes the longstanding concerns of traditional conservatives who have long called for significantly lower levels of government spending.

“If we get to the point where people are no longer willing to buy Treasuries, then we’re in real trouble with a sovereign debt crisis,” said Rep. Lloyd Smucker (R-Pa.), who voted to advance the bill Sunday in the Budget Committee.

But Trump’s agenda has not prioritized fiscal rectitude, and the president’s appetite for deep tax cuts combined with thin congressional majorities that are reluctant to cut too deeply into the American social safety net are adding up to another deficit-busting bill.

The GOP megabill hasn’t been fully scored by the Congressional Budget Office, but preliminary estimates produced by the Yale Budget Lab and the Penn Wharton Budget Model project that it would add $3.4 trillion to federal deficits over the next decade. Republicans who say the bill won’t add to the national debt are including economic growth projections that most economists consider to be unrealistic.

“Nothing that the administration is doing presently is in the direction of trying to right the fiscal house,” said Yale Budget Lab President Natasha Sarin, a former top adviser to Treasury Secretary Janet Yellen.

Meanwhile, the cadre of congressional fiscal hawks who have insisted on deep spending cuts appear to be in retreat. When the Moody’s downgrade hit Friday, House GOP hard-liners felt they had maximum pressure to force major changes in the bill — including dramatically restructuring the design of the spending cuts, which are backloaded toward the end of the bill’s 10-year lifespan.

But all signs are that the Republican Party’s Trump-centric politics are set to outweigh any push for fiscal purity. The president and White House officials were enraged after the handful of Budget Committee holdouts tanked the key vote Friday, and as a weekend of tense talks wore on, it became increasingly clear that the Moody’s downgrade actually ramped up pressure for the budget hawks to fall in line, according to three Republicans granted anonymity to describe the talks.

Amid rising Treasury rates, a weakening dollar, and ongoing fallout from Trump’s global tariff regime — including an announcement last week from Walmart that it would need to raise prices — the downgrade added another concern for the health of the U.S. economy. The White House circulated a report over the weekend underscoring the need to pass the bill in order to keep businesses and households from being swamped by tax hikes.

Four key hard-liners, including Norman, voted “present” in a Budget Committee revote Sunday night, allowing the bill to advance. They are now pushing for changes to Medicaid provisions and clean-energy tax credits that could reap significant savings, though at least some of that could be used to offset additional tax cuts, leaving the bill’s overall fiscal footprint largely unchanged.

One hard-right proposal that is likely to be incorporated is to implement work requirements for Medicaid as soon as 2027 — two years sooner than in the initial draft of the House bill.

Paul Winfree, a veteran conservative policy analyst, said the hard-liners were smart to push for the cuts to bite sooner. The markets, he said, “may be sending a signal that they’re skeptical that the savings in the future will materialize. That’s why it’s so important to make sure that the spending reductions start much sooner than 2028 or 2029.”

Jordain Carney contributed to this report.

Congress

Senate confirms 74 Trump nominees

Published

5 hours ago

August 7, 2026

Blue Light Newsroom

Senate Republicans confirmed dozens of President Donald Trump’s nominees Friday, just before they leave for a five-week congressional recess.

Senators voted 51-47 to approve officials at the Departments of Defense, Energy, State and other agencies.

They included David Cummins to head the Transportation Security Administration, Cameron Hamilton to lead the Federal Emergency Management Agency, Hal Duncan to be OMB deputy director and Francis Brooke to be Treasury deputy secretary. Among the group were several ambassadors, including former Rep. David Brat to be ambassador to Australia.

Senate Republicans changed the chamber’s rules last year to be able to confirm lower-level nominees as a package instead of having to hold a vote on each.

After finishing the expedited procedure Friday, Senate Republicans estimate they will only have a small number of civilian nominees awaiting confirmation.

Congress

Trump says voters are mad at other Republicans, not him, as midterms approach

Published

10 hours ago

August 7, 2026

Blue Light Newsroom

President Donald Trump said voters may seek to punish Republicans — but not him — in the November midterm elections, as GOP lawmakers sweat that affordability concerns and the war in Iran could mean Democrats flip the House and perhaps even the Senate.

“They’re angry at Republicans,” Trump said in an interview with Punchbowl News that aired Friday. “But they’re not angry at me. They’re not angry at me, but they are angry at Republicans.”

The GOP faces the prospect of heavy losses this November, as gas and grocery prices remain stubbornly high due in part to the White House’s five-month-long war in Iran. The administration’s guidance on campaign trail messaging has been “tone deaf,” House Republicans fear.

Meanwhile, the president’s approval rating has tumbled since he returned to the Oval Office last year, and even his biggest supporters have grown frustrated over his Middle East war.

And with a messy, jam-packed slate of primaries now all but in the rearview mirror, Democrats are determined to go on offense. The Democratic Congressional Campaign Committee has 58 seats on its midterm target map that stretches into redder territory — while still facing an uphill climb to take the Senate.

Trump has a massive war chest at his disposal. His MAGA Inc. super PAC reached $400 million in June. The president told Punchbowl he plans to use it to “help Republicans,” but he stressed that he faces no pressure in this campaign cycle.

“I said to somebody, ‘Wait a minute, you don’t understand, I won,’” Trump said, referencing his 2024 presidential election victory. “I’m not campaigning.”

The biggest issue for Republicans this year? That Trump himself is not on the ballot, he said.

“If I don’t run, will those people go out and vote? And that’s the one thing I can’t tell, I’m going to ask them to,” he said.

Congress

Capitol agenda: Senators find their exit strategy

Published

12 hours ago

August 7, 2026

Blue Light Newsroom

The Senate’s plan to get out of town is coming together.

Majority Leader John Thune teed up a final vote on the Russia sanctions legislation for this morning, as well as a confirmation vote for dozens of nominees and a procedural step on a stopgap funding bill.

But there’s still a number of questions that need to be answered if Thune wants to adjourn for recess by the end of the day:

— BLANCHE’S FATE: President Donald Trump’s pick for attorney general needs to secure at least one more vote to be confirmed before the break.

It looks like it’s all up to Sen. Bill Cassidy after Sen. Lisa Murkowski announced Friday morning she is opposed. Thune indicated Thursday night Blanche’s fate was uncertain and that leaders were “still working to get the final vote.”

— SAVE AMERICA ACT: Thune said to expect a vote related to the SAVE America Act as well as an initial vote on a budget blueprint for a third party-line spending bill — which includes elements of Trump’s election security legislation.

The decision to hold the budget vote comes after two Republican senators, granted anonymity to speak candidly, told Blue Light News Thursday they believed Sen. Mike Lee or another member of the GOP’s right flank would have otherwise forced a vote on the framework.

But as we’ve previously reported, Republicans don’t believe the budget resolution has the votes within the conference to be adopted — meaning the expected initial vote today will fail to clear a simple majority threshold.

And it’s not clear Lee or like-minded senators will be satisfied and allow for lawmakers to adjourn for recess without more action on the elections measure. The senator has made similar threats over the past year but has never followed through.

— TIME AGREEMENT: GOP leaders need to strike an agreement to finish other business, including passing the stopgap government funding bill and advancing a college sports bill.

At this point, any single senator could still object to expediting the chamber’s agenda, which would derail Thune’s goal of getting members out of town by the end of the day.

“We’ve been having these conversations with Democrats trying to figure out what’s the path,” Thune said.

“We’ll see how it goes,” he added.

What else we’re watching:

— GOP EXPECTS CRYPTO BILL DELAY: The Senate will leave for the chamber’s August recess without holding a vote on a landmark cryptocurrency bill, according to three people with knowledge of the matter. Thune may still file cloture on the bill, but it likely won’t come to the floor until lawmakers return to Washington next month, two of the people said.

— COLLEGE SPORTS BILL STUMBLES: Sens. Ted Cruz and Maria Cantwell’s legislation to impose new guardrails on college sports is looking increasingly unlikely to hit the floor this week. Eleven senators objected to expedited consideration of the Protect College Sports Act after Thune filed cloture earlier this week, two people familiar with discussions told Blue Light News.

— OGLES OUSTED: GOP House leaders lost an incumbent — and a perennial headache — with Rep. Andy Ogles’ primary defeat in Tennessee Thursday night. His loss to former Tennessee Agriculture Commissioner Charlie Hatcher represents the second Trump-endorsed candidate to lose a primary this week.

Jordain Carney, Mia McCarthy, Andrew Howard and Jacob Wendler contributed to this report.