Congress
Wall Street’s debt warnings went unheeded as GOP pushed megabill forward
As congressional Republicans advanced their megabill in recent months, many fiscal hawks in the party figured they had a powerful force on their side: wary titans of finance who had started sending powerful signals that their appetite for purchasing U.S. debt was not, in fact, endless.
Turns out Wall Street was barely a bump in the road.
In passing the One Big Beautiful Bill Act last week, GOP leaders blew past a host of warnings to potentially add several trillion dollars of additional borrowing — brushing off concerns that they were missing a late opportunity to put the nation on a more sustainable fiscal trajectory in favor of piling on expensive new tax cuts.
The whole episode was a stark display of how short-term rewards and Trump’s demands outweighed any anxieties about long-term calamity — even from a constituency as powerful as Wall Street, whose major players are reliable financiers for politicians of both parties.
Some heavyweights like JPMorgan Chase CEO Jamie Dimon and billionaire investor Ray Dalio emerged as clarion voices for fiscal rectitude. Many others kept quiet on macroeconomic issues and advocated instead for the extension of tax cuts to promote economic growth — and, frequently, their own personal welfare.
Rather than send a big, beautiful signal to the bond markets that discipline would finally be restored, Republicans appear to have done the opposite: Yields on 10-year Treasuries have crept up around 18 basis points over the past week as market watchers ingested tariff news, but also openly wondered if either party is capable of reigning in the roughly $36 trillion national debt.
“If one of the goals was to calm the bond market down, I wouldn’t take much comfort from the past couple of days,” said economist Ed Yardeni, who coined the term “bond vigilantes” to describe investors who undertook massive selloffs of bonds to protest Fed policies in the 1980s.
“The act is not designed as a deficit reduction act. It’s designed as, ‘Let’s cross our fingers and hope that lower taxes boost economic growth again fast enough to bring in revenues,’” he added.
“Growth” was the word repeatedly invoked by President Donald Trump and his allies on Capitol Hill, who relied on rosy economic projections developed inside the White House to argue that the bill’s tax cuts would essentially pay for themselves.
Outside observers saw an entirely different kind of growth: Independent forecasters — including the nonpartisan in-house scorekeepers at the Congressional Budget Office — predicted the added debt created by the bill would increase federal borrowing costs, swamping any economic gains reaped through the tax cuts.
It’s a version of the “debt spiral” that many fiscal doomsayers have warned the U.S. might be entering after spending decades as the world’s safest investment. Lawmakers heard those calls loud and clear at various points recently.
In May, Moody’s Ratings downgraded Treasuries from their prior top rating, citing “persistent, large fiscal deficits [that] will drive the government’s debt and interest burden higher.” In late March, a group of House Republicans heard directly from Dalio, who urged them in a private briefing to start bringing annual deficits down to 3 percent of GDP. Deficits are currently running more than twice that.
Members were already spooked by the spike in Treasury yields after Trump rolled out his sweeping “Liberation Day” tariffs in April. Dalio told them that an even steeper selloff could occur if they didn’t get the nation’s fiscal house in order. The concern seemed to be confirmed when yields for 20 and 30-year Treasuries closed out above 5 percent the day that the House passed the sweeping legislation.
Still, the GOP did not end up heeding Dalio’s warning, and last week he said on X that he now expects sizable increases of government debt relative to GDP. That, in turn, would lead to “unimaginable” tax increases or spending cuts — or, perhaps more likely, inflationary money-printing.
He said that “big, painful disruptions will likely occur” if lawmakers can’t bring the deficit down to 3 percent of GDP.
Earlier on, GOP lawmakers on the House Budget Committee Republicans had taken Dalio’s message to heart, and his March briefing was part of what led House Budget Chair Jodey Arrington (R-Texas) and Budget Vice Chair Lloyd Smucker (R-Pa.) to craft a provision in the House bill linking the amount of tax cuts to spending cuts in the domestic policy legislation.
But when the Senate took up the House products, Senate Republicans added hundreds of billions in tax cuts to the legislation while jettisoning north of $200 billion in spending cuts because they didn’t adhere to Senate budget rules. With pressure from the White House, Senate Republicans forced their product down the throats of fiscal hawks in the House.
As a result, the bill ended up missing the mark on the House framework by around $600 billion dollars, according to the nonpartisan Committee for a Responsible Federal Budget.
“The one piece that I wish was stronger coming out of the Senate was the offset provision, the deficit-neutral principle that was hard-wired into our budget resolution,” Arrington said in an interview after the House passed the final legislation.
Arrington, who authored an austere balanced budget he dubbed “Reverse the Curse” before ultimately supporting Trump’s deficit-busting bill, said he was “not sure either party is unilaterally” capable of changing the nation’s fiscal path. He suggested Congress would have to turn to a bipartisan commission, similar to one established in 2010 under former President Barack Obama, to address the issue.
Outsourcing the hard trade-offs necessary for deficit reduction is one thing; mustering the political will to enact them is another. The megabill drama showed that the issue is hard to crack for even the most powerful lobbies, said Andrew Moylan of Arnold Ventures, a think tank endowed by billionaire investor John Arnold that advocated an array of policies to help close the fiscal gaps in the GOP’s megabill.
“I think that it’s going to be difficult for any actor, whether it’s a Wall Street person or a policy organization or grassroots group or whatever, to have an impact on this debate that helps us reduce deficits unless constituents are feeling pain that they feel like Congress needs to help address.”
Some in the House GOP are hoping that they’ll have a chance to enact additional spending cuts in further party-line bills this year as well as through the appropriations process. Many conservatives said they were reassured by 11th-hour conversations they had with White House budget chief Russ Vought before the final vote.
“You’re going to see a lot of fiscal restraint to add to this growth picture,” said Rep. Andy Barr (R-Ky.), a House Financial Services Committee member. “So growth, fiscal restraint — that will ultimately send the virtuous signal to the bond market.”
Barr said he also supports updating leverage requirements for banks to encourage them to purchase more Treasuries, which could help bring yields down.
As for Democrats, Rep. Ro Khanna of California laid out a progressive debt reduction plan in June that would cut the deficit by $12 trillion through reforms to defense contracting, a crackdown on “corporate profiteering” in Medicare and tax hikes for billionaires and companies.
In an interview Monday, Khanna predicted that serious deficit reduction would most likely occur under a Democratic trifecta rather than as part of a bipartisan effort.
Republicans, Khanna said, “have to be willing to raise taxes on the wealthy. That’s a philosophical difference. The math just doesn’t work without raising taxes on the wealthy.”
The Senate Saturday confirmed Todd Blanche to be attorney general, following a weeks-long struggle with a handful of wary Republicans.
The Senate voted 50-49 to approve him, with GOP Sens. Susan Collins of Maine and Lisa Murkowski of Alaska joining with Democrats in opposition.
Blanche, President Donald Trump’s former personal attorney, has been serving as acting attorney general since Pam Bondi’s ouster in April. Questions about Blanche’s potential conflicts of interest from representing Trump, as well as his role in the creation of a $1.8 billion “Anti-Weaponization Fund” as part of Trump’s settlement this spring with the IRS, created headwinds to his confirmation among a key group of Senate Republicans.
Sen. Bill Cassidy, the Louisiana Republican who lost re-election after Trump endorsed a primary challenger, helped Blanche clinch his 50th vote Friday. He said Blanche wasn’t perfect but that he wasn’t sure Trump would pick someone better to lead the Justice Department.
“The choice is not between perfection and Mr. Blanche,” Cassidy said on the Senate floor. “It is between Mr. Blanche and another acting attorney general who may not run the department effectively under President Trump and who indeed may not be as good as Mr. Blanche.”
Cassidy’s support came after Blanche had already spent weeks negotiating with Sens. Thom Tillis of North Carolina and John Cornyn of Texas, who vetted his nomination as members of the Senate Judiciary Committee. Cornyn struck an agreement with Blanche Sunday for the DOJ to curtail the payout fund and rein in a deal to exempt Trump from IRS audits.
Cassidy’s support came hours after Murkowski announced that she would oppose Blanche’s nomination, putting it on the brink of potential failure. Between unified opposition from Democrats and Sen. Mitch McConnell’s absence for health reasons, Blanche could only lose two Republicans and still be confirmed.
Hours before Friday’s vote, Murkowski told reporters she spoke with Blanche multiple times but that she was “good with where I am.” She said there was no “one” thing that motivated her decision.
“If there was one thing, we might be able to go back to the White House and say ‘Hey, can we work on this one thing,’” she said. “But for me it was a compilation.”
She added that she believed the anti-weaponization fund is “pretty dead” but “what is not so clear” are the audit immunity provisions of Trump’s IRS agreement, “which I just think are viewed by so many in this country as kind of a special and sweet deal for the president and his family.”
The Senate passed a bill Saturday to fund the government beyond the midterm elections, putting the onus back on the House to head off a shutdown looming Oct. 1.
The Senate approved the measure in a bipartisan 90-6 vote, with Sen. Darline Graham of South Carolina voting present. The bill would fund federal agencies through Dec. 11 at current levels, with some exceptions. Senate leaders sped up consideration of the legislation as part of an agreement reached Saturday morning to allow members to leave for August recess.
The House and Senate have now each passed different bills aimed at averting a shutdown at the end of the fiscal year. The House bill would fund the government through Dec. 4.
The Senate legislation sets up a year-end standoff over the Trump administration’s controversial plan to put political appointees in charge of approving federal grants. The bill would block the administration from finalizing that rule during the length of the stopgap — and lawmakers are already expecting a December brawl over the issue.
Sen. John Kennedy (R-La.) said this week that he’s going to “fight like hell” in December to ensure Congress doesn’t further obstruct the grant overhaul.
But lawmakers on both sides of the aisle are resistant to the White House approach to grants. Senate Appropriations Chair Susan Collins (R-Maine) said she will “continue to oppose” the Trump administration plans “because I think they politicize the grants process, and I don’t want that to occur.” Sen. Patty Murray of Washington, the top Democrat on Senate Appropriations, said she too would “welcome the fight.”
The Senate rejected an amendment from Sen. Ted Budd (R-N.C.) intended to ensure that a ban on intoxicating hemp products kicks in come November, after Senate leaders at the White House’s urging included language in the funding bill to delay it.
The Senate bill includes language Democrats sought to ensure Immigration and Customs Enforcement and the Border Patrol don’t get any new funding under the patch. Republicans enacted $70 billion for those agencies along party lines earlier this year.
That prohibition could be contentious in the House.
Rep. John Rutherford (R-Fla.) said in an interview that the provision “could be a dealbreaker” and that he’s “not a fan” of the Senate version. Rep. Jeff Van Drew (R-N.J.) said Tuesday that he would say he’s undecided if GOP leadership whipped his vote on the Senate stopgap.
“I do not like the Senate language,” Van Drew said, noting the grant approval provision. “It’s one I would want to know what the president thinks.”
The White House issued a statement of administration policy in support of the Senate’s funding bill. No such memo was issued for the House bill, which did not include the funding increases and authorizations the White House requested.
“Every Member of Congress should support passage of this [continuing resolution] to keep the Government open as discussions on full year appropriations continue,” it reads.
Rep. Rosa DeLauro (D-Conn.), the top Democratic appropriator in the House, praised the Senate measure for including the grant and immigration enforcement language.
“This bill is a clear improvement over the House Republican continuing resolution, but we are still nearly two months away from the end of the fiscal year and should be working together to pass full-year funding bills,” she said in a statement.
Mia McCarthy and Jennifer Scholtes contributed to this report.
The Senate is aiming to leave Washington for a five-week recess early Saturday after Republicans cut a deal with President Donald Trump to punt some of their priorities, including a framework for a party-line spending plan.
The Senate is trying to lock in an agreement that would set up votes on a college sports bill, a stopgap government funding bill, Todd Blanche’s attorney general nomination and GOP voter ID legislation, according to a copy of an internal notice reviewed by Blue Light News.
The Senate would then leave Washington until mid-September.
Any one senator could object to the tentative deal, forcing it to be altered or dragging the Senate deeper into the weekend. Senators believe there are still objections to advancing the college sports bill. Democrats are also waiting to see if one of their own will prevent speeding up Blanche’s confirmation.
The breakthrough is a U-turn from earlier Friday evening, when Republican senators emerged from a closed-door meeting predicting they would have to spend Saturday trying to break a stalemate within the party about how to wrap final votes before recess.
Shortly after that meeting, Trump spoke by phone with Senate Republicans including Ron Johnson of Wisconsin, Rick Scott of Florida and Mike Lee of Utah about the path forward for the GOP’s lengthy to-do list.
During the call, according to Johnson, Trump agreed to punt a vote on a budget blueprint for a third party-line spending bill until later in the year. Lee, who has been pushing for action on the separate SAVE America Act, also agreed to drop his demand for a formal, roll call vote on adjourning given the understanding with the president.
“I think the conclusion of the conference – and we had a discussion with the president and he agrees – [is] don’t take the vote tonight,” Johnson said after the meeting in Thune’s office.
Republicans were in talks with the White House throughout Friday. A White House official granted anonymity said Friday evening that “we’re continuing to have productive conversations with senators to advance several legislative priorities.”
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