Congress

Wall Street’s debt warnings went unheeded as GOP pushed megabill forward

Published

12 months ago

July 9, 2025

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.”

Congress

Cait Conley wins Democratic primary to face Rep. Mike Lawler

Published

17 minutes ago

June 24, 2026

Blue Light Newsroom

NEW YORK — Army veteran Cait Conley has emerged victorious in the bitter Democratic primary for New York’s 17th Congressional District, setting up a general election fight between a past national security staffer for former President Joe Biden and Republican Rep. Mike Lawler.

Conley, who served six tours overseas before becoming the National Security Council’s director for counterterrorism, leaned on her military service during her campaign, casting herself as a tough-as-nails political outsider who could cut through the noise and find pragmatic solutions.

Congress

Democratic socialist Valdez wins open Brooklyn-Queens primary

Published

32 minutes ago

June 24, 2026

Blue Light Newsroom

NEW YORK — State Assemblymember Claire Valdez prevailed in the tumultuous primary to succeed retiring Rep. Nydia Velázquez, notching the Democratic Socialists of America a win in one of the left’s most high-profile proxy wars.

Valdez, who has served in the Assembly representing Queens since last year, was boosted by the city chapter of the DSA and Mayor Zohran Mamdani. Her major competitor was Brooklyn Borough President Antonio Reynoso, who had the backing of the state Working Families Party and Velázquez.

The dynamics of those competing interests loomed over the campaign, exposing tensions among progressive Democrats.

The 7th District, which covers parts of Brooklyn and Queens, has been dubbed the “Commie Corridor.” That’s a nod to the DSA’s electoral power there — which it flexed during last year’s June mayoral primary when Mamdani enjoyed some of his strongest results in that district.

While the candidates agreed on most policy positions, Valdez and Reynoso spent months sparring over who had the most ironclad progressive values. Complicating matters further for them was New York City Council member Julie Won, who had the support of notable Asian American organizations and elected officials but struggled to gain enough traction to emerge as a real threat. Public defender Vichal Kumar was also on the ballot.

Even though the contenders all referred to Israel’s actions in Gaza as a “genocide,” Valdez repeatedly criticized Reynoso for how long it took him to use that label. She also attacked him for accepting campaign donations from people affiliated with the real estate industry.

In the waning days of the campaign, Valdez sought to tie Reynoso to the American Israel Public Affairs Committee — a tactic progressive candidates have long employed to mobilize their base, especially as the public’s view of Israel has grown increasingly negative. AIPAC said it was not involved in this race, and its independent expenditure arm did not appear to spend money on the contest.

Reynoso, meanwhile, tried to use Mamdani’s endorsement against Valdez, accusing her of being “beholden” to the mayor — a strategy that evidently did not land with an electorate that views Mamdani so positively. One significant flashpoint unfolded when the NYPD faced accusations of collaborating with Immigration and Customs Enforcement during a chaotic incident in Brooklyn, a charge Mamdani has denied. Reynoso said that when things “get complicated with the NYPD,” he doesn’t have “any bosses telling me to slow down and wait and work on messaging.”

A super PAC supporting Reynoso also attacked Valdez for not having as much political experience as Reynoso, who served in the City Council and as a community organizer prior to becoming borough president.

Valdez’s win is a boon for Mamdani, who put his political capital on the line in a handful of races this cycle — and angered Democratic power brokers in the process. Velázquez, a 16-term incumbent known as “La Luchadora” who’s served as a mentor for younger progressives in the city, was an early supporter of Mamdani in the mayoral election. But the two ended up on opposite sides in races up and down the ballot this year, stress-testing how the new mayor navigates relations with powerful, well-respected party figures.

Reynoso emphasized his “underdog” status in the race, despite his backing from Velázquez, the Working Families Party and major unions, pointing to Mamdani’s involvement and the district becoming more gentrified. Like Velázquez, Reynoso also endorsed Mamdani in the mayoral primary. But during the campaign, he accused the mayor of being “disloyal” to the veteran lawmaker.

Super PACs emerged as a major point of contention in the race as well. Reynoso and Won both criticized Valdez for putting public messaging on her campaign site — a common tactic viewed as a cue to PACs known as “redboxing” — where she presented talking points contrasting herself with Reynoso. Reynoso posted a redbox on his site too, but said he “had to do it” after Valdez put one up. After super PACs began supporting both candidates, Won touted herself as the only contender keeping their promise not to accept super PAC spending.

Throughout the campaign, Valdez leaned on her background as a union organizer. Originally from Texas, she moved to New York over a decade ago to be an artist. She is all but certain to win in the fall, when she will face Republican Melvin Rivera. Reynoso has not said if he will decline the Working Families Party ballot line for the general election.

Congress

Brad Lander trounces New York Rep. Dan Goldman in election upset

Published

47 minutes ago

June 24, 2026

Blue Light Newsroom

NEW YORK — Former New York City Comptroller Brad Lander defeated Rep. Dan Goldman in Tuesday’s Democratic congressional primary, ousting the two-term lawmaker after a bruising campaign that focused heavily on their differences over Israel.

On the campaign trail, Lander concentrated much of his attention on immigration and his opposition to U.S. military aid for Israel — and he was buoyed by an early endorsement from Mayor Zohran Mamdani.

Goldman became a household name after helping lead the first impeachment of President Donald Trump in 2019. A former federal prosecutor and heir to the Levi Strauss fortune, he was first elected to Congress in 2022 by a razor-thin margin, making his seat a target for progressives seeking to expand their footprint in the city’s congressional delegation.

The result wasn’t unexpected, as a recent poll showed Lander holding a commanding lead. With the primary in the bag, Lander is expected to coast in November’s general election, since there’s no competitive Republican candidate on the ballot.

Goldman’s district is safely Democratic, so Lander’s victory will not impact the party’s broader push to reclaim control of the House in November’s midterm elections.

Lander’s win is, however, a boon for the Democratic Party’s ascendant left wing — and a feather in the cap for Mamdani, who endorsed Lander the same day he launched his campaign in mid-December. In Lander, Mamdani has an ally who is more likely to push his priorities on Capitol Hill, a sharp contrast with Goldman, who never offered support for Mamdani during last year’s New York City mayoral race.

In many ways, Lander and Goldman, who are both Jewish, do not differ that much from each other politically. They are both ardent critics of the Trump administration’s hard-line immigration agenda and agree millionaires should be taxed at higher rates.

Lander found an edge, though, by making the race about Israel.

Fashioning himself a “liberal Zionist,” Lander attacked Goldman relentlessly on the campaign trail over the perception that the incumbent hasn’t been forceful enough in speaking out against Israel’s war in Gaza, which has left more than 75,000 Palestinians dead after being launched in response to Hamas’ Oct. 7, 2023, terror attack. Lander has blasted Goldman for not supporting legislation to block more U.S. military aid for Israel and accused him of kow-towing to pro-Israel lobbying groups by not calling the country’s war a “genocide.”

Supportive super PACs, including one funded by prominent business owners who also backed Mamdani’s mayoral run, piled on, spending hundreds of thousands of dollars on ads knocking Goldman and lauding Lander in the leadup to the election.

The talking points resonated with voters in Goldman’s district, which voted overwhelmingly for Mamdani, a longtime critic of Israel’s government, in last year’s mayoral election.

Lander was also able to capitalize on his deep ties to the district, especially in the Brooklyn portion, which he represented for 11 years while serving as a member of the New York City Council.

Goldman tried to fend off Lander’s challenge by committing to spend as much as $1 million of his own money on the race. Ultimately, the money didn’t move the needle enough for Goldman, who serves on the House Judiciary and Homeland Security Committees.

Lander mounted his challenge after placing third in the city’s Democratic mayoral primary last June. Initially, he angled for a top job in Mamdani’s administration after the mayoral race, but he switched gears to run for Congress after the mayor reportedly informed him there would be no position available for him at City Hall.