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 chair of the House Agriculture Committee said he’s not willing to “accept bad results” as a tradeoff for the benefits of advancements in artificial intelligence — a direct rebuttal to OpenAI CEO Sam Altman.
“As someone who practiced health care for 28 years, I’m never willing to accept bad results. I think we just need to do our best,” Rep. G.T. Thompson, a Pennsylvania Republican, told reporters Monday.
He was responding to Altman’s comments to Decoded by Blue Light News that people “should accept some bad things happening for the benefits of this technology and people having the agency.”
Pressed further on whether he agreed with Altman’s premise, Thompson replied, “No, I think we have to work harder to prevent any bad things from happening.”
Altman’s comments come in the wake of increased panic over the risks of catastrophic destruction from AI, with many industry leaders and experts arguing that guardrails are needed on the technology to prevent it from spinning out of human control.
Pressure is building on Congress to regulate the rapidly-advancing technology, but lawmakers are divided over whether the AI industry needs federal regulation or if it’s capable of governing itself.
The executives of major AI labs and tech companies gathered at the White House last week to discuss solutions with President Donald Trump, who believes overregulating AI will have national security repercussions. The group ended up signing a “morally binding” AI accord that critics say won’t do enough to prevent a worst-case scenario.
Thompson noted Monday he believes that AI will bring “tremendous solutions,” specifically in regards to finding cures for health issues like cancer and Alzheimer’s disease. But he also said AI has to be led with “principle” — comparing it to how he addressed digital assets in a bill to regulate the cryptocurrency industry, which he worked on as chair of the Agriculture Committee.
“The first principle is ‘do no harm.’ So we need to protect consumers, and that means, I think, building some guardrails — some guidelines — to do that,” Thompson said. He added that the second principle is to “foster innovation.”
“I think AI has a lot to do with that,” he added. “I don’t think AI works without RI: Real Intelligence.”
LE SUEUR, Minnesota — Senate Majority Leader John Thune said Monday there is no “consensus” yet on advancing a bill establishing permanent daylight saving time even as President Donald Trump ramps up pressure on Republicans to pass it.
Thune addressed the matter in a Monday interview after Trump used his Truth Social account multiple times over the weekend to rail against the legislation, known as the Sunshine Protection Act — going so far as to post the personal cell phone number of one of its GOP opponents, Sen. Tom Cotton of Arkansas.
“The president feels strongly on it like he does a lot of issues,” he said. “It’s something we’re having conversations about but there’s no clear path forward or consensus on it yet.”
While Trump singled out Cotton for scrutiny, Thune made clear the opposition to the permanent daylight saving time proposal — which would lead to very late winter sunrises in some parts of the country — ran deeper than one senator.
Cotton has publicly voiced opposition to the proposal for year, citing, among other things, the fact that children in his state would be going to school in the dark for part of the year.
Sen. Roger Wicker (R-Miss.) voiced similar objections Monday to reporters in the Capitol, saying he was mindful of “safety concerns in the more northern and rural states where children get on the school bus in very early hours.”
Thune, who spoke during a campaign swing in Minnesota with GOP Senate nominee Michele Tafoya, has himself opposed previous daylight saving bills. He said Monday that “a lot of it depends on where you are in the country” and that “your geography probably has as much to do with your position on that as anything.”
Sen. Rick Scott (R-Fla.), who has aligned himself closely with Trump, is among the lawmakers who have been pushing to get the bill through the Senate. He recently told POLITICO, “I’m going to make sure it gets passed this year.”
Riley Rogerson contributed to this report.
Democrats have pulled back some of their ads in North Carolina’s Senate race, days after the top Senate Republican super PAC paused its future spending in the state.
WinSenate, a group affiliated with the Senate Minority Leader Chuck Schumer-aligned Senate Majority PAC, has removed roughly $1.1 million in North Carolina ad buys this week, according to ad tracking firm AdImpact. The group still has roughly $18.8 million in future reservations through Election Day.
“Senate Majority PAC is committed to seeing this race through to victory, and will continue to make spending decisions based on how to best build a strong Senate majority,” Senate Majority PAC spokesperson Lauren French said in a statement.
The move, combined with the GOP-aligned Senate Leadership Fund’s decision to pause future spending, are a signal that both parties are shifting resources amid an ever-expanding Senate map. Democrats are increasingly confident in their North Carolina Senate nominee, Roy Cooper, as he continues to hold a sizable lead in public polling over Republican Michael Whatley — but some privately say states like Michigan and New Hampshire need more resources.
Meanwhile, multiple Republican groups, not just SLF, have retreated from the state in recent weeks, effectively deciding that it’s no longer worth the money to boost Whatley’s campaign.
The Koch-aligned Americans for Prosperity Action left North Carolina off its $22 million list of future spending across key Senate contests, and Old North Action removed $6.5 million in ad reservations last month.
The Cooper campaign, however, is still treating the race as competitive, pointing to North Carolina’s closely divided electorate and the fact that President Donald Trump won the state in each of the past three presidential elections.
“North Carolina is a truly 50/50 state and Democrats haven’t won a US Senate race in 18 years. We can’t take anything for granted or our eye off the ball,” said Morgan Jackson, a senior adviser to the Cooper campaign. “DC is broken and we’re going to continue to run this race like we’re ten points down to ensure North Carolinians get the change they desperately need.”
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