Overview
Holding Out Hope: Topline negotiations continue to make progress this week, albeit slowly. Reportedly, Senate appropriators have come in a bit too high for the House to accept, and the House’s proposal is too low for the Senate. We expect the landing zone for a final number could end up somewhere in the middle, constituting a slight raise from FY24 funding levels. While a topline agreement for FY25 continues to be an uphill battle, we are holding out hope despite the recent predictions of a year-long CR.
Tariff Revenue: On Tuesday, President Trump imposed a 10% tariff on imports from China, and proposed and later delayed a 25% tariff on imports from Canada and Mexico. As widely discussed, President Trump expects to raise revenue from these tariffs, which could be used to offset the federal deficit, pay for new spending, and reduce federal income taxes.
This week, the bipartisan Committee for a Responsible Federal Budget estimated that the total revenue raised from these tariffs is estimated to be $1.3 trillion over 10 years. While not insignificant, an extension of the Tax Cuts and Jobs Act, for example, is estimated to cost $4 trillion through FY34. Congress may need to get realistic about what they can achieve through discretionary spending cuts and tariff revenue.
Reconciliation Rundown: The Senate is poised to forge ahead with its own reconciliation plan, making moves this week to set up a two-track reconciliation process – likely with energy and border security first and tax second. Republican senators are scheduled to meet with President Trump in Florida tonight. Anticipating the Senate’s meeting, Speaker Mike Johnson (R-LA) and House leadership met with the President on their one-bill plan yesterday afternoon. The Speaker reported it was a productive meeting and they would work through the weekend to release the framework of a budget deal. Recall that in order to pass a reconciliation bill, both the House and Senate need to pass identical budget resolutions.
Vought Vote: The Senate voted 53-47 to confirm Russel Vought to be Director of the Office of Management and Budget (OMB) last night. Mr. Vought previously served as OMB Director for part of President Trump’s first term and will play a key role in the development and execution of Trump’s budgetary agenda, including working hand-in-hand with DOGE. Mr. Vought has already ruffled feathers by suggesting that the Administration will not rule out the possibility of impoundment as well as through his approach to no-compromise spending deals during President Trump’s first term.
Heads up, FY26: As FY25 negotiations continue, congressional offices have begun opening their online portals for FY26 requests. If you have a request for FY26, our team is here to help you navigate the process.
