Overview
All the Oxygen in the Room: The House Transportation and Infrastructure, Judiciary, Financial Services, Oversight, Armed Services, Homeland Security and Ed and Workforce Committees successfully advanced their portions of the Republican reconciliation package this week, but most of the attention is on the committees gearing up for markups the week of May 12: House Energy and Commerce and Ways and Means. Both committees will address some of the more controversial items, including proposed cuts to Medicaid. Rather than cuts, the Homeland Security and Defense Committees approved their portion of the bill which increased resources to help stop the flow of illegal drugs and immigration into the country and boost other defense priorities.
Despite delaying Ways and Means and Energy and Commerce hearings by a week, the GOP leadership is still aiming to get the bill on the President's desk by Memorial Day. One other item that needs to be addressed: the Senate Parliamentarian could still ban the use of the "current policy baseline," which the bill relies on, and derail the House' measure in the Senate. Stay tuned.
Very Skinny Budget: The Office of Management and Budget (OMB) sent its FY26 "skinny budget" request to Congress this morning, and it's already making waves. The proposal includes a 23 percent ($163 billion) cut for non-defense discretionary spending and a 13 percent ($1.01 trillion) increase for defense.
Reactions on the Hill have been mixed so far. Senate Armed Services Committee Chair Roger Wicker (R-MS) has taken aim at the defense budget, calling it "a cut in real terms." House Budget Chairman Jodey Arrington (R-TX) has called the proposal "bold and unwavering" in its commitment to reining in spending. House Appropriations Chairman Tom Cole (R-OK) restated his goal this week to get all the yearly appropriations bills out of committee by the August recess. Ultimately, the House is likely to accept many of the administration’s proposed cuts while the Senate may reject many of them.
For further information on the requested changes to FY26 discretionary spending, please refer to the tables here.
Rescission Decisions: As Elon Musk transitions away from his role at DOGE, Congress prepares to have their say in what cuts could be codified or reinstated. We do have some idea of what this FY25 rescission package could look like, with cuts expected to target USAID, the State Department, the U.S. Institute of Peace, PBS, and NPR, which would reportedly total $9.3 billion.
House GOP leaders were tentatively planning to vote on the package next week, but that is now unlikely as the proposal has yet to be sent to the Hill. Regardless, Congress has 45 legislative days to consider the proposal, and Senate Republican appropriators will likely use that time to comb through the request. Senate Appropriations Chair Susan Collins (R-ME) said the committee will likely hold a hearing on the package before taking action.
While Congress is eager to codify many of DOGE’s spending cuts, getting consensus on what cuts should be codified is always more difficult than it looks. We are already hearing some Republican members of Congress speak out publicly about specific programs they would not support cutting. Ultimately, getting consensus may be tricky and Congress could approve a much smaller package than what the White House initially asks for.
Indirect Costs: Over the past decade, there have been efforts to cap indirect cost reimbursement rates for federal research grants, particularly within the context of the National Institutes of Health (NIH). In President Trump's first term, the White House proposed a 10% cap, which was rejected by Congress. Earlier this year, the Trump Administration imposed a 15% cap on NIH grants, which was followed by caps on grants from the Department of Energy.
The Senate Appropriations Committee held a hearing on biomedical research this week, focusing on the need for federal funding and this relatively arbitrary proposed cap. Further, we could see a cap on all federal grants in the FY26 President’s budget request, and we have also heard that both NSF and DOD have memorandums ready to publish capping research to 15% in those agencies. This issue merits watching closely.
ICYMI: House Democratic appropriators recently released a tracker of frozen or cancelled funds by the Trump administration.
