Republicans clear first hurdle in ‘big, beautiful’ tax bill battle

Good morning and welcome to White House Watch! A programming note: there will be no newsletter on Tuesday, but we’ll be back in a week. In the meantime, let’s get into:

• Trump’s ‘big, beautiful’ bill

• A tense meeting with South Africa’s president

• Democrats’ struggle to rebuild

Donald Trump is one step closer to getting his “big, beautiful” bill.

The House of Representatives — by a single vote — passed its budget bill, which would slash taxes, reduce social spending and increase federal debt. The president had heaped pressure on his party to advance the cornerstone of his domestic legislative agenda, which is packed with his second-term priorities.

Despite the big political win, the process laid bare the fractures within the Republican party. House Speaker Mike Johnson battled to overcome sticking points including cuts to state-backed healthcare spending and clean-energy tax credits, and the level of state and local taxes that can be deducted from federal levies.

But the deal drew a backlash from fiscal conservatives, who held out as long as they could, meaning the $3tn-plus bill didn’t pass the chamber until a couple of hours ago.

The legislation’s journey isn’t over — the Republican-controlled Senate still needs to take it up, and if it makes any changes the House will have to vote again, too.

The One Big Beautiful Bill Act — its official name — would extend many of the 2017 tax cuts from Trump’s first term, which are about to expire (our explainer on the bill is free to read). It would also cut taxes on tips and overtime pay, two of the president’s promises from the 2024 campaign trail. 

To help pay for those cuts the legislation would slash nearly $800bn from Medicaid (the US healthcare scheme for the poor), the food stamp programme known as Snap and clean energy tax credits.

The markets haven’t been happy about the bill this week given independent analyses estimate that it would add more than $3tn to the deficit over the next decade.

US government bonds and stocks fell yesterday after a weak Treasury auction highlighted investor unease over the country’s debt burden. The surge in public debt needed for the cuts would have to be financed by investors, with the Treasury department accelerating its bond sales. But investors will probably insist on higher yields to buy the debt, increasing borrowing costs.

Despite the tumult in the markets and on the Hill, Trump can take his victory lap.

But there are also risks. During his first term, the Democrats took back control of the House in the 2018 midterm elections after successfully attacking his 2017 tax cuts.

The latest headlines

• Trump attacked South African President Cyril Ramaphosa over his country’s alleged mistreatment of white farmers, further cooling relations between their countries.

• A US judge is considering whether to hold the Trump administration in contempt after the White House ignored court orders against deporting migrants to countries other than their place of origin without due process.

• The Pentagon formally accepted a $400mn luxury jumbo jet gifted to the US by Qatar to be the new Air Force One, despite bipartisan ethics and security concerns.

• Trump is considering an executive order to open 401k retirement plans to private equity. 

• Italian Prime Minister Giorgia Meloni has angered Italian Americans with tighter citizenship rules as some US citizens explore relocating to Europe because of Trump’s White House return.

What we’re hearing

While Republicans relish their victory, Democrats are struggling to rebuild their party.

Joe Biden’s recent cancer diagnosis has brought recriminations over his health and fitness for office back into the spotlight, undermining the party’s efforts to regroup ahead of next year’s midterm elections. It’s also given Republicans lots of ammunition for political attacks.

Some Democrats are frustrated by the renewed focus on Biden’s health, saying it’s a distraction from the president’s sweeping policies. 

“It keeps the attention off [Trump],” Mary Anne Marsh, a Democratic strategist, told the FT’s James Politi.

But Paul Begala, another Democratic strategist, said it’s a “tragedy” that Biden ran for re-election and there had to be “accountability” for the party. Begala added that he didn’t think the conversation around Biden’s health would help Republicans in the 2026 midterm or 2028 presidential elections:

If the Republicans think that that’s going to affect a midterm election that is 531 days away, or a presidential election that is 1,266 days away, they’re nuts.

While Biden’s diagnosis garnered bipartisan sympathy, Trump and vice-president JD Vance couldn’t help but take swipes at Biden this week.

“I think it’s very sad, actually. I’m surprised that . . . the public wasn’t notified a long time ago,” Trump said, despite Biden’s office saying he was diagnosed only on Friday. 

Vance wished Biden the “best” but added “we really do need to be honest about whether the former president was capable of doing the job”.

Viewpoints

• “American exceptionalism in markets is starting to feel like a weird dream,” writes Katie Martin, arguing that investors must accept the era might be over.

• The economic risks of Trump’s “big, beautiful bill” are far uglier than Trump portrays, says the FT editorial board.

• Alec Russell, the FT’s foreign editor, says that while white Afrikaners have legitimate concerns about violence, it is criminality — not the “genocide” that Trump claims.

• Martin Wolf warns that Trump could cause the dollar to lose its dominance.