Republican reconciliation bill falters in House Budget Committee

Bloomberg News

The GOP's "big beautiful bill" was voted down Friday in the House Budget Committee amid conservative Republican opposition.

The 16-21 vote means the closely watched legislation won't be taken up Monday in the Rules Committee. Instead, the budget committee may meet again Monday to take up the bill again, according to committee chair Jodey C. Arrington, R-Texas.

House Speaker Mike Johnson, R-La., had hoped for a full House floor vote next week ahead of the Memorial Day break.

The Friday vote marks a stumble for the sweeping tax and spending bill that encompasses President Donald Trump's domestic agenda, but parties are expected to continue to negotiate through the weekend.

Conservative Republicans in the House Freedom Caucus don't think the bill cuts enough from mandatory spending programs like Medicaid and want faster repeal of clean energy tax credits. A dispute over the state and local tax deduction cap, which has emerged as a top obstacle among Republicans, remains unresolved.

The budget committee, which cannot make any changes to the bill, was tasked with assembling the 11 committee portions together into one measure, and then sending it on to the House Rules Committee, which was expected to make changes to accommodate the competing priorities. That's likely where a deal on SALT would be introduced.

For the municipal bond market, the key question is whether a final House bill — and then the later Senate version, which is expected to undergo big changes — touches any parts of the market, such as the tax exemption, private activity bonds, or certain sectors. So far, market participants said they're cautiously optimistic the market will emerge unscathed.

The House Freedom Caucus said its members, four of whom voted 'no' on the committee, would continue to work over the weekend.

"We were making progress before the vote in the Budget Committee and will continue negotiations to further improve the reconciliation package," the caucus posted on X. "We are not going anywhere and we will continue to work through the weekend."

One of the five 'no' votes, Rep. Lloyd Smucker, R-Pa., said he supports the bill but voted no in order to later float a motion to reconsider if needed.

"To be clear — I fully support the One Big Beautiful Bill (OBBB)," Smucker posted after the committee recessed. "My vote today in the Budget Committee is a procedural requirement to preserve the committee's opportunity to reconsider the motion to advance OBBB."

During the Friday morning budget committee markup, a dispute over different accounting methods used by the House and Senate flared up and signaled another hang up down the line.

Senate Republicans have said they will rely on "current policy baseline" for their reconciliation bill, which effectively allows them to zero out the cost of making permanent the Tax Cuts and Jobs Act provisions.

The House version of the bill did "the hard work" of relying on the traditional "current law baseline," Arrington said during the hearing.

"This is a message to my Senate colleagues," Arrington said. "Let's not use Washington gimmicks and games to hide spending," he said. "If we're going to use current policy ... we can only do so if we offset the impact of the deficit."

Democrats on the budget committee said the bill would add trillions to the debt and cut popular programs like Medicaid and the Supplemental Nutrition Assistance Program in order to pay for tax breaks for the wealthiest Americans.

Trump encouraged Republicans to keep working. "Republicans MUST UNITE behind, 'THE ONE, BIG BEAUTIFUL BILL!'" Trump said in a Truth Social post. "The Country will suffer greatly without this Legislation, with their Taxes going up 65%. It will be blamed on the Democrats, but that doesn't help our Voters."