Kelly Evans, Co-Host of CNBC’s Power Lunch
Are you hearing it, too? On Facebook: the funding for my disabled friend’s home health aide has just been cut in half. At the playground: we could lose all of our military grants next year and have to shut down. On email: please join our rally next week to avoid cuts to your services!
On Wall Street: stocks are down again as markets grapple with recession fears. And in Washington: “Funding for the federal government runs out Friday at midnight,” and Republicans “will have to unite” to pass House Speaker Johnson’s funding bill.
Republicans, remember, have an extremely slim three-seat majority in the House of Representatives. You lose anybody–and you’ve already lost Rep. Massie, who voted against the budget blueprint two weeks ago, and last night said he’s “a NO” on this one too–you need the Democrats .
And guess what the Democrats will be pushing for? What they’re hearing from irate constituents about? As Congressman Gottheimer told us last week, he’s getting calls from seniors who are worried about what could happen to their Social Security, and from veterans concerned the 80,000 job cuts planned at Veterans Affairs could hold up their claims from exposure to toxic chemicals.
In other words, the rest of the GOP has to stay united now in order to pass the continuing resolution to keep the government funded past Friday. Otherwise, they’ll have to turn to Democrats like Gottheimer. And the Democrats in return are likely to want “statutory limits on Elon Musk’s Department of Government Efficiency layoffs and spending shifts,” per The Wall Street Journal, as more and more stories like the ones above pile up.
And this is just the warm-up to the larger fight that’s brewing over future budget spending. The current continuing resolution bill adds a bit of funding for defense and border security, offset by smallish reductions to domestic spending elsewhere, and “omits earmarks requested by a long list of Members,” per the Journal.
The much bigger issue is whether Republicans can pass their massive budget bill, which they hope to do (probably wishful thinking) by Memorial Day. Congressman Ciscomani of Arizona, for instance, has already spoken out against his party’s potential cuts to Medicaid and Pell Grants. Eleven Republicans are in competitive midterm election seats that have above-average Medicaid populations, according to Politico.
And this morning, twenty-one House Republicans sent a letter to GOP leaders supporting Biden-era clean energy tax credits that have benefitted their districts, warning they could pull their support for the budget bill if those are cut.
Point being: the GOP needs to pass that budget bill–which would extend the expiring Trump tax cuts–or else the economy faces a tax hike on January 1, 2026. If they lose support now because constituents are already skittish about the cuts from DOGE and elsewhere, markets will start to worry that tax hikes could follow on top of an already slowing economy.
And all of this–the political math, the shaky U.S. consumer, and the cuts to government workers and services–is why stocks have now round-tripped back to where they were on Election Day. The market sees exactly what a tightrope the GOP is walking.
See you at 1 p.m!
Kelly
