Senate Passes 2018 Budget Paving Way For $1.5 Trillion In Tax Cuts, Sending Yields, Dollar Sharply Higher

Tyler Durden's picture

Senate republicans took a major, if relatively easy, step toward passing Trump's tax plan on Thursday night with the critical passage of a budget blueprint that would protect a $1.5 trillion tax cut from a Democratic filibuster. Senators narrowly voted 51-49 to pass the fiscal year 2018 budget after a several hour-long marathon on the Senate floor. The budget resolution could also pave the way for opening up the Arctic National Wildlife Refuge in Alaska to oil exploration by ensuring that drilling legislation can pass with only Republican votes according to the NYT.

With a 52-seat majority, Mitch McConnell had a narrow path to getting the 50 votes needed to clear the budget through the upper chamber. But GOP leadership caught a break this week when Sen. John McCain, a holdout over defense spending, announced he would vote yes, and Sen. Thad Cochran, recovering from health issues, returned early to Washington.

The budget’s passage could keep Republicans on track to pass a tax package late this year or early in 2018. That said, there are still plenty of possible complications, not least of all bickering within the GOP over the final shape of the tax package - where the fate of state and local tax exemptions has still to be decided - as the following Goldman flowchart shows: the steps that were successfully passed tonight are shown in green.

The House could pick up the Senate-passed budget as early as next week and give final approval to parliamentary language protecting the Republicans’ coveted tax effort. If House Republicans instead insist on negotiating a compromise that melds the Senate and House budget plans, tax legislation could be delayed.

“Passing this budget is critical to getting tax reform done, so we can strengthen our economy after years of stagnation under the previous administration,” said Senate Majority Leader Mitch McConnell (R-Ky.).

The Senate gave its approval to the budget blueprint on Thursday night after considering a flurry of amendments, a tedious process that gives the minority party an opportunity to force the majority to endure politically difficult votes. One Democratic amendment that was rejected sought to stop tax cuts from going to the top 1 percent; another would have restored cuts to Medicare.

The Senate approved the budget after the previously discussed so-called vote-a-rama, a legislative whirlwind in which amendments are considered one after another

Giving tonight events an aura of fatalistic determinism, Senator Lindsey Graham, and a member of the Budget Committee, said "this is the last, best chance we will have to cut taxes,” and warned that the consequences would be ruinous if the party failed. “That will be the end of us as a party,” he said, “because if you’re a Republican and you don’t want to simplify the tax code and cut taxes, what good are you to anybody?”

Where things get laughable is when one considers the context of what just happened: In Congress, the annual budget resolution provides an outline of federal spending and revenues. The Senate’s blueprint, for the 2018 fiscal year that began Oct. 1, claims to achieve a balanced budget within a decade, assuming greater economic growth and using an accounting method that excludes Social Security. In order to erase projected deficits, it calls for trillions of dollars in spending cuts over the coming decade.But the cuts exist only on paper, without legislation to achieve them.

And as the GOP predicts that by 2028 US government spending will equal revenues, here is what will really happen:

 

Meanwhile, as Republicans played with excel's "goalseek" function, Democrats sounded the alarm, warning that the aspirational cuts in the budget plan called for slicing more than $1 trillion from Medicaid and about $470 billion from Medicare over a decade. Unfortunately for Democrats, they have exactly zero say in the matter: Though Democrats have pleaded to have more say in the tax overhaul, parliamentary language in the budget resolution would allow Republicans to pass a tax bill without any cooperation from the minority party.

“Passing this budget is not a requirement for passing tax reform,” said Senator Gary Peters, Democrat of Michigan. “Passing this budget is only a requirement to pass a tax bill with as few votes as possible, without input or buy-in from members of the minority.”

For Republicans, the budget debate provided a moment to showcase their main goal in the coming months, which according to the NYT is approving an overhaul of the tax code for the first time in decades, which they hope will lead to greater economic growth. But before they can move ahead with a tax bill, the House and Senate need to agree on the same budget resolution. The House approved its budget resolution, which had long been stalled, on Oct. 5. The House budget also lays the groundwork for a tax bill, but, unlike the Senate’s approach, it calls for the legislation to not add to the deficit.

The House budget resolution also seeks more concrete action when it comes to cutting spending, instructing committees to come up with legislation that would produce at least about $200 billion in savings.

However, according to The Hill, a House GOP source says the amendment seems sufficient to avoid a conference committee between the two chambers, and allow the House to simply pass the Senate resolution.

Ultimately, however, the only reason why the vote passed so easily is because as the Hill explained, it doesn't matter, and was merely viewed as a mere vehicle for passing tax reform

"This is the biggest hoax cast upon the American people ever that this budget process even exists. The only thing about this that matters is in preparation for tax reform," said Sen. Bob Corker (R-Tenn.), who voted for the budget.  Corker noted bluntly that he believes the budget doesn't have a real-world impact and if he was chairman of the Budget Committee he would disband it. When a staffer told him he was about to miss an amendment vote, he shot back: "yeah, on a vote that doesn't matter."

McCain, explaining why he would support the budget, added: “At the end of the day, we all know that the Senate budget resolution will not impact final appropriations.”

Then again, all of these nuances were lost on the shotgun headline scanning algos, which read that Trump's tax plan is one step closer to passage and sent both the USDJPY...

... and 10Y yields surging...

With gold lower...

And Dow Futs up over 100 points...

... and the Fed cursing their fate, because as Dudley explained yesterday, the last thing the feed needs right now as it is desperate to avoid tightening fast, is a burst of wage inflation, something which Trump's tax proposal, if it passes, will promptly lead to, crushing the Fed's carefully laid plan to take years and years in unwinding it balance sheet and rising rates.

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MaxThrust's picture

Great I want to get more PM before the USD implodes.

MozartIII's picture

Hold your PM. They won't do crap for a while. More bad news, the USD won't fall apart for 7 to 10 years in reality. Just economics, very old one's!

Paul Kersey's picture

The Trump tax cut plan? Trump doesn't even know what's in it. This is the Cohn, Mnuchin, Blankfein, Ross, Dimon tax scam plan. Run up the national debt even faster to further enlarge the offshore bank accounts of the Goldmanite/Rothschild/Morgan money changers.

Ajax-1's picture

We have to pass it to know what's in it. Just kidding. In all seriousness, the house won't pass any substantive tax cuts for the middle class.

GUS100CORRINA's picture

When does AMERICA address its DAMN debt and spending problems? 

I guess we just bury our heads in the sand and forget about DEBT.

BUY, BUY, BUY and fiscal responsibility be DAMNED!!

new game's picture

it will matter when the tresuries bid/cover ratio plunges. someday...

Consuelo's picture

 

 

It seems like it will be another 7 to 10 years, yes.   However, the fragility component which resides directly underneath the 1mm veneer of economic 'normalcy' today, could easily make that falling apart, another 7 to 10 months...

bigkahuna's picture

When people around here say things like 7-10 years.....the end is nigh!  (lol)

Hal n back's picture

nah, the USD and stock market wil fall apart suddenly and severly , sooner rather than later.

My problem is that I am not on any e mail list of when it will really  occur.

Whatta's picture

#BTFD 4-evah...lives on

OckhamsRazr's picture

yea it does.  when it ends it will end quick and hard. 

D.r. Funk's picture

Cue the b f d guy

No it's a losing power structure "contradictorily" raising the bubble higher, every single time an anti-globalist outcome crosses. You wanna be pavlov's dog and continue to be pavlov's dog? And believe it's "uh" "uh" "buy the f dip" "uh" "works forever" "heh" "forever" Try either using your brain more, or not being such a tool thanks

DavidC's picture

Oh there's a surprise - let's keep spending money we don't have.

DavidC

1stepcloser's picture

Like it was every gonna get paid back.... Debt based monetary systems have more outstanding debt than currency in circulation.  SO FUCK IT! 

wisehiney's picture

Me and TLT been waiting for this.

OckhamsRazr's picture

This may send stocks lower in the states tomorrow.  Shepwave needs to do a report on the FTSE.  Been too long. 

bobert727's picture

"This may send stocks lower in the states tomorrow"

 

Good call Einstein

medium giraffe's picture

Another quality sheepwave call, hahaha!

ebworthen's picture

No such thing as money or debt anymore.

To the moon!  (just keep paying those taxes).

Anarchyteez's picture

Notice how this is done all aftermarket? Not at 10:00 am EST?

yogibear's picture

Always.

Just like when Goldman Sachs became a Federal Reserve bank to feast on Hank Paulson's  TARP.

Quietly on a weekend in 2008.

Like the Federal Reserve act.  Quietly around Christmas, as not to stir the masses.

 

Lazane's picture

unstoppable printing of digital currency keeps the ponzi scheme rolling along

 

D.r. Funk's picture

Triple digit futures. Just the bullshit continuation of the by-design additional leg following hurricane irma.

Beyond obvious. You (manipulator cabal) got a little help from ibm & taxes it looks like but the logic is

SO DETECTABLE. The initial senate passage is fairly procedurally expected. Jump on futures is contrived

not organic

deepstate

middlefinger

klondack's picture

Feels like Japan 1990, run it to a generational high! 100% GDP to debt quantifies US for austerity. Why doesn't FED mention this? 

bigkahuna's picture

When the aliens show up with their death ray perhaps they will agree to austerity.

hotrod's picture

So how much is the BUDGET Deficit approx. for fiscal 2018????????

Savvy's picture

At this point, what does it matter?

hotrod's picture

You are right.  The budget deficit is a non issue now.

bigkahuna's picture

treasury opens massive short - then fed reserve takes away the sugar - deficit paid in full with FRNs - then zombie apocalypse

yogibear's picture

Double the debt again in 4 years  and again in 4 years. 

These currencies are backed by BS.

 

Hal n back's picture

well, we know that the "budgeted defiict" dears no resemblamce to teh debt increase-I calculated that since 1983, the debt increases have been 8 trillion more than the claimed budget deficits.

Nobody has stepped forward since 1983 to explain that variance.

and teh way govt reports data, a we need to assume the situation is worse.

The problem then is who besides us here are we trying to convince.

 

All this is is a nice plce to blow off our frustration.

 

Seasmoke's picture

Are they all fucking insane. USD should be plummeting and Gold rocketing. It just never ends.

Hey Cuban. Where's that market crash if Trump is president. LOL. Now you see why Trump wants to own the market rise.He knows Dow 36,000 is a guarantee.

FactDog's picture

deep sleep

 

DOW 100,000 within six years!   BTC at $200,000 each!  President Trump on third term plan.

 

Yikes -- wake me up.

 

 

sk0r9y0s's picture

You say the market is insane one paragraph ..then call out Cuban for pointing out that insanity in the next paragraph?

#hypocrite

jamesmmu's picture

u must be kidding me!

jamesmmu's picture

according to the chart, is that mean we will have so many bullish news to push the stocks even higher? OMFG!!!

ClickNLook's picture

What would you rather have:
dry swamp or strong dollar?

Hulk's picture

Dry swamp with recognizable politicians hanging from white oaks...

I'll provide the white oak limbs...

supernintendosegagenesis's picture

ZH Its official, no more crash articles should be posted on this site.

hotrod's picture

Stockman said this wouldn't happen, Government will shut down

Hulk's picture

Its the corruption that will take us down, not the debt...

yogibear's picture

Stockman worked under a different paradigm.

It's BS and smoke and mirrors to the max. The mad max.

Because central banks know if honesty and price discovery was allowed their whole Ponzi scheme would implode.

BitchesBetterRecognize's picture

so...... by the end of the year we're likely to witness Nasdaq @ 8K, Dow @ 25K & S&P @5K.......like nothing happened...... just print the fuck up, BTFD, & pretend everything is cool.......

 

damn.... 

 

D.r. Funk's picture

Not gonna happen. The power structure that 'owned' the market prior to nov 8, used the final fumes of one of their last tools (v i x) to merely jack the indexes over the guy who is undoing everything they've worked for. Things are getting closer at least, to popping (between awans, comey, wasserman, foundation, nk, mueller russia, west vs east currency etc) Big game of chicken as described accurately by some of us months ago. 

My point to interjecting on you? There's a lot more under the stock levels than just the "oh it goes up forever" or, "oh they just keep jacking it up on everything forever" or, "they CAN and WILL just keep jacking it up on everything"

There are universal limits and outer walls

The game will end and there're

Tons of signs of it

 

Hongcha's picture

If so obvious, why not get long?  Why pitch a bitch?  Just asking.

Golden Showers's picture

Anyone remember when even "balancing the budget" got you a ticker tape parade?

http://politicalticker.blogs.cnn.com/2010/02/03/cnn-fact-check-the-last-...

Of course that meant someone just had to stuff their cock into an aide's mouth and explode all over that dress like, you know, because he balanced the budget.

No shame in that game.

You and I think of a budget like we carry the groceries home. The government thinks of a budget as unlimited free healthcare, pension for life, doing as little as possible for anyone but thier own disgusting lying selves, and then charging it.

There is no budget. If there was, there would be money. But there is no money. It's so convenient. How could this be a problem?

Anteater's picture

$4T is $200B MORE than the 2017 budget and they were running a $1.1T

deficit last spring, it's probably pushing up on -$2.0T, and job openings have

fallen by -32% (!) under Trump, so if they cut capital gains and estate taxes,

then they"re gonna have to COMPLETELY ELIMINATE HEALTH AND HUMAN

SRRVICES, especially since Pentagon-DHS-CIA/NSA is pushing up on $1T.

We're on a highway to hell and The Orange Jesuit is Twiddling on the toilet.

Sad.