Trump’s policy megabill heads to the U.S. House after narrow Senate passage

Investing.com - Republicans in the U.S. House of Representatives are set to deliberate over the Senate’s version of a massive tax-cuts and spending bill that has become a signature piece of President Donald Trump’s legislative agenda, with a self-imposed deadline to pass the package just days away.

In a razor-thin 51-50 vote, Senate Republicans approved their update to Trump’s sweeping legislation on Tuesday, overcoming some intraparty defections and staunch Democratic opposition. Vice President JD Vance cast the deciding vote. 

Three GOP lawmakers stood against the measure, criticizing its impact on the federal debt pile and changes to a key aid program for low-income Americans. Crucially, Sen. Lisa Murkowski (R., Alaska), a longstanding Republican skeptic, was persuaded to back the bill after hours of wrangling with GOP leaders led to both a delay to nutrition-assistance cuts for states that have a higher payment error rate and the removal of an excise tax on wind and solar projects.

However, an end to tax credits for many of these projects that begin operations after 2027 remained -- a measure that has weighed on sentiment around some U.S. renewable energy stocks.

Senate Majority Leader John Thune (R., S.D.) defended the legislation, saying it fulfills Trump’s campaign promises. "No tax on tips, no tax on overtime, lower taxes for seniors, for Social Security recipients," Thune said. "These are all targeted at working Americans, working families."

Although Trump’s policy plans are now one step closer to reaching his desk before Republicans’ Fourth of July deadline, media reports suggest that the bill could still encounter resistance in the House. Any changes made by the House would need to be approved by the Senate, and potentially throw a wrench into GOP legislators’ tight schedule.

House Speaker Mike Johnson has said is aiming to meet the deadline, even with Republicans divided over the impact of the Senate’s bill on the country’s ballooning national debt pile. The legislation would raise the U.S. debt ceiling by $5 trillion, higher than the $4 trillion proposed in a House version passed in May.

The nonpartisan Congressional Budget Office has also projected that the measures -- which included an extension to Trump’s 2017 tax cuts and new tax reductions as well as increased spending on defense and border security -- could add more than $3 trillion to the nation’s $36.2 trillion debt load.

Despite the projected uptick in U.S. obligations, Treasury markets have reacted in a relatively muted manner, “cushioned by hopes” that the Federal Reserve may move to slash interest rates in the coming months, analysts at ING said in a note to clients.

However, analysts at Capital Economics said they expect recently-rallying Treasuries to "struggle over the rest" of 2025, adding that the Senate’s policy bill would "ensure that issurance remained high for some time."

"Indeed, we suspect the risk of a fiscal crisis is rising: against that backdrop we’d be surprised if term premia declined meaningfully further over the remainder of the year," the Capital Economics analysts said, referring to the extra return investors demand for holding long-term bonds over shorter durations.

U.S. stock futures were marginally higher on Wednesday, after trading in mixed fashion in the previous session.

(Frank DeMatteo contributed reporting.)