Romina Boccia and Dominik Lett
On February 7, Senate Budget Committee Chairman Lindsey Graham (R‑SC) released a budget resolution for fiscal year 2025. A budget resolution is meant to establish a responsible fiscal framework that sets priorities for federal spending and revenue. With this year’s deficit approaching $2 trillion as Congress is running up against the federal debt limit in a few months, a responsible budget resolution would reduce spending significantly, extend and enhance pro-growth tax cuts in a deficit-neutral manner, and stabilize the US debt.
The Senate plan is a far cry from that ideal. It is little more than a procedural shell to pave the way for partisan policy goals through reconciliation—a fast-track process that circumvents the usual 60-vote threshold in the Senate.
While unlikely to be the final reconciliation vehicle, the Senate resolution proposal sets the stage for $342 billion in new spending over four years, supposedly to be offset by unnamed spending cuts. Eagerly laying out plans for new spending without a real plan to offset the resulting deficits is hardly sound fiscal policy, especially as the national debt soars ever higher.
We reached out to Cato Institute experts to evaluate the budget resolution’s approach in several key policy areas, including border security, energy production, national defense, and tax reform. Below are their assessments.
The budget resolution drops the ball on tax policy, setting the stage for fiscal uncertainty. As Adam Michel, Director of Tax Policy Studies, explains:
The Senate’s budget resolution sets up the American people for continued uncertainty over how much money the federal government will take from them next year. It does this by splitting tax permanence from Republicans’ other priorities. The billions in unspecified spending cuts will not reduce taxes but instead, fund new expansions of government spending.
The budget also introduces a novel “current policy” revenue baseline, assuming—outside the binding resolution—that the Trump tax cuts will be extended with no fiscal impact. This sets the stage for no net spending cuts in the next package, letting the government grow on autopilot, effectively raising taxes on future Americans. The Senate budget will make pursuing a permanent, pro-growth tax bill more challenging by cannibalizing the easiest spending cuts for new spending instead of tax relief. This will increase the likelihood a second reconciliation tax bill will be delayed until December or, worse, January, making it impossible for employers and families to plan for the future.
Senator Graham proposes a huge and unwarranted increase in defense spending. As Justin Logan, Director of Defense and Foreign Policy Studies, explains:
To paraphrase PJ O’Rourke, giving Sen. Lindsay Graham input on defense policy is like giving whiskey and car keys to teenage boys. As chair of the Senate Budget Committee, Senator Graham has drawn up a defense budget that reads like a Dick Cheney fever dream.
The Graham proposal would increase defense spending by hundreds of billions of dollars in real terms just over the next five years while running massive budget deficits. US defense spending would be higher in real terms than it was during the height of the Cold War, comparing to the bloodiest years of the Iraq War.
The United States, combined with its treaty allies, accounts for about two-thirds of global military spending. If that isn’t enough, something is drastically wrong with our foreign policy.
The budget resolution gives Trump a slush fund for mass deportations. As David Bier, Director of Immigration Studies, explains:
Congress cannot pretend this $175 billion will be used to apprehend criminal public safety threats. The administration has spent its early weeks mostly arresting immigrants without criminal records and stripping immigrants of their legal status. The president has made clear that his deportation agenda will not be constrained by acts of Congress and that he wants a slush fund for untargeted deportation of millions of peaceful people. This budget resolution ignores America’s outdated and failing legal immigration system—the true source of illegal immigration.
The budget resolution falls short of repealing the Inflation Reduction Act, leaving in place market-distorting subsidies. As Travis Fisher, Director of Energy and Environmental Policy Studies, and Joshua Loucks, Research Associate, explain:
Although Senator Graham’s framework for the budget resolution includes some necessary energy proposals, it falls short of delivering real energy reform. Any serious effort to unleash American energy—whether from the Senate or the House—must fully repeal the Inflation Reduction Act and address permitting restrictions across the board.
Meanwhile in the House
The Senate’s proposed budget resolution arrives as the House finalizes its own budget resolution, aiming for $2 to $2.5 trillion in cuts. Unlike the Senate strategy, which plans to break up tax reform and defense, energy, and border security into two separate bills, the House is pushing for one big bill that tackles all these issues together. The House also has a clearer picture of where spending cuts are likely to come from, including reforms to Medicaid, food stamps, and other welfare programs.
Per Punchbowl, some Republicans believe that extending the 2017 Tax Cuts and Jobs Act can only be done by reducing revenues by $4.7 trillion. This belief is misguided, overlooking trillions of dollars in loopholes and spending through the tax code. There are plenty of politically viable base broadeners that should be paired with tax cuts, from repealing green energy subsidies to limiting tax credits for noncitizens. A full list of roughly $14 trillion in offsetting tax options can be found here.
Assuming the House manages to agree on $2.5 trillion in cuts, setting revenue loss expectations at $4.7 trillion leaves $2.2 trillion in new 10-year deficits on a conventional scorekeeping basis. Congress can and should do better.
Balancing Policy Ambitions with Fiscal Realities
The Senate’s budget resolution is a missed opportunity to chart a responsible fiscal path. Instead of using this process to rein in spending, stabilize the debt, and create certainty for taxpayers, the Senate has opted for more spending, more deficits, and more political maneuvering. The contrast with the House’s approach—pursuing meaningful spending cuts and a unified fiscal package—underscores the Senate’s failure to take the nation’s fiscal crisis seriously.
With the debt burden rising and the window for reform narrowing, lawmakers should reject budget gimmicks and prioritize policies that promote economic growth, fiscal sustainability, and long-term prosperity—this starts with a deficit-neutral path to extend and enhance the 2017 pro-growth tax cuts. Hopefully, the House will offer a more promising budget framework in the coming days.