Politico report indicates that Republican deficit hawks are beginning to dig in

Politco reports on the latest state of play as Republicans try to use a razor-thin majority in the House to cobble together a plan to deliver on Trump’s tax agenda.

They highlight a fight between the bill writers and budget hawks led by Chip Roy.

The report says that the latest costing on promises they’re hoping to deliver is $5.5 trillion over 10 years after spending cuts.

The number that lawmakers had tentatively settled on last Thursday — around $4.7 trillion — would make it virtually impossible to implement anything above an extension of the expiring tax cuts.

I think that’s telling. Mainly, it shows that the tax cut is the sacred cow and that all other election promises are going to be much tougher.

The main ones are:

1. No tax on tips, Social Security, overtime pay
2. Adjust SALT cap
3. Tax cuts on products made in America

There the possibility that they can’t find enough consensus or tax cuts to appease the deficit hawks. A sign of that would be if the first Republican bills are split, with border security, energy and defense in the first bill. That’s something that the Senate also appears to favor.

Finally, the report also said the “many” Republicans are skeptical of using tariffs to pay for tax cuts, which would be good news for non-USD currencies.

The risk is that we see some major kicking and screaming in the stock market if it looks like the hawks could win. Reading the report makes me think that it won’t be easy, especially with just a 217-215 majority in the House.

This article was written by Adam Button at www.forexlive.com.