So, the Senate has passed the OBBB, warts and all, and the Speaker of the House has indicated his intention, no doubt motivated by the July 4th deadline, to pass it "as-is." We would assume he wouldn't have taken a stand so publicly if he didn't think he had the votes, and we certainly would not underestimate Speaker Johnson at this point. We think barring some asteroid strike, the bill will pass and be signed by the President this week.

So let's see where the score lies.

Overall impact. The Tax Foundation estimates that it will boost GDP by 1.2%, pre-tax wages by 0.4%, create 938,000 new jobs, reduce revenue by 4 trillion (using a dynamic estimate) over 10 years, and increase the deficit by 2.9 trillion over ten years. Well, we know it would be something like that.

AI moratorium.

SALT.

Medicaid. The bill requires able-bodied adults up to age 64 who are without dependents or disabilities to work at least 80 hours per month to maintain Medicaid coverage, beginning in 2026. Recipients must also document twice a year that they're working and can maintain coverage through community service or educational programs. States would be required to reverify Medicaid eligibility for expansion populations every six months, rather than annually. The bill not only bans Medicaid for illegal aliens, but, according to Senator Eric Schmidt, "it: Requires states to verify citizenship status before providing coverage; Bans automatic Medicaid enrollment for children of illegal aliens; Excludes DACA from Medicaid." We should note here that, contrary to what you may see online, Medicaid use by illegal aliens is a real issue, even though it is already formally banned: illegal aliens get Medicaid either through sanctuary state policies or through their citizen children.

Medicaid provider taxes. Here is where we landed: For states that have expanded Medicaid under the Affordable Care Act, the allowable provider tax rate will be reduced from the current federal ceiling of 6% to 3.5%. This reduction will not begin until 2028 (delayed by one year from earlier proposals), and the phase-down will occur gradually, with the rate decreasing by 0.5 percentage points each year. The bill excludes nursing homes and intermediate care facilities. Reminder that the Medicaid provider tax scheme is a scam whereby when providers pay this tax, they are then reimbursed by the Federal government under Medicaid cost-sharing rules; this means that reducing the tax actually saves money for the Federal government and costs money for the providers.

Rural hospitals. The bill includes a "Rural Health Transformation Program" that allocates $25 billion over five years to hospitals affected by the Medicaid tax changes.

Green energy. So, the green energy tax was removed (good), but the credits for green projects remained, with the "started construction" language that is designed to expend them into the future de facto indefinitely. Very bad. However, the bill does phase out the EV credit for new car sales, the credit for used EVs, the commercial EV credit, the Alternative Fuel Vehicle Refueling Property Credit, the Residential Clean Energy Credit and the New Energy Efficient Home Credit.

Immigration. The very good news is on immigration. The bill allocates massive funding for border enforcement and immigration detention operations. $46.5 billion is designated to Build The Wall, which represents more than three times what the Trump Administration spent on the wall in its first term, $7.8 billion for hiring Border Patrol agents and vehicles, with the aim of hiring 3,000 new agents. For detention and deportation, the bill provides $45 billion over four years in order to add 100,000 new migrant detention beds. This would be a 365% increase in ICE's budget for detentions, and $29.9 billion to ICE for hiring new agents with the aim of hiring 10,000 new officers. There's also $17.3 billion to support state and local law enforcement with border enforcement. The reality is that the US system for controlling the border and deporting people was overwhelmed by the Bidenwave, so that there is not, at present, the required facilities and personnel to competently enforce immigration law and step up deportations. This will solve that, and bring the US closer to being a nation of laws.

SALT. The bill increases the SALT cap to $40,000 for households making less than $500,000. There are slight differences with the House bill: it doesn't apply to pass-through entities, and phases out after 4 years, but presumably the House SALT Caucus can live with it. We understand that this was pre-negotiated between Senate Leadership and the House SALT Caucus.

Expensing. It's an obscure but important issue: the bill reinstates 100% first-year bonus depreciation for qualified property, permanently restores immediate expensing for domestic research and development expenses, and temporarily provides 100% expensing of construction in physical facilities and plant. This will juice investment.

The question then arises…what's next?

Hate to be cynical, but: the midterms.

But, other than that, we see two big potential fields for action: energy/NEPA, and regulatory stuff overall. And, of course, executive action. More on this anon…

Policy News You Need To Know

#MAHA — The promise and peril of MAHA in one moment: the FDA just held an online event to officially declare and confirm that, yes, taking mRNA Covid-19 vaccines carries some risk of developing myocarditis, especially for young men. However, it is still the case that the risk of developing myocarditis is still higher from Covid-19 infection than from the vaccine. Why does this embody the promise and peril of MAHA? Because the first fact, that there was some myocarditis risk with the vaccine, particularly for young men, was taboo and loudly denied, or at least displayed, by public health authorities, for many years. Doing this is corrupt, it is anti-science, and destroys the credibility of our institutions. At the same time, it is still true that taking the vaccine is, on average, a better bet than not taking it! And so the promise and peril of MAHA are there: on the one hand there is a corrupt, incompetent scientific establishment, which needs to be bulldozed; on the other, too many of the people wanting to replace them are cranks. And thus the wheel of history turns…

#TheScience — Speaking of, NIH has announced a new policy that all research funded by the NIH must be publicly available as soon as it is published. It's crazy that this rule wasn't always in place.

#AmericanManufacturing — The Pentagon is suspending some deliveries of weapons to Ukraine because stockpiles have reached a critical level, Politico reports. This is a domestic policy newsletter, so we are highlighting this not to comment about Ukraine, but about what that says about the state of the American manufacturing base, and the fact that promoting a strong American manufacturing base has ramifications well beyond GDP.

#LGBT #HigherEd — The Trump Administration has struck a deal with UPenn, forcing the school to strip "Lia" Thomas of his records, titles and other recognitions won while competing on the women’s sports team. This is great news, and certainly an important symbolic victory, but doesn't scratch the surface.

#Trade — President Trump has announced a very striking new deal with the nation of Vietnam: according to the President's statement on Truth Social, Vietnam will pay a 20% tariff on all goods it exports to the US, and a 40% tariff on transshipment, and in exchange, will completely open its economy to the US, with zero tariffs or restrictions.

#Census — Here's an interesting headline: "President Trump says he plans to re-do the U.S. Census before the 2026 midterms, removing all illegals from the count to stop Democrats from gaining seats." We certainly hope he tries, but it feels like the move would face significant constitutional barriers (previous attempts to do this were stopped by the Supreme Court) as well as logistical (can we do a census in an off-year before 2026, and then change the apportionment of seats?).

#YIMBYMaybe — We think the prospects of the YIMBY cause in the Democratic Party are poor, mainly because Democrats don't like to build things, as demonstrated by the policies in the states they run. But could we be wrong? Governor Gavin Newsom signed legislation on Monday night that exempts most urban "infill" housing development from the California Environmental Quality Act (CEQA), which he called "the most consequential housing reform in modern history in the state of California." CEQA not only mandates environmental review before construction, but allows anybody to sue over the environmental study. Understandably, this is a big obstacle to construction. We're not holding our breath, though. Zoning, land use, mandatory parking, and density rules are still onerous, and projects still face the hurdles of city planning commissions, design review boards, and multiple hearings. Still, it's interesting that Newsom, who is widely rumored to be planning a run for President, has taken on YIMBY as an issue.