House GOP Reconciliation Bill Shrinks, But Passage Remains a 'Long Shot,' Analyst Says

House Republicans have introduced a significantly scaled-back framework for a new reconciliation package, slashing the proposed defense funding to $60 billion from an initial $350 billion target. According to an analysis by Wolfe Research, this smaller bill only marginally improves the odds of passage while substantially reducing its potential impact for investors.

Details of the Proposal

The draft budget resolution lays the procedural groundwork for a reconciliation bill by allocating funds to several committees. The key figures include:

• $60 billion for the Armed Services Committee
• $13 billion for the Intelligence Committee
• $11 billion for the Agriculture Committee
• $10 billion for the Administration Committee

Wolfe Research noted that the reduced size reflects the political difficulty of finding sufficient offsets for a larger spending package. The firm assesses that the proposal is not intended as a structural increase in defense spending, but rather aims to cover costs related to the Iran conflict and effectively replace the administration's separate $67 billion supplemental defense request.

Steep Political Hurdles Remain

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Despite the smaller scope, Wolfe Research cautioned that the bill's path to enactment is fraught with challenges. The firm highlighted the House's narrow Republican majority, procedural difficulties in the Senate, and a compressed legislative calendar ahead of the midterm elections as primary obstacles.

The House Budget Committee is scheduled to begin marking up the framework before it can advance. Even with an optimistic timeline, Wolfe Research projects that any final legislation would likely not be signed into law before September.

Outlook for Defense Spending

The revised proposal reinforces Wolfe Research's long-held view that Congress is unlikely to approve a major, long-term expansion of the defense budget. The firm maintains its expectation that overall U.S. defense funding will remain largely unchanged.

For investors, this suggests that while Congress will likely cover immediate war-related costs, a significant boost to the defense sector through either this reconciliation effort or the regular appropriations process is improbable.