Washington Edition

This is Washington Edition, the newsletter about money, power and politics in the nation’s capital. Today, congressional correspondent Erik Wasson looks at what’s ahead in the Senate for the GOP tax and spending bill. Sign up here and follow us at @bpolitics. Email our editors here.

‘Having Conversations’

This is John Thune’s big moment. It’s now down to the Senate majority leader to renegotiate the bill carrying President Donald Trump’s promised tax cuts that was released just yesterday and wrangle enough GOP votes to get it passed.

The goal is to get all this done — including another House vote — in the next few weeks. Thune has his work cut out for him.

The draft legislation released so far by Senate committees doesn’t have the votes to pass either the Senate or the House. It ignored some of the fragile compromises made in the House to get it passed (just barely) there as well as demands from different factions of the Senate GOP.

Thune, who can only afford to lose three Republican votes, risks hitting an impasse if he moves too far in either direction.

Thune Photographer: Eric Lee/Bloomberg

“Ultimately that’s the math that I’m working with,” Thune said today. “We are having conversations with our members.”

The toughest issue is Medicaid. The Senate bill makes even deeper cuts to the program than the House version did. That has senators from states where more voters rely on Medicaid, like Missouri Republican Josh Hawley, balking.

Another potential hurdle is Trump, who promised not to cut Medicaid (though the definition of what constitutes a cut is flexible). Hawley said he talked with the president, who “was also surprised by what they did on this.”

Meanwhile hard-line conservatives like Wisconsin’s Ron Johnson say the spending cuts don’t go far enough, and has Medicare in his sights as well.

There are dozens of smaller fights, as well, on provisions from gun regulation to radio spectrum auctions. Thune also will need to strike a deal on the state and local tax deduction cap. The likely result will be a limit somewhere between the $10,000 in the Senate bill and the $40,000 cap in the House version, but getting there could be rocky given how dug in both sides are.

Thune will no doubt rely on Trump to help corral members of the party even as the president is occupied by a growing crisis in the Middle East. But Thune’s credibility as majority leader will be made or broken in how he handles the next few weeks, and the US will live with the resulting changes to the tax code and health system for years to come. — Erik Wasson

Key reading:

Don’t Miss

Trump met with his national security team in Washington to discuss the escalating Middle East conflict, fueling fresh speculation that the US is on the verge of joining Israel’s attack on Iran.

The president has a wide range of military assets in the Middle East and across the globe to bring to a potential fight against Iran as he weighs one of the most momentous foreign policy decisions of his administration.

Two family-owned toy companies are asking the Supreme Court to consider striking down many of Trump’s tariffs, putting a case with worldwide economic implications before the justices for the first time.

Homeland Security Secretary Kristi Noem directed the FEMA officials to prepare a memo on how to abolish the agency and create a re-branded, radically smaller disaster response organization.

The Trump administration is discussing making it harder and more expensive for pharmaceutical companies to advertise directly to patients, a move that could disrupt more than $10 billion in annual ad spending.

New York City Comptroller Brad Lander, a candidate in next week’s Democratic mayoral primary, was arrested by Immigration and Customs Enforcement agents outside of immigration court in lower Manhattan.

Retail sales in the US fell for a second straight month in May, suggesting anxiety over tariffs and personal finances prompted consumers to pull back after an early-year spending rush.

US industrial production fell in May for the second time in three months as utility output declined and manufacturers struggled for traction against a backdrop of cooler demand.

Crypto companies are investing in Democrats as they seek to muscle an industry-friendly regulatory regime through Congress and ensure new laws persist after Trump leaves office.

Trump’s continued use of California’s National Guard to respond to protests in Los Angeles is facing fresh scrutiny in a high-stakes court proceeding on the limits of his executive authority.

Watch & Listen

Today on Bloomberg Television’s Balance of Power early edition at 1 p.m., host Joe Mathieu interviewed retired Marine Corps General Frank McKenzie, former commander of United States Central Command, about the choices the US faces as Israel and Iran trade strikes.

On the program at 5 p.m., Joe and Julie Fine talk with Republican Senator Ron Johnson about the GOP’s tax bill and what he’d like to see changed.

On the Big Take podcast, Golnar Motevalli, who covers Iran for Bloomberg, joins host Sarah Holder to discuss the on-the-ground reality in Israel and Iran, the choices facing their heads of state and what other world leaders might do to encourage a deescalation. Listen on iHeart, Apple Podcasts and Spotify.

Chart of the Day

Treasury Secretary Scott Bessent is promoting new research produced by his department that shows blue-collar production and non-supervisory workers have seen a 1.7% increase in hourly wages, adjusted for inflation, since Trump took office. The research, produced by economist Joe Lavorgna, who recently joined Treasury from SMBC Nikko Securities, shows that it was the biggest gain in blue collar pay during the first five months of a presidential administration since 1969 with the exception of Trump's first term, when wages increased by 1.3%. The gains have been helped by cooling inflation in recent months. — Daniel Flatley

What’s Next

Housing starts and building permits in May are released tomorrow.

The Federal Reserve issues its interest rate decision at 2 p.m. tomorrow followed by a news conference with Chair Jerome Powell.

Jobless claims for the week ending June 14 will be released Thursday.

Existing home sales in May will be reported June 24.

The Conference Board’s gauge of consumer confidence will be released June 24.

The 90-pause for Trump’s reciprocal tariffs on most counties is scheduled to end on July 8.

Seen Elsewhere

As school officials are dealing with an increasing number of students with greater health needs they also are confronting a shortage of school nurses, the Washington Post reports.
Research on leopards and hyenas in a Ugandan forest unexpectedly turned up evidence that may help explain how deadly viruses jump from bats to other species, including humans, the New York Times reports.
Two thirds of the counties that lost federal funding for projects to prevent flood and storm damage as part of Trump administration cuts had backed the president in the election, CBS News reports.