Trump Tax Bill’s Final Hours & Zero-Click Search 5/21/25

0:00Bring in show music please. Hi, I'm CNBC producer Katie Kramer. Today on Squawk Pod. Up later, starting early. The House in a 1 a.m. committee session as Congress tries to get President Trump's key legislative agenda to the floor before the weekend. Our Emily Wilkins burning the midnight oil. The House had to find$1.5 trillion of spending cuts. It is about there. It's fuzzy math, isn't it? And from the White House, Deputy Treasury Secretary Michael Falkender on the taxing timeline. As Reagan used to say, if you'll offer me 80%, I'll take it and I'll come back for the other 20 % later. But we are going to get this bill passed out of the House this week.

0:42Are you not Googling so much anymore? How artificial intelligence is disrupting search and building a new industry? We talked to Cloudflare CEO Matthew Prince. If you look at the most thoughtful AI companies that are out there, they understand that they have to pay for content. Plus, the rest of today's news, surviving the mess at Newark Airport and retailers braving the volatility of both taste and tariffs. This thing is battered, beaten, bruised. Shareholders are, you know, they're crying uncle. It's Wednesday, May 21st, 2025. Squawk Pod begins right now. Stand Andrew by in three, two, one, cue Andrew.

1:24Good morning and welcome to Squawk Box right here on CNBC. We are live at the Nasdaq market site in Times Square. I'm Andrew Ross Sorkin along with Joe Kernan. Becky is off today and Joseph is back. Oui, oui, oui. Nice to see you, sir.

1:39Good morning. The committee will come to order. Today, the Rules Committee is convening to consider H.R. 1 the one big beautiful act. The question I have is why the Rules Committee decided to deviate from the protocols that the chairs have apparently established, those who are testifying in front of our committee. Why this committee, the Speaker's Committee, decided to gavel in in the middle of the night to take up this bill. It's an interesting question and I've yet to get a good answer, but maybe the third panel will perhaps provide some clarity. Chairman Jordan. I was going to say when you got a great product, you want to get after it and get it passed.

2:19Oh, is that right? This thing cuts taxes, secures the border. House Rules Committee meeting early this morning, try to move President Trump's reconciliation package of priorities forward. Emily Wilkins joins us now with the latest. Hey, Emily. Good morning, Joe. Yeah, well, you know, they've been going since 1 a.m. And behind the scenes, Republican leaders on the Hill are rushing to try to finalize changes that will get some of these holdouts to yes and on board with this bill. You know, we've been covering these days of negotiations, but this is really the part where they have to finalize the changes, show their work, and actually put pen to paper.

2:57We did get the details on at least one of those changes, a new cap for state and local deductions. NBC News is now reporting a new tentative agreement that would raise the SALT cap to$40 ,000 for those making$500 ,000 or less. Now, under the plan, both the cap and the income level would increase by 1 % over a period of 10 years, and then they would lock in those final numbers and that would become the new baseline. Also overnight, we got a new analysis from the nonpartisan Congressional Budget Office. It shows that the average American household would see an increase in resources provided to them by the government under this mega bill.

3:36However, the report breaks it down a little bit more and finds that resources would decrease for households in the lowest tenth of the income distribution, whereas resources would increase for households that are in the highest 10th. Speaker Mike Johnson told reporters yesterday that a vote could happen as soon as tonight. And guys, this means lawmakers, especially those on this committee here, might be in for a very long day. I got frustrated looking once again, and I realized the whole system is kind of not great, Emily. You barely get through 100 days, and what's controlling Republicans in the House right now is an election in a year and a half or two years or whatever it is.

4:17So, you know, when Republicans now have the, you know, the presidency, the Senate and the House, they have a chance to do something, but they can't do it. They can't do what they need to do. And I'm talking about Medicaid. I'm talking about the way that that's set up, whether it's salt that holds it back. You've got Freedom Caucus on one side and you've got Republicans that were in purple districts on the other side there, you know, at loggerheads. And then the president comes in and what did he say? Stay the F away from Medicaid or something. What was the quote? I mean, he didn't he he used the word.

4:56He said the word. But yeah, you got it. Yeah. And I mean, there are some, you know, this is kind of what we saw. It reminds me of what we saw with Democrats when it came to passing Biden's big agenda. They had all these ideas for what it was going to be. But the fact of the matter is, is that they had narrow majorities. And to get consensus, a lot had to be left on the cutting room floor. And I think that's what you're seeing this time, too. And I think part of Trump coming to the Hill yesterday was reminding members that, hey, you might not get everything you want from this bill, but it is going to be a win.

5:28It does need to get done. And certainly these members are cognizant that if they don't move on this, you will see a tax increase for millions of Americans out there. And so they've got that pressure. They've got the debt limit pressure. And they've got reasons to try and get this done, even if it doesn't have everything they want. With the$37 trillion and, you know, S &P is already there. But with the Moody's downgrade, front and center again, we have a spending problem. We have a spending problem. So the majority of what we're seeing here is the president getting his way on a lot of new tax cuts, extending the old tax cuts, doing the new.

6:02So you're counting on future growth being higher to try to rein in the deficit spending instead of the spending itself. So that's a big ask. And it's not what Republicans should be doing normally. If you're going to cut taxes, you need to cut spending at the same time. If you want to raise taxes, fine to try and do it. But then you're not going to have the growth. But the way Medicaid operates now, Emily, and you know this, it was it was through Obamacare. It has now become the go to entitlement for a lot of able bodied working age men that just sit at home. Men and women that are sitting at home.

6:43I understand the Democrats. They're still going to demagogue it. So the Republicans probably will still lose the House in two years. But they're unable to do anything because they're afraid of that election already. And Joe, you know, I have talked to members who are very frustrated that this bill isn't doing more with entitlement cuts. I mean, obviously, this is something that both Democrats and Republicans, if you speak with them, they say, yes, you know, we recognize that a lot of our debt is coming from the fact that these programs continue to balloon. The difficult thing is that no one wants to blink first.

7:14The current political environment is that if you go even talk about starting to talk about cuts to Medicaid, you are going to have attack ads run against you. This is really a game that both sides of the aisle play. And, you know, it's it's it'll be very interesting to see if and when there is a point that is reached where Congress does feel the need to act in a bipartisan manner on this one. our forefathers, it was a great idea, do it every two years, which really makes it almost impossible to make any huge moves. Because even you finally get all three branches of government, and you're already worried about losing one of those branches in two years.

7:54So you really don't. And it happened, as you said, to Democrats as well. But maybe I could do a whole monologue about all the things that are preventing They didn't want. They want to make it far. In D.C. There are a lot of them. There are a lot of underlying factors on these members. But I mean, at this point, at least I will say from some of the conversations, there was a shift in tone after Trump came yesterday. You still had a lot of members who were no. You still have a lot of members who are pushing for what they want. But based on kind of what I've been hearing from my sources, just being in the Capitol, there is a lot more optimism, at least on the Republican side, that they can get this to pass the House.

8:33Of course, then you have the entire Senate process, which is weighing on a lot of minds of members. They know that anything they pass here could wind up getting changed in the other chamber and wind up presenting them with another tough vote, say, sometime in July. And you got the salt guys. I mean, either it shouldn't be that you shouldn't be double taxed or you should be 40 ,000, 30, 50. Andrew, what do you don't want? Don't you think that you just leave the salt the way it is or not? You want this. What is this? Forty thousand dollars going up one going up one percent a year. That's all budget based.

9:05Right. And so it does it. You don't have to. Nothing happens too badly right away for the deficit on that as well. Why do why do Blue State report? Why is it so important to them to get this back in New Jersey? What I would do there. They're the ones who help make the majority. What I would do is why is it so right. Go ahead. I would do something slightly different. This is a philosophical thing. to the degree that we think that every state should just be even, even Stephen. But given that the budgets of these states have ballooned and shifted and changed, but as it relates to this, right, like everyone knows what this is, I think I would set up some kind of 10-year deal, meaning where these deductions eventually go away, but over a period of time.

9:52So to get your act together over 10 years? Basically, I would say to the states, look, we're no longer doing SALT. If, in fact, that's the position, if the position is no salt, I think, by the way, I have this is a similar view about tariffs. If you said you want to do tariffs, I'd say, OK, you want to get to 10 percent tariffs. Let's do that over three years. Every company in America has no what it knows, what the deal is. They can get there. They can get their affairs in order and people can actually act in rational ways and they don't have to have a freak out. That would be my approach to both of those things.

10:22But Emily, if you're going to extend the old tax cuts, which, you know, the reason that that they expired was was budgetary in the first place. So now you're going to extend those. So, you know, that's going to be that's going to increase the deficit. Then you layer on all these new tax cuts, these ideas that come to the president from time to time. But then you don't cut the spending. How does it? And you just got a downgrade. whether Moody's who knows you know what that was about but we know we're at 37 trillion you're just putting all your cards on on hoping for this growth to come from the tax cuts I guess is that that how it works that that is part of it I mean Republicans will point out and this is true they are cutting spending in this bill the house had to find 1.5 trillion dollars of spending cuts I'm not sure what the actual number that's in this bill, but it is about there.

11:16And they have found places to do the cuts. Of course, again, we'll see what happens once this bill gets to the Senate. But at the same point, I mean, there are real cuts in here. At the same point, it is true. I mean, if you score this bill, it is going to add several trillion dollars to the deficit at this point. And yes, they are expecting for GDP as well as other cuts, things like Doge. They've mentioned tariffs that they will sort of cover that. But yes, there is a real concern here. I think there's also just a realization that if they don't get this done, taxes go up on Americans. And there is a wide sense across the caucus, probably even within Democrats, too, if they were a part of this, that they absolutely do not want that to happen.

11:58OK, Emily, thank you. Target out with first quarter results. Courtney Reagan joins us now with more. She's fast. Yeah, I am. I'm very fast. So, yeah, it looks like a pretty disappointing performance from Target for the first quarter. Revenues, 23.85 billion, missing the estimates for 24.27 billion. Adjusted earnings come in at$1.30 per share. It's unclear if this is comparable to consensus. We think it is, but there's this favorable litigation settlement, pretty large, actually, that analysts most likely were not expecting. Comparable sales fell 3.8 percent, much worse than the 1.9 percent expected drop.

12:38Digital sales did grow 4.7 % driven by same-day options. Target is lowering its sales guidance to low single-digit declines compared to consensus for 0.3 % growth. It's also cutting and widening its earnings forecast for the year between$7 and$9. Now, on a media call, Target CEO Brian Cornell wouldn't say definitively if the retailer had raised prices due to tariffs or would in the future. He did say Target has many levers and mitigation strategies it would employ first, raising prices as a, quote, last resort. Chief Commercial Officer Rick Gomez explained mitigation should offset the majority of tariff pressure, but added the retailer would adjust prices if necessary.

13:21Now, Cornell called out, quote, ongoing pressure from discretionary for discretionary categories, five consecutive months of declining consumer confidence, tariff uncertainty and the reaction to its upgraded DEI program. It's called Belonging as drags on the quarter. Traffic and transactions both fell. Margins were compressed from higher markdowns and higher cost of digital fulfillment. Valentine's Day and Easter, that did drive sales, and that limited Kate Spade collaboration was the strongest in a decade. Cornell said, quote, we're not satisfied with these results. They're focusing on factors within its control.

13:57Target is setting up a new program led by its COO, Michael Fidelke, that's tasked with moving faster and accelerating growth, or re-accelerating growth, rather, in the business. And Christina Hennington, as well as Amy, too, are exiting their executive roles as a part of that move. Can I just tell you how fascinating it was, not just to watch you speak about this so that we understood it, but if you watch the stock as it was going, I mean, this is like algos. First, on the original back of the news, I don't know if you saw it, it was like up 5%. For a hot minute, it was like up 5 % because people, the algos must have been reading the initial headline, probably with this legal settlement in there, I don't know.

14:38In their favor, yeah. Then it moved into the red. Now it's back. It's now back up 3 % or 2%. And I know it's early. I'm not saying that. I'm saying, you know what the high was? Oh, yes. Life is relative. I'm not dismissing that. No, it was 260. This thing is sold out beyond belief. That was only a couple years ago. That was in 2021. This thing is battered, beaten, bruised. Shareholders are, you know, they're crying uncle. I don't know what they'd have to say to get this to go down more at this point. Think about that. What, 260? You just think this is like you can't fall off the floor situation.

15:17Exactly. That's all. I mean, 260. Think about it. Isn't that a great phrase, by the way? I should give credit. It's my mother-in-law. You can't fall off the floor. No. Yeah. I like that. No. And in the same period, same business, right? Sort of. Walmart. Look at that stock. Yeah. Yeah, and we've sort of asked these questions, too, to the target executives. And they're like, look, we don't know Walmart's business like we know ours, but we do know that our discretionary categories are much larger than Walmart's. And so that can account potentially for some of this. And we know those categories have been pretty soft.

15:51Can we talk tariffs for a second? Yeah, please. And just the articulation, communication. And the language very precisely from some of these retailers. So we have Lowe's this morning. We had Home Depot yesterday saying Home Depot got all the headlines it could possibly want. at least if there's an audience of one in the White House, which was to say, effectively, we're eating the cost and it's not going to get passed to customers. I'm not sure that that's actually accurate. Exactly. And they were very careful in repeating the same phrase. We generally intend to maintain pricing across our portfolio.

16:25Very careful phrasing, because I think if they are unable to do that, yeah, they would like to keep pricing. And yes, they have done all of these mitigation strategies. and diversify their supply chain, but hasn't everybody else? Right. And that was just sort of my question. Home Depot still imports about half from other countries. Now, they say in 12 months, no one country outside the U.S. will represent more than 10%. Right. But if they import 50%, and Walmart is only importing a third, and they're bigger, and also do all these strategies, yet Walmart says we can't absorb it all, how can Home Depot?

17:00That's just, like, how does the math? Okay, so I haven't lost my mind. No. Okay, what about Lowe's? So Lowe's, when I looked at that release, they did not really say anything in there. They said nothing. About the tariffs. I was, that's what I was looking at right now. Yeah. So the call is at 9 a.m., so we'll see what they have to say. But the analyst community had thought that tariffs would likely hit Lowe's more than Home Depot. They didn't say anything. And they affirmed their guidance. Yeah, and to be fair, Target doesn't really mention tariffs in their release as well. But luckily, as a member of the media, we were able to get through to them and get some more clarity on the bigger picture things that are not included in that release right away.

17:38So we can give some context to the numbers so that those stock moves can be more accurate. There we go. Looks like there might be a trap door to the basement in your floor. You can fall. You can fall off the floor, apparently. Also, there's a thing called like floor time where apparently if you lay on the floor, it's supposed to like reset your body and it's like relaxing. So that's what this is. floor time i don't think it's relaxing though no but i'm just thinking sometimes you like to just like lay on the floor and just like i do like to let i like to sit on the floor and lay on the floor i do not i don't sleep on the floor like when i'm playing with my kids i like to lay on the floor it's kind of like no anyway not good for the neck basically like you know if you like to lay down anywhere the floors is you know if you don't have a you know you don't what it is a futon or something yeah laying down is nice because two pine is better life is hard else What's the yoga pose where you just lay there?

18:28I guess... It's a long word. Don't look at me. Don't look at either of us for yoga. It's my favorite one. You just lay there. At my gym, I see guys walking around with yoga mats, and I just... You know, okay. They're very flexible. Who are? Yoga guys? Yoga guys. You know, our former colleague, Tyler Matheson, a big yogi. Really? Did wonders for him, health-wise. Maybe that's my problem, because I'm not flexible. I want to be like Gumby. For those travelers, this is a big story. The FAA now capping the number of flights allowed into Newark Airport following technology outages and a staffing crunch that led to delays and cancellations.

19:0528 planes will be allowed to arrive per hour between June 15th when construction on a runway is scheduled to be completed. Outside the construction period, arrivals will be capped at 34 per hour. The interim limits take effect immediately and run through October 25th. So this is a long period of time, including departures that brings down the traffic to 56 flights per hour. That's down from more than 70 that the airport had been handling during peak periods before the FAA began slowing traffic. United had already taken a number of its flights off of its schedule. So the disproportionate impact at this point is likely to impact a lot of the other airlines.

19:46It may still impact some United flights, we'll see. And then, of course, the question is, does this make the situation hopefully safer? Which is to say that before there was, you know, less time for error, if you will. Now, if you have a lot less flights coming in. This idea that the radios have stopped communicating with, you know, from the tower to the planes, that apparently happens. I couldn't believe it. This is not, like, specific to Newark. This happens all over the place. The problem is that a place like Newark, when you're landing, you know, 70 planes an hour, there's not a lot of time to, you know, fix the situation in those instances.

20:29People that are in charge would say, yes, it's safe to fly into Newark. They would have said that at 70 and they would say it now. It's safer. Er. That's the question. And we shouldn't overstate it because there hasn't been anything happened. But we'd like safer. Now is 40 safer than 56? I think it has to be, right? I don't know. But is it overall, though, is it safe? If I told you it was two an hour, it'd very easily be safer. That's from that movie. Is it safe? But if it was two an hour, it'd be safer. Right? because they'd be spaced out and like super spaced out. Right. Well, 56 sounds better than 70, but it sounds like a pain.

21:20And you just have to take that into account, I guess, when you're traveling, booking places. I mean, can they do it? Did we need 70 flights? Oh, I think that yes, because now the flip side is prices are going to go up materially and the prices for flights out of LaGuardia, out of JFK, out of Philadelphia, all that's going to go up. There's no question. The T's will be next. President Trump took his case right to Capitol Hill yesterday in a meeting with House Republicans, urging swift passage of his cornerstone legislative agenda. There's some people that want a couple of things that maybe I don't like or that they're not going to get.

21:59But I think we're going to have tremendous, not luck, we have tremendous talent. Coming up, a check-in with an economic advisor to the president, Deputy Treasury Secretary and Acting IRS Commissioner Michael Falkender, who echoes the message to Congress that the time for a massive tax package is now. What is the alternative? The alternative is a$4.5 trillion tax increase at the end of this year. The alternative is for all of the investment incentives that are being negotiated, things like bonus depreciation extensions, factory immediate write-offs, R &D tax credits. Those things will go away. Squawk Pod will be right back.

23:07It's true. Honestly, you know, Becky's off today. She's should I feel uncomfortable now? I mean, you don't have the cooties. The House Rules Committee debating the reconciliation bill on what's a critical step before it can reach the floor for a full vote. Join us now. Deputy Treasury Secretary Michael Falkander. He is also the acting commissioner of the IRS. This is a case study, I think, Michael, in what it takes to get one of these across the finish line. We've seen it. We've seen the Democrats try to do it. And reconciliation is unique in what it takes. Are you singing an optimistic tune about who's getting whipped and whether the president was effective yesterday?

23:53Absolutely, Joe. I mean, you think about where we're at now compared to where we were at in 2017. And what's really remarkable is the ongoing unanimity of the Republicans. So, you know, in December, till December 2017, to get the Tax Huts and Jobs Act over the line, we've already got a budget reconciliation bill done, you know, the joint resolution in order to unlock the reconciliation process. We're now looking to have the bill on the floor of the House later this week. We expect to take it to the Senate. And so we're making remarkable progress. We always knew that with these tight numbers, there were going to be negotiations all the way down to the end, all the way until that bill passed.

24:31But we continue to make remarkable progress. And it really demonstrates the leadership that Speaker Johnson, that Chairman Smith have been providing, and the fact that they have been working on this probably for about a year now. The expression that don't let the perfect be the enemy of the good, you always have to use that. And obviously, between Democrats and Republicans, they're split. But between Republicans on one side and Republicans on the other side, there's a lot of it's fractionated at this point. And you're asking both sides, the salt side and the people that want deeper cuts, you're asking both of them to swallow quite a bit.

25:10And my point earlier was, you know, when you when you finally get all three branches of government and you have a chance to do something, when you're worried about who's going to win in two years. That's all you're ever worried about. It makes almost impossible to govern. Joe, we are going to get this bill over the line. There are going to be negotiations down to the very end that reflects the fact that we are a big tent party, that there are a lot of different people in this party that have different types of outcomes they want to see come of this bill. This is the major piece of legislation that we're going to see come out of this Congress.

25:43And so we see representatives looking to get as much as they can for their to implement the policies that are going to best help their part of the country, their districts. And so we always knew coming down to the end that the president and the secretary and the administration were going to have to weigh in to get this final bill over the line. But we are going to get there. And as you said, we are not going to let the perfect be the enemy of the good. As Reagan used to say, if you'll offer me 80 percent, I'll take it and I'll come back for the other 20 percent later. But we are going to get this bill passed out of the House this week, get it over the Senate so that the president can sign this.