GovMoneyNews -- July 2, 2025
Does the Fed's accounting for itself constitute 'duplicity?' Will an investigation of Harvard have much broader implications for accounting in private equity and, in turn, for public pension funds?
Today’s Top Three Reads include an article at Law & Liberty criticizing Federal Reserve accounting that is argued to hide the fiscal impact of massive Fed losses, a WSJ article covering a House Republican’s investigation of Harvard with much broader implications for asset valuation and accounting in the private equity industry, and an article at The Hill covering the latest developments on the massive “big, beautiful” tax-and-spending bill now back in the House.
This daily newsletter gathers news and opinion about government finance and financial markets. My name is Bill Bergman. You can reach me at billbergman34@gmail.com
TOP THREE READS
Law & Liberty
From July 2, by Paul Kupiec and Alex Pollock, includes “The Federal Reserve System has unique powers among Congressionally-chartered government bodies, and yet its powers do not include the authority to borrow money at taxpayer expense to pay for huge accumulating losses without Congressional approval. The Fed has invented its own unique financial accounting standard to disguise the fact that, under normal accounting rules, the system is deeply insolvent. … Under current accounting standards, neither Fed cash losses nor the taxpayer contingent liability created by accumulating Fed losses are reflected in the annual federal budget. … Unbelievably, the book surplus account balances the Fed reports are not reduced by its giant operating losses, thanks to the “deferred asset” gambit. …” (Note: See “FROM THE VAULTS” below.)
The Wall Street Journal
Private equity caught in the crosshairs of Elise Stefanik’s attack on Harvard
From July 1, by Jonathan Weil, includes “Rep. Elise Stefanik (R., N.Y.) recently sought an investigation into Harvard’s financial disclosures to bondholders. She might as well have fired a bazooka at the entire private-equity industry. In a letter to Securities and Exchange Commission Chairman Paul Atkins, the Republican congresswoman said the university’s finances might be more precarious than publicly acknowledged. Much of its $53 billion endowment is invested in private-equity funds that “are often overvalued due to reliance on internal estimates and outdated transaction data,” she said. … The biggest scandal here is what’s legal, and the problem is much larger than Harvard. When it comes to the valuations used by investors in private-equity funds, the accounting rules practically encourage willful blindness.”
The Hill
House Rules Committee advances Trump megabill as potential GOP revolt looms
From July 2, by Mychael Schnell, includes “The House Rules Committee advanced the GOP’s “big, beautiful bill” early Wednesday morning after an hours-long meeting, sending the legislation to the floor for consideration as its fate in the chamber remains unclear. The panel adopted the procedural rule in a 7-6 vote, with two Republicans — Reps. Chip Roy (R-Texas) and Ralph Norman (R-S.C.) — siding with Democrats against the measure, showcasing their opposition to the underlying legislation over deficit concerns. … Despite the successful vote, the legislation is far from being out of the woods.”
FEDERAL GOVERNMENT FINANCES
Semafor
Republican megabill faces tallest hurdle yet
From July 2, by Eleanor Mueller and Shelby Talcott, includes “It’s a make-or-break day for President Donald Trump and House Speaker Mike Johnson as their teams look to muscle the party’s mammoth tax-and-spending bill through the House as-is. This is their last hurdle and also, potentially, their tallest: The version the Senate passed Tuesday irked both conservatives and moderates by trimming less in spending and more from Medicaid, respectively. With votes expected as soon as this afternoon, leaders are also watching closely to see if weather delays members’ flights.”
The Wall Street Journal
House Republicans threaten to sink Trump’s megabill
From July 2, by Olivia Beavers, includes “House Republicans are already lining up to oppose President Trump’s “big, beautiful bill,” with conservatives and centrists blasting the legislation just hours after Vice President JD Vance cast his tiebreaking vote on the Senate version. … Only three House Republicans need to join Democrats in opposing the bill to sink it. … A crescendo of complaints began building across the disparate wings of the House Republican conference days before the Senate passed the bill, following an exhaustive 27-hour marathon of amendment votes. … It is too early to write the bill’s obituary. Trump and Johnson have previously persuaded shaky Republicans to support the president’s agenda.”
The New York Times
Republican bill puts nation on new, more perilous fiscal path
From July 1, by Andrew Duehren, includes “Washington has not exactly won a reputation for fiscal discipline over the last few decades, as both Republicans and Democrats passed bills that have, bit by bit, degraded the nation’s finances. But the legislation that Republicans passed through the Senate on Tuesday stands apart in its harm to the budget, analysts say. Not only did an initial analysis show it adding at least $3.3 trillion to the nation’s debt over the next 10 years — making it among the most expensive bills in a generation — but it would also reduce the amount of tax revenue the country collects for decades.”
Reuters
Republicans ignore debt worry as they push forward on Trump tax-cut bill
From July 1, by David Morgan, Bo Erickson and Davide Barbuscia, includes “As President Donald Trump's Republicans push ahead on a sweeping tax-cut and spending bill that nonpartisan analysts say could add $3.3 trillion to the nation's debt over the next decade, they're taking a new approach - denying there is anything to worry about. Instead, they argue that extending and adding to tax cuts signed into law by Trump in 2017 during his first term - which were set to sunset in 2025 to limit their hit to the deficit - will not drive the debt higher.”
Reason
Why the ‘current policy’ baseline is a massive gimmick that effectively kills the filibuster
From July 1, by Eric Boehm, includes “… Using the "current policy" baseline, the Congressional Budget Office estimates that the Senate version of the tax bill—which could get a final vote as soon as today—will reduce the long-term deficit by about $521 billion. When evaluated in a more typical way, without that giant gimmick, the bill will add about $3.9 trillion to the deficit. Comparing government budgets to a household is never a perfect apples-to-apples measurement. Still, that's about the same as if you'd agreed to a new lease at the same $2,000 per month rate, but you were going to set your personal household budget on the assumption that the new lease costs nothing since you are merely extending the terms of the old lease.”
The Wall Street Journal
From June 30, editorial, comment on editorial by Jacob Hildner includes “You're ignoring the inconsistency of using the temporary nature of the tax cuts when first passed to lower their ostensible cost but then ignoring their temporary nature when extending them, thus never counting their costs. This makes a difference when it comes to budget reconciliation bills, which are supposed to be budget neutral after ten years, necessitating the sunset provisions in the first place. … If you care about the budget, as opposed to just cutting health care, you should be concerned that Republicans are busting through a budget constraint, a practice sure to be taken up by the other party when they're in charge. You won't be able to tsk-tsk them then.”
The Criterion (Archdiocese of Indianapolis)
'Big Beautiful Bill' trillion-dollar increases to US debt to hit poor hardest
From June 30, includes “… Luz Tavarez, vice president of government relations for Catholic Charities USA, said the organization understands the difficulties legislators face as they attempt to balance the federal budget and reign in the deficit. "We share a concern for the national debt and fiscal stability. But we also share a concern for the social safety net and programs that support the working poor and vulnerable," Tavarez emphasized. "And both things are in our best interest as a country." … The U.S. Conference of Catholic Bishops -- in a May 20 letter to Congress -- expressed deep concern over the proposed budget bill's cuts to Medicaid and SNAP, labeling the provisions "unconscionable and unacceptable." …”
Idaho EdNews
Republicans used to be the fiscally responsible party, but look at us now!
From July 1, by Rod Gramer, includes “Do you remember when the Republican Party was known as the party of fiscal responsibility? Do you remember when Donald Trump promised that he would drain the swamp? Do you remember when the Republicans bragged about being the party of the working people? Well, those days are over, and those campaign-trail promises, as it turns out, had the short life span of a gnat. … The “big, beautiful” bill is a betrayal of the working people of America as it gives most of the tax cuts to the richest Americans who already control 70 percent of the wealth in the country, according to Statista, a global business data company. In short, “the big, beautiful” bill turns Robinhood on his head – it takes money from the working people of America and gives it to the richest in the largest shift of wealth in American history.”
GOVERNMENT FUNDING AND HIGHER EDUCATION
Time
House Republicans’ budget could cut Pell Grants for millions of students
From July 1, by Kim Cook, includes “The Pell Grant—the backbone of the nation’s college financial aid system—is facing a funding shortfall at the exact moment students need it most. Even as college enrollment rebounds, the program is projected to face a $2.7 billion deficiency by the end of the fiscal year. As part of the ongoing budget reconciliation process, both the House and Senate have proposed $10.5 billion to stabilize Pell, a crucial step in keeping it solvent. On Tuesday, the Senate narrowly passed President Donald Trump’s “Big, Beautiful Bill,” sending it back to the House. But the House’s version of the bill comes with some unexpected—and troubling—strings attached that could put college out of reach for millions of students.”
Inside Higher Ed
Layoffs, budget cuts pile up in June
From July 1, by Josh Moody, includes “From the nation’s wealthiest universities to struggling small colleges, institutions are shedding jobs as they contend with federal research funding uncertainty and other financial challenges. … By and large, the cumulative cuts across higher education in the last month were driven not by Trump but rather by dwindling enrollment, shrinking state support, rising costs and other financial pressures.”
The Bloomingtonian
From June 30, includes “Indiana University Bloomington is suspending or eliminating more than 100 academic programs across a wide range of disciplines ahead of the 2026-27 academic year. The programs are on a list from the Indiana Commission for Higher Education released on a PDF from the June 30, 2025 meeting. … The changes, affect undergraduate, graduate, and doctoral programs and touch nearly every corner of the university … The cuts also come after the appointment of a new Board of Trustees majority, aligned with Indiana’s Republican Gov. Mike Braun, which has called for more “practical” degrees with workforce outcomes.”
James G. Martin Center for Academic Renewal
Trump, Harvard, and federal research funding
From July 2, by Terence Kealey, subtitled “Government funding of academic research does not stimulate growth,” includes “By nearly universal consent, the federal government’s cuts to the universities’ research budgets portend disaster, and the national commentary is unanimous in suggesting that the threatened cutbacks to U.S. university science will damage Americans’ health and economic wellbeing. Here, however, I argue that, if the administration will only introduce its cuts in a measured way, the consequences will be wholly beneficial. … The core function of a university is not research—that can be undertaken elsewhere. The core function of a university is teaching, which should be untrammeled by any concern other than the transmission of truth.”
STATE AND LOCAL GOVERNMENT FINANCES
EducationWeek
Trump tells states he’s holding back $6.8 billion for schools
From June 30, by Mark Lieberman, includes “The Trump administration is holding back nearly $6.8 billion in federal funding for K-12 schools it was scheduled to dole out July 1, Education Department staff told state education agencies on Monday afternoon—the day before the funding, by law, was required to start flowing. Thousands of school districts and dozens of states that had banked on those funds to cover staff salaries, vendor contracts, curriculum materials, technology tools, and other priorities will now have to consider slashing student services—including some mandated by federal law—or tapping other funding sources if the federal money doesn’t show up on time or at all.”
National Education Association (NEA)
NEA reacts to Trump administration withholding critical education funding
From July 1, by Celeste Fernandez, includes “Almost $6.9 billion in federal K–12 education funding, normally released to states on July 1, is being withheld from students and classrooms, according to the U.S. Department of Education. Despite Congress passing a continuing resolution in March—which President Trump signed extending previous funding levels through fiscal year 2025—the Department is taking a first step toward “impoundment,” the illegal withholding of money appropriated by Congress to fund federal programs and activities. … The loss of these funds affects thousands of school districts and every state in the nation.”
National Public Radio (NPR)
The Trump admin is withholding over $6 billion in education grants for schools
From July 1, by Sequoia Carfillo, includes “On Monday, the Trump administration notified states that it was withholding over $6 billion in previously approved federal education grants to schools. The announcement came a day before the July 1 deadline when those funds have traditionally been dispersed, and will likely impact school districts' plans for the fall. … The largest pot of grant money under review consists of roughly $2.2 billion for professional development for educators. Thomas says districts often use these funds to help pay for continued teacher training: "At the end of the day, it's really just funding that makes teachers better at their jobs." …”
FROM THE VAULTS
Institute for New Economic Thinking
From September 2020, by Edward Kane, includes “Like master illusionists, bank accountants conceal losses from federal regulators, putting the whole economy at risk. … I compare skilled bank accountants to master illusionists such as Siegfried and Roy. Much as these famed magicians made audiences think that they could make large wild animals disappear, some bank accountants enhance their income by convincing client banks that they have the power to make losses disappear. But in both kinds of illusion, items we no longer see have not actually vanished. They have been moved surreptitiously to places for which outsiders have no sightline. …”