Washington: What to Watch Now is a regular column that analyzes only those political and regulatory issues that could potentially affect investors. For more, listen to the WashingtonWise podcast on Apple Podcasts.

Congress returns this week from the two-week Easter recess to face a critical stage in the crafting of the massive budget bill of tax cuts and spending cuts that forms the heart of the Republicans' legislative agenda. Up to now, Congress has been dealing with the broad outlines of that bill, setting the targets for how much in tax cuts and spending cuts should be included in the package. Now it is time to fill in the details.

All eyes will be on the House of Representatives, which will take the first crack at the specifics. Over the next three weeks, House committees will be meeting to work through the provisions in their areas of jurisdiction. This is where things get tricky. The House hopes to cut at least $1.5 trillion in federal spending. Members of Congress are all for cutting federal spending as a general idea, but also have things important to their communities back home that they want to see preserved. Expect a lot of internal tussles over what's in the bill and what's out.

Particular focus is likely to be on the House Energy & Commerce Committee, which is tasked with coming up with nearly $900 billion in cuts. Most experts believe that figure can't be achieved without large cuts to Medicaid, something that is politically unpopular. President Donald Trump has said Medicaid cuts should not be on the table, but said he is open to efforts to root out waste, fraud, and abuse in the program.

On the tax side of things, the baseline plan is to extend all of the 2017 tax cuts that are set to expire at the end of 2025, including lower individual income tax rates, the higher standard deduction, the estate tax and dozens of other provisions. But this presents a problem for Republicans from a messaging standpoint, because extending all of those provisions won't feel like a tax cut—it will just continue the status quo. While it's true that an extension would prevent a tax hike, the public rarely responds with much enthusiasm to the message that politicians prevented something from happening.

So Republicans will be focused on what else can be included in the package. Reportedly under consideration is a four-year period of no taxes on tip income, Social Security benefits, and overtime hours. But the details of how those will work and who they will apply to still need to be sorted out. Other issues like an increase in the $10,000 cap on the State and Local Tax (SALT) deduction are also still being debated.

Republican leaders are pushing to pass the final package through the House by Memorial Day—an ambitious timeline given the complexity of the bill. Even if they are successful, the Senate is likely to have a different approach. Ultimately, the two chambers will have to agree to one final plan, something that may take well into the summer.

The budget blueprint includes a $5 trillion increase in the debt ceiling, which would likely take the issue off the table until after the 2026 midterm elections. But a key question is exactly when the debt ceiling will need to be raised. The Treasury Department has been taking "extraordinary measures" since January to ensure the United States does not default on its debts. April's tax receipts were reportedly higher than expected, and tariff revenue is also starting to roll in, both of which should boost the Treasury's cash on hand and provide a little more time before Congress will need to raise the debt ceiling. Treasury officials are expected to provide an update this week on the "X date"—the deadline by which Congress must act to avoid a default—and that announcement is going to be closely watched on Capitol Hill. If the date is earlier than expected, it may arrive before the budget bill containing the debt ceiling increase is approved by Congress. That would necessitate a separate action by Congress to ensure the nation can continue paying its bills—something Republican leaders would prefer to avoid. But if the debt ceiling deadline is not until late summer or early fall, that would give lawmakers more time to sort out the complexities of the budget bill.

Trump caused quite a stir—and a negative market reaction—earlier this month when he said that he was considering firing Federal Reserve Chair Jerome Powell. He blasted Powell in a series of social media posts and called on the Fed to cut interest rates. But the president backed away from his threats on April 22nd, saying that he had "no intention" of firing Powell. That eased market concerns.

Firing the Fed chair would be an unprecedented move that would likely roil the markets and launch a lengthy and messy court fight. With Powell's term set to expire next year, the president will get to pick his successor, and it seems he has concluded that waiting for that opportunity is the best course of action. Expect continued social media posts and comments from the president making his opinions about monetary policy clear, but firing the central banker no longer seems likely.