Here's What's In The House Republican Budget (And Why It Matters)

Jul 19, 2017
Originally published on July 19, 2017 9:29 am

The House budget plan would slash spending by $5.4 trillion over 10 years, including more than $4 trillion in cuts to mandatory spending like Medicaid and Medicare, while ramping up defense spending.

It's true that budgets are often called "political documents" — which is to say that they are more statements of priority than exact plans of how every dollar should be spent. But this 2018 fiscal year budget, released Tuesday, could also allow Republicans to pass one of their big-ticket items — tax overhaul — via reconciliation. That's the powerful tool that allows lawmakers to advance tax and spending legislation with only 51 votes in the Senate, rather than 60 — and the GOP currently has 52 senators.

Even with reconciliation, though, Senate Republicans were unable to get enough support to move forward with their bill to replace the Affordable Care Act. By attaching taxes to this budget, they once again will try to lower the hurdle for passing one of their top priorities. As with health care, the question is then whether Republicans can get enough support to push through something they've hoped to accomplish for years.

That could require some compromise, as House GOP leaders will have to balance the desires of its party's centrist and far-right members. Members of the more moderate Tuesday Group, as the Hill reported Tuesday, oppose big mandatory spending cuts, while members of the conservative Freedom Caucus would more likely be in favor of drastic cuts.

Here are a few things the House budget proposes:

It would ramp up military spending while slashing other discretionary spending. The House budget would bump up defense spending by around $929 billion over the next decade and save on non-defense discretionary spending by $1.3 trillion. Broadly speaking, that's similar to the White House budget as proposed in May (and as scored by the CBO), in that both ramp up defense spending and make major cuts to other programs.

The House budget ultimately plans for trillions of dollars in mandatory spending cuts, but in the near term, it calls upon 11 committees to cut $203 billion altogether over a decade. So, for example, the Committee on Education and the Workforce will have to cut $20 billion over the next decade. And the Ways and Means Committee, which has jurisdiction over a variety of spending programs like Temporary Assistance for Needy Families, would cut $52 billion over the next decade.

It assumes an optimistic economic growth rate. On this one, the House budget echoes the president's. The White House's budget assumed a 3 percent growth rate would create $2 trillion in revenue from tax code overhaul. That was widely panned — aside from the fact that the White House double-counted that $2 trillion as paying for deficit reduction and tax overhaul, most economists agreed that sustained 3 percent growth just isn't possible.

The House budget assumes 2.6 percent growth and says economic feedback would cut the deficit by $1.5 trillion over a decade (and does not double-count that growth). That's still a lofty goal. As we wrote last week, top economists have said that growth around 2.6 percent would be great but difficult.

The Committee for a Responsible Federal Budget generally lauded the budget's belt-tightening, but called this growth target "unrealistic."

"Economic growth should not be used to paper-over our dire fiscal picture," said Maya MacGuineas, president of the nonpartisan D.C.-based think tank, in a statement. "You base budgets off the likely, not the hopeful."

For their part, House Republicans presented a five-page paper from conservative economists arguing that 3 percent growth is possible.

It slashes safety net programs. Like the Trump budget, the House budget would slash Medicaid — it says that via Medicaid cuts plus changes to Obamacare, it would save $1.5 trillion. And the House budget would also impose work requirements on Temporary Assistance for Needy Families (known as welfare) and the Supplemental Nutrition Assistance Program (known as food stamps).

It also cuts Medicare. The House bill would cut Medicare by $487 billion over 10 years, while the president's budget, as proposed, barely touched it.

And the House budget proposes deficit-neutral tax changes. This is one significant way that the House plan would break from what the president wants, said one expert.

"The really big picture or takeaway from this budget is that tax reform cannot increase deficits," said Joel Friedman, vice president for federal fiscal policy at the left-leaning Center on Budget and Policy Priorities. He said that matters because it contrasts with Trump's plans to "just cut taxes a whole bunch and we don't care about the deficit," as Friedman put it.

That may not be how the White House sees it, but it is true that Trump has pushed some massive tax cuts. That promises to look different from Trump's tax proposal as released in April. That proposal, Trump said, would be "bigger, I believe, than any tax cut ever" — and as the New York Times later reported, would likely add trillions to the national debt. The House budget does include a non-binding "policy statement" that gives general guidance, but not specifics on what that tax code overhaul should look like, or how that deficit neutrality would come about.

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