Historic spending cuts...

Tax bill could trigger historic spending cuts

By ADAM CANCRYN and SARAH FERRIS

Republicans are on the verge of a massive tax overhaul that would hand President Donald Trump his first major legislative victory. But the $1.5 trillion tax package could trigger eye-popping cuts to a slew of federal programs, including Medicare.

Unless Congress acts swiftly to stop it, as much as $150 billion per year would be cut from initiatives ranging from farm subsidies to student loans to support services for crime victims. Medicare alone could see cuts of $25 billion a year. And the specter of those cuts has thrust Congress into a high-stakes game of political chicken.

With so much attention focused on the tax bill itself, neither lawmakers nor many of the advocacy groups had paid as much attention to the depth and breadth of the cuts that will ensue unless the House and Senate come up with a bipartisan deal to stop them. Some groups had run Medicare ads, but they were largely overshadowed by the tax debate itself.

The tax bill hit snags in the Senate late Thursday, as Republicans worked on ways to ease the concerns of deficit hawks. Leaders were still scrambling for votes.

But within the GOP, leaders are confident that once the tax bill is passed, they can strike a quick deal to waive the federally mandated cuts. But Democrats deeply opposed to the tax bill aren’t making any promises they’ll agree to bail out their rivals — raising the risk of a historic gutting of government programs.

“This would be unprecedented,” said William Hoagland, a senior vice president at the Bipartisan Policy Center and a former GOP Senate staffer with expertise on the budget. “The law never envisioned that we’d eliminate programs.”

GOP leaders are asking moderates like Susan Collins (R-Maine) to back the tax package with the mere promise that lawmakers can find a bipartisan solution during an already divisive year-end crunch that could lead to a government shutdown.

One senior House GOP source was confident a deal on spending would go through. "A statutory PAYGO sequester has never happened, and we will prevent one from being triggered," the source said, adding that Congress has until the end of the year to work it out.

The far reach of the Republican tax plan is the consequence of limitations placed on Congress under the “pay-as-you-go” rule. The decades-old law, revamped during the Obama presidency, requires Congress to offset the cost of each piece of legislation or risk spending cuts painful to both parties.

Lawmakers have repeatedly voted to waive this rule, a total of 16 times, for major bills like the Obama-era stimulus and multiple tax cut packages under George W. Bush.

The GOP’s $1.5 trillion tax plan would trigger $150 billion in cuts to domestic programs every year for a decade if Congress doesn’t step in, according to the CBO. That would include $25 billion from the money Medicare pays health care providers.

"You’re likely to have doctors who will see less patients; you’re likely to have hospitals and other health care facilities cut back on certain services,” said David Certner, legislative counsel for the AARP, which has loudly opposed cutting Medicare. “It really affects the program.”

The fallout for numerous smaller federal programs would be even more drastic, effectively zeroing out their budgets. And while conservatives want smaller government, they don’t necessarily want programs lopped off across the board.

The largest chunk would come from health and domestic programs like the Social Services Block Grant, which stands to lose $1.7 billion, and the Federal Hospital Insurance Trust Fund, which would lose $715 million. Obamacare’s Public Health and Prevention Fund — long a target for Republicans — would be wiped out.

Agriculture is usually a spending priority for conservatives, but the tax bill could put $20 billion of farm aid on the chopping block. Nearly all federal programs for farmers would see funding evaporate.

“Basically, Mr. Perdue would only have the food stamp program to work with,” Hoagland said, referring to the Trump administration’s Agriculture secretary.

Those cuts would also kick in for the Department of Education's student loan repayment services, U.S. Customs and Border Protection and the unemployment trust fund.

Republican leaders rushing to pass the tax package have so far dismissed that doomsday scenario as far-fetched — although they were still making last-minute changes on Thursday to address fiscal concerns and stay within Senate budget rules.

Collins, a key moderate holdout on the tax bill, said she received a personal assurance from Majority Leader Mitch McConnell on Wednesday that the cuts would be waived — one day after she threatened to oppose the bill over the severe reductions. She said House Speaker Paul Ryan had made the same promise.

“I am confident that neither side of the aisle wants that to occur,” Collins said Thursday morning at an event hosted by the Christian Science Monitor, adding that GOP leaders will likely strike a year-end deal to waive the pay-as-you-go requirement.

But the price tag could raise some thorny questions for Republican leaders desperate for a legislative win in the waning weeks of the year — a year in which they controlled the House, Senate and White House and have little to show for it.

Some deficit hawks have already objected to ballooning the national debt, pushing instead for required tax hikes if the bill fails to pay for itself — as many economic analysts predict, including Congress’ own Joint Committee on Taxation. Raising taxes would effectively have the same overall impact on the deficit as allowing the spending cuts to take place.

“A vote to block that sequester becomes an awkward vote for some Republicans who said we should be cutting spending,” said Ed Lorenzen, a senior adviser at the Committee for a Responsible Federal Budget. “It is ironic that congressional leadership is simultaneously telling members that they’re going to block the sequester at the same time they’re negotiating a trigger that’s supposed to have tax increases.”

The looming threat of the cuts, known as sequestration, has been a political gift for Democrats as they’ve attempted to kill the GOP’s tax bill.

Senate Minority Leader Chuck Schumer has repeatedly railed against the GOP’s tax bill for “gutting Medicare.” A series of ads targeting vulnerable House Republicans last month warned that the GOP bill “forces a $25 billion cut in Medicare."

Publicly, at least, some Democrats have suggested that they could play hardball — withholding their votes to waive the cuts and forcing Republicans to take the fall.

But privately, longtime Capitol Hill veterans say Democrats would never allow spending cuts, even if they could avoid the blame.

“Medicare is underfunded as it is. If we have to change the PAYGO rules, we’ll just change ‘em,” said Rep. Phil Roe (R-Tenn.). “At the end of the day, we — Republicans and Democrats — have to go home and face our constituents. I wouldn’t want to go home and face my constituents if I’d cut Medicare."