A stethoscope sits on an examination table in an exam room at a Community Clinic Inc. health center in Takoma Park, Maryland, April 8, 2015. 
Photo by Andrew Harrer/Bloomberg/Getty

CBO: Republican tax plan would trigger big cuts to Medicare

The federal budget deficit, which Republicans used to pretend to care about, is poised to get vastly larger if the GOP tax plan passes. There’s reason to believe, however, that Republicans will renew their interest in balancing the budget – just as soon as they’re done slashing tax rates on the wealthy and corporations.

Gary Cohn, the director of the National Economic Council at Donald Trump’s White House, hinted as much last week, as did House Speaker Paul Ryan (R-Wis.) yesterday.

The scope of this vision is pretty extraordinary: GOP officials have a vision of overhauling the federal tax code, redistributing wealth to the top, scrapping health care benefits for millions, and then targeting social-insurance programs like Social Security and Medicare.

And before you ask, “Didn’t Donald Trump give his word to Americans that he wouldn’t cut entitlements?” it’s important to remember the president’s rhetoric has very little to do with his actions, and he’s already endorsed some entitlement cuts, despite his commitments.

But in practical terms, we don’t really need to wait that long to see Republicans undermine popular social-insurance programs. As the Wall Street Journal reported yesterday, the GOP tax plan may very well bring about some sharp cuts sooner rather than later.

The Republican tax bill would force $25 billion in immediate cuts to Medicare, according to the Congressional Budget Office, a move that could be stopped only with a bipartisan vote.

Those are the consequences under the pay-as-you-go law that Congress passed in 2010. That law requires tax cuts and certain spending increases to be paired with offsetting provisions. If not, the law forces automatic spending cuts…. Congress could prevent the cuts, but that couldn’t be done under the fast-track procedures they’re using for the tax bill.

The full CBO report is online here.

Now, if you read the Republican tax plans, you won’t find explicit provisions that cut Medicare, because it isn’t one of the intended goals. Rather, we’re talking about the unintended consequences.

The budget math gets a little complicated, but in 2010, policymakers approved a pay-as-you-go rules – generally known as “PAYGO” – that requires new laws to be deficit neutral. If not, the Office of Management and Budget would be required to cut spending.

How much? Well, in the case of the Republican tax bill, the CBO found that the legislation would increase the deficit next year by $136 billion, which means the Trump administration would have to cut spending by $136 billion.

Just to make this a little more complex, it’s worth emphasizing that a whole bunch federal programs are exempt from these cuts, including Social Security and Veterans Affairs, but the cuts would affect priorities such as Medicare and student loans. (Vox explained that cuts to Medicare “are capped at 4 percent,” which is where the $25 billion figure comes from.)

Indeed, there are so many exemptions that in order to even try to comply with the PAYGO rules, the administration would have to eliminate spending on some priorities altogether.

The catch is, Congress can simply vote to circumvent PAYGO and prevent unpopular cuts from taking effect, and Republicans are now saying this is what would happen to prevent Medicare cuts. But that would require approval from both chambers, including 60 votes in the Senate, where Democrats may not be in the mood to help Republicans clean up their own mess.

But if you start hearing chatter that the GOP tax plan would lead to billions of dollars in Medicare cuts, it’s not a political scare tactic. Based on the Congressional Budget Office’s own numbers, that’s a likely outcome of the Republican proposal.

Entitlements, Medicare, Tax Policy and Tax Reform

CBO: Republican tax plan would trigger big cuts to Medicare