House and Senate Republicans are still butting heads over the budget parameters needed to advance President Trump’s agenda, and nearly every one of them must be on the same page for the party-line bill to succeed.
It’s been three weeks since the House adopted a budget blueprint laying out that chamber’s benchmarks for sweeping tax and spending cuts that will be part of a massive reconciliation package that House Speaker Mike Johnson hopes to send to the president’s desk by Memorial Day.
Senate Republicans have agreed to the House plan for “one big, beautiful bill” for the filibuster-proof reconciliation process. But they want to make changes to the House budget before moving forward.
Some of the outstanding issues the two chambers need to hammer out are minor, but others are significant tripwires that could derail the whole package.
These are the four major roadblocks Republicans must resolve:
Cost of tax cuts
Republicans have spent most of the past few weeks discussing how to set an appropriate ceiling for the net cost of extending and expanding Mr. Trump’s first-term tax cuts that are set to expire at the end of this year.
The House budget sets the tax cut ceiling at $4.5 trillion, with a provision that would allow it to be dialed up or down depending on how much spending cuts are paired with it.
Senate Republicans’ top priority is making the 2017 Trump tax cuts permanent, which they say cannot be done under the House budget.
They are pushing to add language requiring the tax cuts to be measured under a current policy baseline that would effectively wipe away the cost of extending tax cuts already in place.
Extending the expiring 2017 tax cuts would cost roughly $4.6 trillion under the standard “current law” baseline the Congressional Budget Office uses. Switching to a “current policy” baseline would give Republicans significantly more budget room to work with as they consider adding trillions in new tax cuts.
Mr. Johnson, Louisiana Republican, endorsed the current policy baseline despite some skeptics in his conference, and Mr. Trump backed the idea in a meeting with Senate Finance Republicans last week.
“I think we’re going to get there,” Sen. Steve Daines, Montana Republican, told The Washington Times. “It seems like it’s moving in that direction.”
One obstacle is the Senate parliamentarian, the referee on Senate rules. She will decide whether the current policy baseline can be used in reconciliation, as there is no precedent for doing so.
House Budget Chairman Jodey Arrington, Texas Republican, is skeptical that the change would comport with the reconciliation rules, the basic premise of which is that any policy change must have a material budget impact to be included in the filibuster-proof process.
“With current policy, there is no budget impact,” he said.
Even if both chambers and the Senate parliamentarian agree to the current policy baseline, Republicans will still have to set an upper limit for the cost of new tax cuts like Mr. Trump’s proposal to exempt tips, overtime and Social Security income.
Spending cuts
Adjusting the tax ceiling could lead Republicans to renegotiate the floor for spending cuts in the House budget, which some lawmakers are already interested in lowering to avoid potentially harmful cuts to Medicaid.
The House budget set a technical floor of $1.5 trillion over 10 years for spending cuts across multiple committees but an actual target of $2 trillion, with the ability to lower the tax cut ceiling if they fall short or raise it if they exceed that goal.
Hardliners in the House Freedom Caucus who negotiated that compromise said they are unlikely to entertain any changes that would lower the spending cut target.
The problem is Senate Republicans are not sold on the House targets, specifically an instruction that requires the House Energy and Commerce Committee to find $880 billion in cuts that would require savings from Medicaid.
Reconciliation only allows cuts to mandatory spending and of the $8.8 trillion that falls under the Energy and Commerce panel’s jurisdiction, only $581 billion is from programs other than Medicaid, according to the CBO.
GOP leaders have said they can find savings in Medicaid without cutting benefits. Several Republicans floated lowering the federal matching rate for states that opted into the Obamacare expansion of Medicaid to include more able-bodied adults.
House Energy and Commerce Chairman Brett Guthrie, Kentucky Republican, said the Obamacare incentive offering states a 90% federal matching rate for the expansion population is unfair when the rate is lower for disabled children and others covered under the original program.
“We want to make sure that the most disabled, the destitute, the people that Medicaid was originally designed for, works and works effectively,” he said.
Debt limit
The House plan calls for including a $4 trillion increase in the debt limit in the party-line reconciliation bill, which conservatives in that chamber say they will support if paired with the deep spending cuts.
Several Senate Republicans agree that including the debt limit in the party-line reconciliation is better than trying to cut a deal with Democrats.
However, some have questioned whether adding the debt limit will make it harder to find a compromise between Republicans on differing sides of the spending cut debate.
Sen. Ron Johnson, Wisconsin Republican, for example, has said he’d need more spending cuts than the House budget calls for if he were to support a debt limit increase.
Defense funding
Republicans are planning to use the reconciliation process to increase spending in a handful of areas, namely border security, immigration enforcement and defense.
The Senate, which has a stronger contingent of defense hawks than the House, had been pushing for adding $150 billion over four years to the Pentagon budget, compared to the $100 billion increase over 10 years the House proposed.
The stopgap government funding bill Congress passed last week provides for mostly flat funding for fiscal 2025, but an extra $6 billion for the Defense Department. Because that’s less than would have been agreed to under a bipartisan appropriations deal for new fiscal 2025 funding levels, Senate defense hawks are pushing for a larger increase in reconciliation.
Senate Armed Services Chairman Roger Wicker said he believes the target will need to be raised to north of $175 billion.
“We’ve had conversations back and forth,” he said when asked if he’s discussed that figure with House Republicans.
Before the government funding stopgap debate, House Armed Services Chairman Mike Rogers, Alabama Republican, said he expected a compromise to end up somewhere in the range of $125 billion to $150 billion.
