House GOP Budget Calls for Tax Reform, Spending Cuts

House Republicans released a budget proposal for the coming fiscal year on Tuesday that calls for tax reform and spending cuts. This comes with the Budget Committee set to hold a markup hearing to debate and approve the measure on Wednesday.

Over the 10-year budget window, House Republicans project the plan to balance the federal budget, gradually reducing the deficit from $472 billion in fiscal year 2018 to a surplus of $9 billion in 2027.

Ordinarily, budget resolutions such as this have little impact on actual federal spending — they serve as blueprints that don’t authorize spending and don’t even get scored by the Congressional Budget Office. Because this budget resolution also contains reconciliation instructions related to drafting a tax reform package that could be passed with simple majorities in both chambers of Congress, it carries more significance, particularly with regard to its top-line budget figures.

We’ve broken down some of the major items in the House Republican budget along with the assumptions upon which it’s based below:

Assumptions: The House GOP budget assumes the enactment of the House-passed American Health Care Act, which is currently stalled in the Senate with Republicans unable to agree on a revised plan of their own.

It also assumes that the U.S. economy would grow on average by 2.6 percent over the 10-year period due to tax reform, welfare reform, spending cuts, regulatory reforms, plus the repeal and replacement of Obamacare. In its most recent budget and economic outlook, the Congressional Budget Office (CBO) forecasts an average annual growth rate of 2.1 percent through 2018 and 1.9 percent during the 2023-2027 period.

Finally, the House GOP budget assumes a reduction of $700 billion in improper payments by the federal government over the 10-year period. In 2015 alone, improper payments totalled $136.7 billion, which extrapolated over 10 years would be about $1.4 trillion, a figure the budget looks to halve.

Taxes: The proposal gives the House Ways and Means Committee reconciliation instructions to draft comprehensive tax reform legislation that simplifies the tax code, lowers tax rates for individuals, and reduces corporate tax rates while transitioning to a more competitive system of international taxation. It’ll be up to the committee to produce a tax reform bill after this budget is enacted.

Spending: Federal spending would be reduced by $5.44 trillion over the 2018-2027 period under this budget relative to current law, with most of the reductions coming from Medicaid and other non-defense programs.

Defense: A total of $11.543 trillion in defense spending would be authorized over the 2018-2027 period. That’s $929 billion more than what the spending caps imposed by the Budget Control Act (commonly known as sequestration) would allow for over that period.

Medicare: This proposal assumes the enactment of a premium support system for Medicare, under which beneficiaries would choose a federally certified plan and the government would directly pay insurers to cover the plan’s cost (similar to how Medicare Advantage and Medicare Part D work). Coverage would be guaranteed and traditional Medicare would still be available for those in the program.

Medicaid: In addition to the American Health Care Act’s reforms to Medicaid, this budget would propose a mandatory work requirement for able-bodied, non-elderly, non-pregnant adults who are enrolled in Medicaid. Those who are unable to work would be exempt from the requirement. It also reduces the amount of federal assistance provided to those above the federal poverty line.

Social Security Disability Insurance: Individuals would no longer be able to "double dip" and receive both Social Security Disability Insurance and unemployment insurance.

Border Security: The Dept. of Homeland Security would be fully funded, and this budget would provide funding for the border wall, surveillance technology, and bases near the border through DHS.

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— Eric Revell

(Photo Credit: Gage Skidmore via Flickr / Creative Commons)