The Republican tax bill could force billions of dollars in cuts to programs like Medicare

Mitch mcconnellMark Wilson/Getty ImagesSenate Majority Leader Mitch McConnell
  • Republicans’ Tax Cuts and Jobs Act would add $US1.5 trillion to the federal deficit over 10 years.
  • According to the Statutory Pay-As-You-Go Act, or Paygo, the new debt must be offset or the Paygo requirement must be waived.
  • If Paygo is not waived it would trigger automatic cuts to programs like Medicare and farm subsides.

The Republican tax plan would force the government to slash billions of dollars worth of core services unless Democrats relent, according to a new report.

A letter from the Congressional Budget Office (CBO) to Democratic Rep. Steny Hoyer said that due to a congressional rule, essential programs like Medicare and Border Patrol could face deep cuts unless some Democrats agree with the GOP to waive the provision.

In question is the Statutory Pay-As-You-Go Act, or Paygo, that requires tax cuts and other types of legislation to pay for themselves or else triggers automatic spending cuts to offset any new debt added because of the legislation.

According to the CBO, since the GOP’s Tax Cuts and Jobs Act (TCJA) adds roughly $US1.5 trillion in new debt over the next 10 years, Paygo would force immediate cuts in spending of $US150 billion a year on average to offset the reduced revenue.

In order to get around Paygo, at least a handful of Democrats in the Senate would have to vote to waive the requirement for the GOP tax bill. Without the waiver, substantial offsetting cuts would go into effect.

The letter from the CBO said that the cuts in 2018 would total $US136 billion, including slashing the budget to core programs like Medicare. The CBO said Paygo would force a cut of $US25 billion from Medicare — the maximum amount allowable — and then other cuts totaling “between $US85 billion to $US90 billion” from other programs like Border Patrol, the federal student loan program, and farm subsidies.

These cuts can be waived, but not under the current budget reconciliation process being used by the GOP to pass the TCJA. The reconciliation process allows Republicans in the Senate to avoid a Democratic filibuster and pass the bill on a party-line vote.

The Paygo wavier, however, would not qualify for reconciliation consideration and would need at least 60 votes. Since Republicans only have 52 seats in the Senate, they would need eight Democrats to get on board to waive these requirements.

Democrats say that the Paygo cuts would fall on Republicans, because they did not fund their tax legislation and are passing it on a purely partisan basis. This would, in theory, give them leverage to demand changes in the tax bill in order to win Paygo support.

The GOP, on the other hand, would say that Democrats knew the consequences and held the Paygo cuts hostage to block the tax bill.

Regardless of who shoulders the blame, the Paygo implications could throw another massive question mark into the already volatile TCJA negotiations.

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