Trump may not sign the tax bill until 2018 to avoid a Medicare disaster

  • Trump may delay the signing of the tax bill until January 3, due to the PAYGO (Pay As You Go) provision.
  • Since the tax bill adds to the debt, PAYGO would automatically trigger a $US25 billion cut to Medicare to offset that new debt unless Congress waives the rule.
  • Trump is waiting to see if Congress passes a PAYGO wavier before signing.
  • If they do not, he will sign the tax bill in 2018 so the Medicare cuts don’t go into effect until 2019.

Republicans have passed their massive tax reform bill through Congress, but they may have to wait a bit longer for it to become law.

President Donald Trump still needs to sign the bill, and he might not do so until the new year. That’s for one reason: to avoid a massive $US25 billion cut to Medicare.

The cut would come from the Pay As You Go Act, or PAYGO. The rule requires that any substantial increase in the deficit from a bill must be offset by reduced spending elsewhere. If no offsets are included in the bill, automatic cuts kick in when the deficit starts to grow.

The tax bill will add substantially to the deficit – around $US1.5 trillion over 10 years – meaning that under PAYGO rules, an equal amount of spending must be cut to make up for the shortfall. According to a letter from the Congressional Budget Office, $US150 billion a year would need to be slashed.

The biggest of these cuts would come in Medicare. According to the CBO, if the tax bill is signed into law in 2017, a $US25 billion offsetting cut to Medicare in 2018 would result. The rest of the $US150 billion in cuts would come from things like border security and farm subsidies.

The cuts could be avoided if Congress passes a waiver that would prevent PAYGO from applying to the tax bill. Such a waiver is currently included in the government funding bill that is going through Congress. A White House official said Trump would likely sign the tax bill Friday if the waiver passes with the funding bill.

Trump has long promised not to cut Medicare. His back-up plan, if the waiver fails to pass, is to sign the bill on January 3. That would delay the automatic cuts until 2019 and give Congress more time to try again on a waiver.

January 3 is the latest date Trump could sign the bill without what is known as a pocket veto going into effect. A pocket veto occurs if a president does not sign a bill for 10 days, not including Sundays or federal holidays.

If Trump does not sign the bill by then, it would be considered vetoed, and another vote would be needed in Congress. That vote, however, would require the support of two-thirds of the House and Senate members, which would doom the bill.

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