House GOP Budget Ignores Trump Cuts to Domestic Agencies

(Bloomberg) -- President Donald Trump’s proposed budget cuts to federal agencies are about to strike out in Congress again.

House Republicans on Tuesday are unveiling a 2018 budget that ignores Trump’s request for $54 billion in cuts to departments and agencies such as State and the National Institutes of Health. Instead, spending outside of defense would be reduced by $5 billion. The GOP proposal would boost funding for the nation’s defense by $72 billion, $18 billion more than Trump sought.

Congress previously ignored Trump’s requested spending cuts for the last months of the fiscal year that ends Sept. 30. The new plan outlines $1.132 trillion in spending to keep the government open when the 2018 fiscal year starts Oct. 1. The House Budget Committee plans to vote on the plan Wednesday, with a vote by the full House expected next week.

The budget also would start a fast-track process for achieving two long-sought Republican goals -- a tax-code overhaul and long-term cuts to entitlement programs such as food stamps and Medicaid. The GOP-controlled House and Senate would be able to pass both proposals with no Democratic votes. The tax code changes wouldn’t be able to be enacted without $203 billion in entitlement cuts over 10 years, though that amount hasn’t been fully agreed to yet by all House Republicans. It doesn’t provide any new detail on what the tax plan will look like.

The proposal also would facilitate approval of a partial repeal of the Dodd-Frank financial law, as well as changes to medical malpractice tort law, and would help enact cuts to food stamps, among other policies.

Drilling in the Arctic National Wildlife Refuge is projected to raise $1.8 billion, just as in the Trump budget proposal. Allowing drilling there would require a change in the law -- one repeatedly blocked on Capitol Hill amid concerns about oil exploration in the refuge threatening caribou, polar bears and other wildlife in the region.

Like Trump, House Republicans say the policies enacted by their budget would erase the deficit within 10 years, in part by bringing in more revenue from faster economic growth. The budget assumes the gross domestic product would grow an average of 2.6 percent annually over the next decade, shrinking the deficit over the period by a total of $1.5 trillion. The Congressional Budget Office estimates that growth will average 1.9 percent under current law.

Choosing Battles

Cutting domestic spending isn’t the fight Republicans leaders want to focus on this year. The reductions outlined in March by Trump’s budget director Mick Mulvaney met a wall of resistance from all but the most conservative members of Congress.

Senate Foreign Relations Chairman Bob Corker, a Tennessee Republican, told Secretary of State Rex Tillerson last month that reviewing the proposal to cut the State Department by 30 percent was “a total waste of time.”

Republican Senator Roy Blunt of Missouri, whose subcommittee funds the Education Department, told Secretary Betsy DeVos that the 14 percent cut proposed for her budget wasn’t viable either.

“This is a difficult budget request to defend,” Blunt said.

An administration official said the $5 billion cut to domestic spending, while much smaller than what Trump sought, is a step in the right direction toward reducing the budget deficit. The official lauded the budget for easing passage of some entitlement cuts.

‘Govern as They Campaigned’

Dan Holler of the conservative group Heritage Action, though, is pressing Republicans to deliver on their promises to cut federal spending.

“The Republican Party has shown time and time again that they are not willing to govern as they campaigned,” Holler said. “This is when the rubber meets the road, when they actually do what they said they would do.”

Even if House and Senate Republicans agreed to back Trump’s cuts, they would meet universal opposition from Democrats. And while the budget measure can be adopted with a simple majority, using only Republican votes, a separate funding bill needs 60 votes in a Senate where the GOP holds 52 seats out of 100.

"They are bowing to reality. It would be hard to get appropriations bills through Congress with that level of cuts," said Steve Ellis of Taxpayers for Common Sense, a group that opposes government waste.

Entitlement Cuts

On entitlement spending, the main dispute among House Republicans is how much to cut. House Budget Chairwoman Diane Black of Tennessee is proposing to speed cuts to food stamps, Medicaid and other social safety-net programs of at least $203 billion over 10 years.

The entitlement cuts, which could be achieved in part by setting work requirements for many recipients, are a key demand from House conservatives in exchange for supporting the smaller agency budget cuts.

“Everybody who is able-bodied needs to work, that’s just common sense,” conservative Ohio Representative Jim Jordan said. “If we can make these changes, we could be comfortable voting for higher budget caps for next year than we otherwise would be.”

But moderate Republicans late last month told House Speaker Paul Ryan of Wisconsin that $200 billion is too large a cut for them to support.

‘What Needs to Happen’

Maya MacGuineas, president of the Committee for a Responsible Federal Budget, said it makes sense to focus on so-called “mandatory” programs like entitlements -- while ignoring Trump’s call to cut "discretionary" funds for programs like Head Start and cancer research -- because the entitlement programs are larger and are growing faster.

"In many way, Trump’s budget request missed the mark both on what needs to happen and what can happen. The discretionary cuts are not going to fix our budget problem and they are not going to materialize because there isn’t the will to make them," she said.

For Heritage Action, following through on the entitlement cuts would make the budget acceptable.

"What matters in this budget is the required mandatory cuts," Holler said.

While the president vowed not to touch Medicare for senior citizens, the House budget assumes Congress will make $487 billion in future cuts. They’re offering a proposal similar to Ryan’s plan to give seniors the option to forgo traditional Medicare and buy private plans using limited government subsidies. Over time, seniors would bear more and more of the cost of their health care.

The proposed entitlement cuts don’t have the same teeth as the House budget’s defense and domestic agency spending levels, which are already being included in must-pass spending legislation to keep the government open in October. Instead, the budget would nudge lawmakers to make the cuts by requiring them to be a part of the tax code overhaul that is the top economic priority of the White House.

Tax-Overhaul Priority

Of all the major proposals in the new House budget, a tax overhaul is the one most likely to happen given the priority that Trump and Republican leaders have put on the issue. Treasury Secretary Steven Mnuchin said last week the White House wants a tax overhaul enacted by the end of the year.

The House budget plan would let Republicans use a fast-track procedure that allows a simple majority vote in the Senate, rather than the usual 60 votes that require Democratic consent.

As in the Trump budget, Republicans are proposing large tax-rate cuts without yet explaining how they would be enacted without adding to the deficit.

Trump has at times indicated he would support a tax cut that wouldn’t necessarily be paid for with spending reductions elsewhere.

“The most important thing about this budget is tax reform,” said Josh Gordon, policy director of the Concord Coalition, an advocacy group that backs deficit reduction. He said requiring tax-rate cuts to be paid for by ending some deductions is "huge for fiscal responsibility."

The House Ways and Means Committee under the budget will have to produce a tax code and spending cut bill that cuts at least $52 billion from budget deficits over 10 years.

--With assistance from Jennifer A. Dlouhy

To contact the reporter on this story: Erik Wasson in Washington at ewasson@bloomberg.net.

To contact the editors responsible for this story: Kevin Whitelaw at kwhitelaw@bloomberg.net, Joe Sobczyk