(Bloomberg) -- House Republicans are considering an ambitious target of about $500 billion in cuts to so-called mandatory spending in their fiscal 2018 budget resolution, according to two people familiar with the plan.
The House Budget Committee is considering instructing Congress to pursue the cuts to a rarely-touched slice of the budget that totaled $2.4 trillion in 2016 and which includes spending on safety-net programs like Medicare, Medicaid, unemployment benefits and food stamps.
If agreed to by the Senate, the instructions in the budget resolution would set up a fast-track process to make the spending cuts over 10 years, bypassing any threat of a Senate filibuster by Democrats. The purpose of the cuts would be to reduce the deficit, rather than offset other pieces of legislation, such as a tax overhaul, said one of the people. Both asked not to be named because the discussions are private.
While spending cuts would create political risks, Republicans could tout them as a sign of fiscal discipline as they consider a menu of tax cuts for businesses and individuals favored by President Donald Trump. A bill to rewrite the tax code is the primary objective of a reconciliation package for fiscal 2018 that lawmakers are trying to use in order to ease passage in the Senate. Lawmakers say their goal is to make the tax overhaul revenue-neutral, so the changes would be permanent under Senate rules.
Meanwhile, the House Budget Committee is weighing all options for using the reconciliation process for the intent of deficit reduction, the person said.
The committee’s goal has been to approve the budget resolution by June. Once the House and Senate adopt the same spending and revenue targets for the fiscal year, the committees that oversee the programs are tasked with deciding how to achieve them.
Medicaid Funding
House Budget Committee Chairman Diane Black declined to comment when asked Wednesday about whether the mandatory cuts are under consideration.
The non-partisan Congressional Budget Office projects the federal government will spend $34 trillion in mandatory funds over the next 10 years. Of that amount, $23 trillion falls under Medicare and Social Security, two programs that President Donald Trump has vowed to protect from cuts. The fast-track process cannot be used for Social Security.
That leaves a pot of money totaling $11 trillion. The largest share of that goes to Medicaid funding, followed by food stamps, Supplemental Security Income, unemployment compensation and child-nutrition programs. Also in the category are retirement programs for federal workers and agricultural subsidies. Money raised from spectrum auctions or cutting the earned income and child tax credits also count toward mandatory spending reductions.
‘Powerful Tool’
Any bill making the cuts will likely not be linked to a bill enacting a tax code overhaul, said Ed Lorenzen, a former House budget staffer who’s now at the Committee for a Responsible Federal Budget, a Washington policy group.
“Previous budget resolutions have assumed large spending cuts that were never acted on,” Lorenzen said. “Budget reconciliation can be a powerful tool to actually achieve the deficit reduction promised in the budget resolution.”
Black’s budget could contain separate spending and tax reconciliation instructions to insulate tax-code changes from any added political complications caused by mandatory spending cuts. Otherwise, a tax bill that fails to meet the spending cut instructions could be subjected to a filibuster in the Senate, Lorenzen said.
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