US House Speaker Mike Johnson. — Bloomberg
WASHINGTON: House Republican leaders took the first step toward enacting trillions of US dollars in tax cuts and raising the nation’s US$36 trillion debt limit, offering a plan that risks rankling quarrelling factions in the party.
The proposal aims to smooth the passage of President Donald Trump’s top legislative priorities: the extension of expiring individual and business taxes passed in 2017, boosting defence and border security spending and cuts to non-defence spending.
Passing any measure is far from certain, given Republicans’ narrow and fractious majority.
Democrats are expected to be unified in opposition.
The budget would allow Congress’s tax-writing committees to increase the deficit by US$4.5 trillion over 10 years to accommodate tax cuts.
The US$4.5 trillion runway means that Republicans could only do a straight extension of Trump’s 2017 tax cuts.
To make any other tax code changes – eliminating taxes on tips, or fulfilling any of Trump’s other campaign pledges – they’d need to find spending cuts or tax increases to offset the cost.
The plan requires at least US$1.5 trillion in spending cuts over a decade in programmes such as Medicaid health coverage for the poor and disabled, Obamacare subsidies for low-income families and food assistance.
It also mandates a US$300bil increase in spending on defence, immigration enforcement and border security.
To mollify fiscal hawks, the plan would reduce the size of the tax cuts if Congress doesn’t meet a goal of cutting at least US$2 trillion in spending.
The plan also would fast-track a US$4 trillion increase in the debt ceiling, avoiding a catastrophic default on US payment obligations later this year.
Dozens of current GOP lawmakers are opposed to raising the debt ceiling on principle and have never voted to support an increase to the nation’s borrowing limit.
Previous increases have required bipartisan support.
The debt ceiling came back into effect on Jan 2 but the Treasury Department can avoid a default by employing accounting measures, possibly into the summer.
By using the partisan budget reconciliation process, the GOP would deprive Democrats of any ability to use the debt ceiling deadline to extract concessions.
Bills passed with this process cannot be filibustered in the Senate, effectively allowing passage by a simple majority rather than the usual 60 votes needed to end debate.
Speaker Mike Johnson’s budget plan could still fall short because of ongoing rifts in his party and a slim majority in which any two Republicans can team up with unified Democrats to defeat legislation.
The first step would be having the Budget Committee approve the plan yesterday before a full House vote slated for the end of the month.
If both the House and Senate approve the budget, then they must craft a bill that complies with the outline in order to enact the tax cuts and debt ceiling increase.
Johnson told reporters he will use the coming days to rally his conference behind the plan.
“This will unlock the process and get us moving, so we are excited about it,” he said. “We will need the week to work through it and talk to members.
A handful of fiscal hawks have demanded much larger cuts to non-defence spending in any tax cut bill, while a group of moderate Republicans have said they would not back deep cuts to programmes like Medicaid, the government-funded health care programme for people with low incomes.
The GOP also has been divided over how high to let the deficit go to accommodate tax cuts.
House Ways and Means Committee Chairman Jason Smith is pushing for as much flexibility as possible on the deficit in order to enact top Trump priorities like ending the tax on tipped wages.
Flexibility may also be needed to satisfy a group of Republicans mostly from New York, New Jersey and California who want to see an end to the limit on the deduction of state and local taxes.
Ending that limit would lead to bigger tax cuts for many property owners in their states. — Bloomberg
