Spending Skirmishes – The Dispatch

“We’re working around the clock to build that consensus to get 218 votes and deliver on President Trump’s America First agenda so the American people can really begin to feel relieved,” Speaker Mike Johnson said at a Wednesday press conference. He insisted that his chamber was on track to meet its self-imposed deadline and pass the bill before Congress takes a week off for Memorial Day—effectively by May 22.

But whether that will happen is unclear. With the text released, enough members have said they won’t support the bill that it probably would not pass in its current form. It’s a familiar story for the House in the 119^th Congress; Republicans’ three-vote majority is so slim—and their conference so fractious—that the consensus Johnson seeks is extremely difficult to find.

Two main issues are at play. Spending hawks want to ensure deep spending reductions, but more moderate members want to ensure those cuts did not severely affect Medicaid coverage. Meanwhile, Republicans from New York, New Jersey, and California want to raise the cap on the state and local tax (SALT) deduction, but that’s not much of a priority for GOP House members generally—plus, a higher SALT cap would jeopardize other parts of the legislation. 

After its 26-hour bill markup session that started Tuesday, the Energy and Commerce Committee, which has jurisdiction over Medicaid, advanced the text of its piece of the bill. The committee’s heavy lifting enabled the House to reach its goal of $1.5 trillion in spending reductions that got fiscal hardliners on board for the budget resolution last month. But now the spending hawks are dissatisfied because some of the cost reductions won’t kick in right away.

“That math is dependent on a whole lot of variables, and you’re talking about back-loaded savings, front-loaded taxes, so I’m not sure that math is right,” Rep. Chip Roy of Texas told reporters Wednesday. But he added that the $1.5 trillion in cuts was a minimum “to even get in the door of having a conversation.”

One of the cost-saving measures Republicans included was work requirements for entitlement programs, but those do not take effect until 2029. 

“We didn’t come here to claim that we’re going to reform things and then not do it,” Roy said. “Again, the work requirement thing that doesn’t actually take place for four years, ‘til after the Trump presidency—that is facially absurd. It’s one of the stupidest things I’ve ever heard of, actually.”

While Roy and his fellow spending hawks already have serious misgivings about the bill, there is a faction of Republicans whose demands could alienate them further. GOP members such as New York Reps. Mike Lawler and Nick LaLota have coalesced around their goal to raise the SALT cap. The 2017 Tax Cuts and Jobs Act set it at $10,000, and the Ways and Means Committee text would increase it to $30,000 for households making $400,000 a year or less. Still, SALT-y Republicans are not satisfied.

“You can look at a district like mine, where three of the four counties I represent are in the top 16 highest property tax counties in America, so when you start talking about income caps at $400,000, you’re screwing a whole host of people who are getting hammered by property taxes,” Lawler told reporters Wednesday. “So this, as it stands—I’ve been very clear—does not have my support.”

To this point, that handful of Republicans have not said publicly what their floor for the cap would be in order to vote for the bill. “We’re New Yorkers. We know that the first person in a negotiation who says a number essentially gives themselves a ceiling towards the other party,” LaLota said last week.

But raising the bill’s current SALT cap would mean lost revenue that would likely necessitate more cuts elsewhere. Ways and Means Chairman Rep. Jason Smith of Missouri has said that the cost of the tax plan is just over $3.9 trillion, a little below the cap of $4 trillion set by the rules of last month’s resolution. Per those rules, any revenue the federal government loses in the reconciliation bill’s tax portion above $4 trillion must be met dollar-for-dollar in spending reductions above the $1.5 trillion target level.

“If SALT goes up, then there’s going to have to be some adjustments elsewhere,” said Freedom Caucus member Rep. Byron Donalds of Florida.

Members of the different factions—Freedom Caucus types, SALT Republicans, moderates, and rank-and-file Republicans—met in Johnson’s office on Thursday to iron out their differences. No agreement materialized, but Johnson said it was “a very thoughtful discussion” and insisted the conference was still on track to pass the bill by Memorial Day.

“Not everybody’s going to be delighted with every provision in a bill this large, but everyone can be satisfied, and we’re very, very close to that,” he told reporters after emerging from it. “So I’ve committed to work throughout the weekend on it. Others are as well, and I am convinced that we’ll be able to adjust the dial, so to speak, so that we can come to an agreement that will meet the criteria that everybody has.”

The next step is for the Budget Committee to hold a markup of the entire One Big Beautiful Bill Act (yes, that’s what congressional Republicans have actually named it) on Friday and advance it, allowing the House to vote on it next week. Still, there are numerous obstacles. Roy and fellow Freedom Caucus members Rep. Ralph Norman of South Carolina and Rep. Andrew Clyde of Georgia all sit on the committee and have said they will vote against it. Because Rep. Brandon Gill of Texas is on paternity leave, just two “no” votes would result in a tie and see the bill fail in committee.

House Majority Leader Steve Scalise said Thursday afternoon that the Medicaid work requirements would likely be implemented earlier than 2029, though there is no text for an amendment yet. 

And then there’s the Senate. There are no SALT Republicans in the upper chamber, but that body will see a similar fight over spending cuts. Sen. Josh Hawley of Missouri, for example, has raised concerns about other measures in the section of the bill dealing with Medicaid.

“I’m not going to support this bill from the House in this form,” he said on CNN Wednesday. “I think that’s clear—it’s got to change before it can pass the Senate. And I continue to stand by my line in the sand, which is no Medicaid benefit cuts. Listen, if you want to do work requirements, I’m all for that. I bet every Republican—and I bet most Americans—would agree with that. But we’re not talking here about just work requirements. The House goes much, much, much further than that.”

On the other side of the issue is Sen. Ron Johnson of Wisconsin, who wants drastically more cuts than the House version currently includes. He has called for a return to pre-pandemic levels of spending—which would be a net reduction of about $2.5 trillion.

“It’s easy to cut taxes, it’s easy to increase spending. What’s hard to do is address the whole spending equation,” he told reporters.

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