Last week, House Minority Whip Steny Hoyer (D-MD) shared a letter from Keith Hall, Director of the Congressional Budget Office, revealing that the GOP tax reform bill will trigger automatic cuts to a host of programs due to the Pay-As-You-Go (PAYGO) Act. PAYGO was most recently passed in 2010 as a fiscal responsibility measure. If a bill passed by Congress is predicted to add to the deficit, equivalent cuts to a pre-set list of programs are triggered automatically to offset the new deficit.
For a bill like the Tax Cuts and Jobs Act, which is predicted to add $1.5 trillion to the deficit over the next 10 years, the Office of Management and Budget is required to issue a sequestration order to pay for the overage. The list of programs subject to sequestration is long and includes federal student loan programs and agriculture subsidies. But a major sticking point for Congressional Republicans is the fact that the passage of their tax reform bill will trigger automatic cuts to Medicare, to the tune of $25 billion in 2018 and 4% of the total Medicare budget for each year until the end of the 10-year window in 2027.
As outlined by Vox’s Tara Golshan, it’s possible for Congress to waive the PAYGO sequestration requirement. However, such a waiver cannot be added directly to the GOP tax bill because Congressional Republicans intend to use the reconciliation process to pass the bill with only 51 votes. That means that the PAYGO cuts would be triggered automatically unless Congress is able to pass a separate waiver later this year. The catch: such a waiver would require a full 60 votes in the Senate, meaning that Senate Republicans can’t pass a PAYGO waiver without votes from some Democrats.
So, what have Congressional Republicans had to say about the automatic Medicare cuts that would be triggered by the passage of their tax reform bill?
Senator Mark Warner (D-VA) tweeted about the Republican response when he held up the official CBO letter during last week’s Senate Finance Committee markup of the bill.
The Vox report included a strong denial from Senator Pat Toomey (R-PA), who said, “No such thing is going to be triggered automatically.”
According to a report from The Bond Buyer, Senate Finance Committee Chairman Orrin Hatch (R-UT) argued that PAYGO sequestration orders have typically been waived in the past so the cuts would not be automatic. “Let’s not try to claim that the legislation we’re debating will surely lead to a Medicare sequestration because, so far, no law has,” Hatch said.
However, PAYGO waivers are typically packaged with the bill that triggers the sequestration. Because the waiver can’t be included in the Tax Cuts and Jobs Act due to reconciliation rules, the passage of a waiver would have to come later, during a month when Congress will already be busy with some major pieces of legislation, including the budget, CHIP funding, and a legislative solution for Dreamers. And many Republicans would love an opportunity to cut benefit programs, so even if a waiver vote makes it to the floor, can Senator Hatch or anyone really promise that these same Republicans would choose to protect Medicare at the expense of the deficit?
As reported by Stephen Koff of cleveland.com, Senator Rob Portman (R-OH), who has been uncharacteristically vocal about his support for the tax bill in recent weeks, used another approach to sidestep the issue. At a tax reform event hosted by the Koch-funded PAC Americans for Prosperity, Portman was asked by a constituent whether the tax bill could impact his Medicare benefits. In response, Portman rehashed some testimony from last week’s Senate Finance Committee hearing, quoting an exchange with Joint Committee on Taxation Chief of Staff Thomas Barthold:
“Mr. Barthold, is there anything in this bill, ANYTHING in this bill, that affects Medicare and Medicaid? No. It’s a tax reform bill.”
After Portman’s narrow interpretation of the question, he claimed that he didn’t know why Democrats on the committee believed Medicare cuts would be linked to the bill, blaming the discussion on “partisan rhetoric.”
When an attendee at the event stood up to ask Portman directly about PAYGO and its effects on the Medicare budget, Portman ignored the question, and an Americans for Prosperity staff member moved to end the event. Although Portman agreed to continue the session for a few more minutes, he did not address the PAYGO question.
This cascade of denials and half-truths from Congressional Republicans begs the question: How do GOP lawmakers plan to deal with the automatic PAYGO sequestration order that will be issued if the Tax Cuts and Jobs Act passes?
Do Republicans plan to let the sequestration order stand, fulfilling the long-term aspirations of some GOP leaders, including House Speaker Paul Ryan? Will Republicans attempt to waive the cuts by bringing some Democrats on board? Or perhaps Republicans will try to use a loophole, convincing OMB Director Mick Mulvaney to simply declare that the tax bill doesn’t add to the deficit.
Thanks to Stephen Koff’s report, we may finally have an answer.
When Koff followed up with Portman’s office, Portman’s spokeswoman Emily Benavides said that Democrats would be to blame if they refuse to waive the PAYGO cuts. Benavides made the following statement:
“It would be unprecedented and a heartless political stunt if Democrats vote to cut benefits for Medicare recipients in an attempt to stop tax cuts for the middle class.”
So, there you have it. Republicans plan to pass a fiscally irresponsible tax bill that transfers huge amounts of money to corporations and the wealthiest Americans at the cost of programs and deductions that help the middle class. And rather than facing the consequences of their bill, they want to pin those costs on Democrats.
Have you asked your representatives about the PAYGO cuts? Call them as soon as their offices open, and help stop Congressional Republicans from hiding behind half-truths while they rush this bill to a vote.
