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- Republicans’ Tax Cuts and Jobs Act is expected to add about $1.5 trillion to the federal deficit over 10 years.
- According to the Statutory Pay-As-You-Go Act, or Paygo, the new debt must be offset or the Paygo requirement must be waived.
- If Paygo is not waived, it would trigger automatic cuts to programs like Medicare and farm subsides.
The Republican tax plan would force the government to slash billions of dollars’ worth of core services unless Democrats relent, according to a new report.
A letter from the nonpartisan Congressional Budget Office to Democratic Rep. Steny Hoyer on Tuesday said that because of a congressional rule, essential programs like Medicare could face deep cuts unless some Democrats agree with the GOP to waive the provision.
The Statutory Pay-As-You-Go Act, or Paygo, requires tax cuts and other types of legislation to pay for themselves; if they don’t, Paygo triggers automatic spending cuts to offset any new debt added by the legislation.
According to the CBO, since the GOP’s Tax Cuts and Jobs Act is expected to add roughly $1.5 trillion in new debt over the next 10 years, Paygo would force spending cuts of $150 billion a year on average to offset the reduced revenue.
The letter from the CBO said the cuts in 2018 would total $136 billion, including slashing the budget to core programs like Medicare. The CBO said Paygo would force a cut of $25 billion from Medicare – the maximum amount allowable – and then cuts totaling “between $85 billion to $90 billion” from other programs like the federal student-loan program and farm subsidies.
These cuts can be waived – but not under the process being used by the GOP to pass the tax bill. The process, known as budget reconciliation, allows Republicans in the Senate to avoid a Democratic filibuster and pass the bill on a party-line vote.
The Paygo wavier, however, would not qualify for reconciliation consideration and would need at least 60 votes. Since Republicans have only 52 seats in the Senate, they would need eight Democrats to get on board to waive these requirements.
Democrats say the Paygo cuts would fall on Republicans, which are pushing the expensive tax legislation on a purely partisan basis. This would, in theory, give Democrats leverage to demand changes in the tax bill to win Paygo support.
The GOP, on the other hand, would say Democrats knew the consequences and held the Paygo cuts hostage to block the tax bill.
Regardless of who shoulders the blame, the Paygo implications could throw another massive question mark into the already volatile tax-bill negotiations.