Photo: Roy De La Cruz/SOPA Images/LightRocket/Getty Images
As the crawling pace of congressional Republican action on Trump’s legislative agenda has shown, cutting taxes by a few trillion dollars when the federal government is already running record deficits and debt is hard work. Sure, regular MAGA folk may think that federal spending is just a target-rich environment of wokeness, waste, and welfare (defined as benefits other people surely don’t deserve). But people in Congress know it’s not that easy.
Thirty-six percent of federal spending is on Social Security and Medicare, which Republicans generally try to leave alone (though Elon Musk is definitely violating all rules of political prudence by greatly interfering with the Social Security Administration). Another 13 percent goes for national security, which Republicans invariably try to increase. And still another 13 percent is devoted to interest payments on existing debt, which must be paid. So three-fourths of the budget is basically off-limits as a source of funds to pay for the roughly $5.3 trillion in tax cuts (over ten years) Team Trump and its congressional allies want authorized as part of the “one beautiful” budget-reconciliation bill they intend to enact by the end of the summer. And because budget-reconciliation bills deal with long-term mandatory spending required by law, not annual appropriations that Congress can in theory take or leave, the spending cuts need to come from entitlement programs; discretionary spending cuts (being made so heavily by Musk) are just short-term pocket change from a big-picture point of view.
So if you take all the sacred cows of the federal budget off the table, there’s really just a small pot of money, most of it targeted to low-income Americans, that’s available for plundering to pay for those all-important tax cuts. Less than a half-trillion goes to what we usually think of as “welfare” (income-maintenance programs for poor families, food stamps and other nutrition programs, and low-income tax credits). Then there’s around $600 billion for Medicaid, and the closely associated Children’s Health Insurance Program (CHIP), and another $100 billion and change for Obamacare marketplace subsidies. The biggest target of all is Medicaid, the principal source of health insurance for 72 million Americans.
Cutting Medicaid may be less unpopular than cutting Social Security or Medicare, but it’s still unpopular. A recent national poll of registered voters from the firm of Donald Trump’s own pollster, Tony Fabrizio, shows limited willingness to cut Medicaid even among the president’s own supporters:
Voters oppose cutting Medicaid by a 69 to 23 percent margin. Trump voters oppose Medicaid cuts by 10 points, while swing voters oppose by a sizable 48-point margin.
Now voters, particularly Trump voters, really like the idea of tax cuts. But when asked if they’d support financing tax cuts with Medicaid cuts, the reaction was impressively negative:
When asked specifically if voters support or oppose cutting Medicaid spending to pay for tax cuts, they oppose it by a 50-point margin, 70 to 20 percent, with a 54 percent majority strongly opposing cutting Medicaid to pay for tax cuts. Two-thirds of swing voters oppose this as do Trump voters by a 15-point margin.
That’s right: Half of Trump voters oppose this specific trade-off, which is precisely what congressional Republicans are looking at doing. The House-passed congressional budget resolution assumes $898 billion over ten years coming out of the programs supervised by the Energy and Commerce Committee. The vast majority of those savings will have to come from Medicaid.
There are two major evasions of this terrible problem being advanced by congressional Republicans, one in the Senate and one in the House. The Senate is, for the moment at least, defining much of the problem away by deeming $3.6 trillion in tax cuts (the portion representing extension of the 2017 Trump tax cuts, which expire at the end of this year) as having no impact on the deficit, and thus as “free,” requiring no spending-cut offsets. That reduces the pressure to whack Medicaid, and, indeed, the Senate version of the budget resolution absolutely requires no more than $4 billion in spending cuts. The House, meanwhile, is trying to pretend it can wring significant savings out of Medicaid without reducing actual benefits by going after — you guessed it — waste, fraud, and abuse.
One tack from the House will likely be to impose a national work requirement on Medicaid beneficiaries, which might be reasonably popular in theory. But as the Kaiser Family Foundation noted of Medicaid recipients under 65, that may be a shallow well of dollars:
Ninety-two percent were working full or part time (64 percent) or not working due to caregiving responsibilities (12 percent), illness or disability (10 percent), or school attendance (7 percent). The remaining 8 percent of Medicaid adults reported that they are retired, unable to find work, or were not working for another reason.
A more profitable source of federal Medicaid savings may come from one or more methods of shifting costs to the states, which currently pay (overall) 31 percent of the program’s expenditures. In 2017, the failed Republican bill to repeal Obamacare would have simply capped federal Medicaid expenditures at a fixed amount per beneficiary and forced the states to pick up the rest. Now there’s talk of lowering the exceptionally high match rate set for those covered by the Medicaid expansion authorized by the Affordable Care Act. Unfortunately for congressional Republicans, that would really hammer people in red states where either legislators or voters recently pushed through a Medicaid expansion, particularly those with laws requiring abandonment of state coverage if the Fed tries to welsh on the original arrangement. Overall, the KFF estimates, a drop in the federal match rate for the expanded Medicaid population is likely to deny health insurance to 20 million Americans. That’s a “Medicaid cut” by anyone’s definition.
So what will Trump and the GOP do? They are very unlikely to go back on their ambitious tax-cut plans unless everything falls apart. There may be a limit to exactly how much lying they can do about the deficit impact of tax cuts or their ability to generate many hundreds of billions of dollars in savings from eliminating “waste, fraud, and abuse.” So eventually, we will likely see the same debate that turned out so poorly for Republicans in 2017 with cutting Medicaid to pay for high-end tax cuts becoming less popular every day. Then the question will become whether Trump & Co. even care about public opinion.
