Senate Budget Won't Allow Full ACA Defunding

When Republicans attempted to use the 2017 budget process to repeal Obamacare earlier this year, they didn't provide a 10-year plan for reducing the deficit.  

The new Senate plan proposes a balanced budget within nine years, while leaving it to other committees to figure out how to achieve that. The proposal calls for $4.8 trillion in spending cuts over 10 years and $1.635 trillion in revenue losses, including the tax cuts. Balance by 2026 is achieved by assuming $1.2 trillion in economic growth, in part due to the tax cuts. Enzi claims to achieve a $197 billion surplus in 2027.

The Republican assumptions of robust economic benefits from the budget were called into question by a separate CBO analysis. CBO predicted that the budget would reduce economic growth in the first two years and slightly increase it in later years.

CBO estimated that annual real GDP growth in the first two years would average 1.3 percent, down from an average of 1.6 percent in CBO's baseline. In later years, real GDP growth would be 2.0 percent, compared with 1.9 percent in the CBO baseline.

The budget, unlike the one proposed by Trump in May, would hold defense spending at the current budget cap instead of the president's proposed $489 billion defense increase over 10 years. Non-defense discretionary appropriations — which fund domestic agencies like the Agriculture Department and National Institutes of Health — would be cut by $632 billion over 10 years compared with $1.6 trillion in Trump's budget request.

While the Trump and House budget proposals contain a number of nonbinding policy suggestions to carry out their spending cuts, Senate Republicans — weary of policy infighting — are keeping things vague. 

Medicare, Medicaid

The House budget seeks to make $203 billion in cuts in entitlements such as Medicare, Medicaid and food stamps, and it could be used to fast-track changes to the Dodd-Frank financial law. The Senate plan avoids those options.

The Senate proposal does allow adjustments to increase the defense spending caps. It also urges senators to revise the Children's Health Insurance Program, improve management of wildfire-prevention funding, prevent private-pension bailouts and improve services to veterans.

The budget resolution doesn't address Social Security, which will run a trillion-dollar-plus deficit in the coming 10 years. In the past, Republicans have sought to balance a "unified budget" that includes the program. This time, they are keeping it "off-budget."

The plan renews authority for the CBO and Joint Committee on Taxation to use so-called dynamic scoring when evaluating bills — a move allowing lawmakers to assume that tax cuts will cause economic growth that would offset some of the revenue loss.

The Senate plan avoids other tricks. Enzi included provisions to keep appropriators from using phantom cuts known as "changes to mandatory programs" to offset discretionary spending increases.

The chairman also rejected pressure from some lawmakers to use a baseline number for tax revenue that would allow $450 billion in additional tax cuts. Instead, he stayed with the baseline used by the CBO.

— Check out Senators Nearing Bipartisan Deal to Stabilize ACA Markets on ThinkAdvisor.