Republicans Could Face Trouble Balancing Next Budget

The GOP has a formidable challenge in trying to write a fiscal 2018 resolution that balances in a decade

Republican Sens. Ted Cruz of Texas, left, and Mike Lee of Utah want to eliminate the deficit within 10 years.(Photo By Tom Williams/CQ Roll Call)

Republicans face a formidable challenge in trying to write a fiscal 2018 budget resolution that balances in a decade, a principle important to many conservative lawmakers and likely critical to landing their votes.

That’s because lawmakers almost surely will not be able to tap a major source of savings they’ve used in the past to make their budgets balance. They won’t be able to rely on $2 trillion in assumed savings from repealing the health care law.

That in turn could put Republicans, who are under pressure both to repeal the law and balance the budget, in a bind.

Here’s how it could play out.

When Congress adopted a fiscal 2016 budget resolution, the blueprint showed the deficit gone within 10 years, thanks in part to repeal of the health care law. Republicans found $2 trillion in savings by doing away with the law.

In addition, a fiscal 2017 budget resolution approved by the House Budget Committee, just like that fiscal 2016 resolution, assumed that $2 trillion of its spending cuts would come from repealing the health care law.

But if the coming health care repeal bill is similar to the last one, it will not save nearly $2 trillion.

The last repeal — a bill passed separately from the budget resolution — was scored as reducing the deficit by a much smaller $516 billion. And that measure, passed by the House and Senate in 2015, did not include any of the costs of replacement legislation, as the next repeal bill is likely to do.

Balanced budget

Some GOP lawmakers acknowledge it will be much more difficult to eliminate the deficit within a decade when they write their fiscal 2018 budget resolution this spring. But others, such as Republican Sens.  Mike Lee of Utah, Marco Rubio of Florida and Ted Cruz of Texas, are insisting on a path to balance within 10 years.

Alabama Republican Gary Palmer, who sits on the House Budget Committee, said he and several other members of the panel are pushing for another balanced budget.

“I think we’ll be able to have a more intelligent discussion about what the numbers are when we see what the replacement bill is, and that’s going to be key,” he said.

Palmer said Republicans on the committee already have met once to plan the next budget.

The House and Senate earlier this month adopted a new, different fiscal 2017 budget resolution that served primarily as a vehicle to set up the health care repeal process through reconciliation.

Several conservatives voted for it in part because of assurances from GOP leaders that they anticipate balancing the budget later on in the fiscal 2018 budget.

Mark Meadows, chairman of the hard-right House Freedom Caucus, acknowledged balance will be harder to achieve because of the loss of at least some of the assumed repeal savings.

“Your numbers are different and the numbers are not as high, so yeah, it would be much more difficult,” the North Carolina Republican said. “You’ve got to look for savings in other areas.”

History of balance

Republicans have made sure their budget resolutions have balanced since 2013, when the House adopted a fiscal 2014 budget that assumed cutting $4.6 trillion in spending to achieve a $7 billion surplus at the end of 10 years.

The fiscal 2016 budget resolution served as the foundation for the 2015 health care repeal bill. GOP lawmakers used reconciliation instructions in the budget resolution to write the repeal bill, which moved through the expedited reconciliation process.

However, instead of saving the $2 trillion envisioned in the budget resolution, the repeal bill would have cut the deficit by $516 billion.

The budget resolution assumed all the coverage benefits of the health care law were ended, saving $2 trillion.

But it kept all the revenue generated by the law as well as hundreds of billions of dollars in cuts to Medicare providers. That meant it saved well beyond the $2 trillion and balanced the budget.

The separate repeal bill, by contrast, delayed elimination of the Medicaid expansion and tax subsidies for individuals who purchase health insurance on exchanges for two years. This added cost. The repeal bill got rid of the taxes and penalties, reducing its savings. The measure kept the Medicare cuts.

The Congressional Budget Office estimated the repeal legislation would have reduced spending by more than $1.3 trillion and revenue by $833 billion, resulting in just $516 billion in deficit reduction. The GOP-controlled House and Senate passed the bill, but it was vetoed by President Barack Obama.

The nonpartisan Committee for a Responsible Federal Budget estimates that if Republicans write a repeal that is similar to the last one, it would save $750 billion over the next 10 years.

Republicans have long advocated the repeal of all the taxes in the health care law. Nevertheless, the fiscal 2016 budget resolution — which, remember, balanced the budget — assumed the revenue generated by those taxes would not be lost. Republicans said they wanted to overhaul the tax code in a revenue-neutral way, eliminating many taxes and tax breaks but keeping the same level of revenue.

Maryland Sen. Chris Van Hollen criticized the GOP on this point when he was ranking Democrat on the House Budget Committee. “The Republican budget does not balance, not by a long shot,” he said on the House floor March 25, 2015, when the chamber was debating the fiscal 2016 budget resolution. “It assumes the revenue from the Affordable Care Act, even though they claim to repeal the Affordable Care Act.”

Two options?

In a blog looking ahead to the fiscal 2018 budget resolution, the CRFB said repealing some of the health care law’s offsets and keeping or replacing some of its coverage provisions “will make balancing the budget more difficult and leave policymakers with two options.”

One option, CRFB wrote, is to find spending cuts or revenue increases outside of the health care law. The group said the other option is to “identify a new fiscal goal that falls short of achieving budget balance within a decade.”

When the health care measure was being debated in 2010, the CBO estimated it would reduce the deficit by $143 billion over 10 years. The legislation provided new health benefits, which cost money. But it more than paid for those benefits with new taxes and penalties and cuts to Medicare providers.  

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