To satisfy GOP fiscal hawks in the House of Representatives, Speaker of the House Mike Johnson and Senate Majority Leader John Thune promised $1.5 trillion in spending cuts in the 119th Congress’ key tax and spending bill. Now, they have to answer the hard question: Where do the reductions come from?
With Johnson having successfully passed a budget resolution through his slim and unruly Republican majority earlier this month, Congress unlocked the reconciliation process, by which it can pass a fiscal bill with 51 GOP votes in the Senate instead of a 60-vote majority. But the resolution is just a framework.
Of the cuts needed to fund President Donald Trump’s agenda, the biggest chunk will come from the spending overseen by the House Energy and Commerce Committee—$880 billion, per the House’s instructions to its committees. The wrinkle? That’s the committee that oversees Medicaid.
On the one hand, Republicans need to keep meaningful cuts in the reconciliation bill to win over the spending hardliners. At the same time, they can’t cut so deep that they’ll lose the votes of more centrist members. Having survived as the head of a rowdy Republican House majority since fall 2023, Johnson will face his biggest challenge yet to win the votes of both groups and pass the bill.
As he has sought spending reductions, he has long promised not to cut benefits for vulnerable people such as children, pregnant women, and disabled people who are part of the 79 million Americans on Medicaid last year.
“Medicaid has never been on the chopping block,” Johnson said at a press conference in February. “What we’re talking about is finding the—it’s non-benefit-related reforms to the program, right? Medicaid is infamous for fraud, waste, and abuse. By some estimates, large percentages of the dollars that are allocated there are wasted and stolen.”
But the amount needing to be cut by Energy and Commerce, which oversees spending on both Medicaid and Medicare, makes it unlikely that simply eliminating waste and fraud would be sufficient. One reform Johnson floated was work requirements for “men under the age of 40, for example, who have rolled onto Medicaid” as a result of the 2014 expansion of Medicaid mandated by the Affordable Care Act. Again, the associated savings from such a reform is unlikely to be substantial.
Centrist Republicans and those from swing districts are not totally convinced that benefits to their constituents will not be on the chopping block, despite Johnson’s promises. Twelve of them sent a letter to top House GOP leadership and Energy and Commerce Chairman Rep. Brett Guthrie of Kentucky, threatening to vote against a final bill with drastic cuts to the program.
“We support targeted reforms to improve program integrity, reduce improper payments, and modernize delivery systems to fix flaws in the program that divert resources away from children, seniors, individuals with disabilities, and pregnant women—those who the program was intended to help,” the signees wrote. “However, we cannot and will not support a final reconciliation bill that includes any reduction in Medicaid coverage for vulnerable populations.”
One of those Republicans was Rep. Don Bacon, who represents a Nebraska swing district that former Vice President Kamala Harris won in November.
“I’ve committed to logical reforms to Medicaid,” he told The Dispatch in an interview. “I think workforce requirements for able-bodied people that don’t have young kids are smart. That saves a lot of money right there. And also doing an audit of the rolls periodically saves lots of money. We haven’t done a good audit of the Medicaid rolls for five years, and there’s no doubt there’s people who probably shouldn’t be on there.”
For what it’s worth, that isn’t too far off from what Rep. Ralph Norman, a key fiscal hardliner on the Budget Committee, has said.
“I don’t call it a cut. Is work requirements a cut? Is block grants to the state a cut? No, it’s a reallocation. You’re putting it back to the states, which I think makes sense,” he told reporters in February.
Part of the reason for the spending reductions is to fund the tax cuts that Trump hopes to codify, which are estimated to cost around $4.5 trillion over 10 years. A key piece of Republicans’ agenda is extending the expiring provisions of the 2017 Tax Cuts and Jobs Act. Should those tax breaks fully sunset at the end of this year, most Americans will see a tax increase. Republicans want to make the tax cuts permanent, not merely extend them. To ensure compliance with the Senate’s rules regarding the reconciliation process, they plan to use the current policy baseline, a novel and controversial method of scoring tax cuts that effectively measures their impact on the deficit at zero dollars.
But putting in place Trump’s 2025 tax plan likely will not be a mere copy-paste job of the legislation from 2017. Throughout the campaign, the president floated several new tax reduction ideas.
For one, Trump committed during the campaign to raise the cap on state and local tax deductions—commonly referred to as the SALT deduction—which benefit earners in Democratic cities and states with high tax rates. The 2017 law had lowered that cap. He also promised to eliminate taxes on tips, Social Security payments, and overtime pay.
One controversial idea to pay for those new priorities is to raise taxes on the wealthy. As The Dispatch reported earlier this week, there are very real proposals circulating among Republicans on Capitol Hill to raise taxes on those making over $1 million a year.
That idea saw one of its first public supporters emerge last week: Rep. Dan Meuser of Pennsylvania. “The president is determined not to have a standard … Republican-style budget. What he wants to see is something that is in the interest of all America, middle-income America, small businesses.” he said on Fox Business.
While the proposals are under active consideration among Republicans, the chances of tax hikes getting into the final bill are low, especially since neither Johnson nor Trump support raising taxes on top brackets, which would be a departure from decades of standard Republican fiscal policy.
“You’ll lose a lot of money if you do that,” Trump said Wednesday. “And other countries that have done it have lost a lot of people. They lose their wealthy people. That would be bad, because the wealthy people pay the tax.” The same day, Johnson made similar comments: “I’m not in favor of raising the tax rates because our party is the group that stands against that traditionally. So there are lots of ideas thrown out on the table along this process over the last year, but I would just say for everybody, just wait and see.”
So, when will we know what Republicans have decided to do on taxes and spending? Punchbowl News has reported several details of the timeline. First, the relevant committees will hold markups, where they debate amendments to their portions of the reconciliation bill before the legislation is sent to the full House for a vote. Some committees are starting that process as soon as Congress returns from its Easter recess next week. Energy and Commerce will hold its markup a bit later on May 7. It is unclear when the Ways and Means Committee, which handles tax policy, will have its meeting. Finally, the House could vote on the final reconciliation bill as soon as the week of May 19, before Congress adjourns for Memorial Day week. It is unclear when the Senate would take it up.
Republicans have hoped to get the bill signed quickly so that they can reap the political benefits they expect will come from extending the tax cuts soon enough to win favor from voters in the midterm elections. But there is a more immediate concern that could influence the timeline: the debt ceiling. The so-called “X date” is the day the federal government reaches its borrowing limit. To stop the country from defaulting on its debt, Congress must first raise the debt ceiling, which is usually a battle. To sidestep that process, Republicans threw a provision about raising the debt ceiling into the instructions for the reconciliation bill. That avoids a tricky legislative fight, but it also means Trump must sign the budget reconciliation package before the X date.
The Treasury Department will release next week its prediction of when that date will occur. Most likely the date will fall in August or September, according to a Congressional Budget Office prediction from last month. But there is an “unlikely” possibility that the X date could come as early as June, leaving a very tight window to pass the bill.
The June date probably will not materialize, but any major delays would still make Republicans, along with the already fragile stock market, sweat. All they have to do is make enough spending cuts to satisfy the hardliners but not cut too much to lose the moderates. Plus, both chambers need to ensure that the reconciliation package can pass with no more than three Republican “no” votes. How hard can that be?
