With the federal deficit growing and President Trump suddenly talking about another tax cut, the conversation in Washington has turned to the inevitable question of how — or whether — Congress will engage in any type of fiscal discipline.
Senator Mitch McConnell, the majority leader and Kentucky Republican, got people in Washington talking — and generated some new campaign ads from Democrats — when he suggested this month that changes to Medicare, Social Security and Medicaid were needed to tame the deficit.
So what does that presage should Republicans maintain control of Congress?
More tax cuts, less safety net spending
This month, the Treasury Department recorded a $779 billion deficit for the 2018 fiscal year, stemming in large part from a sharp decline in corporate tax revenues after a $1.5 trillion tax cut last year. Since Republicans have historically made deficits a big talking point, Mr. McConnell was naturally asked what the heck he was going to do about it.
“It’s disappointing, but it’s not a Republican problem,” Mr. McConnell told Bloomberg News in an interview. “It’s a bipartisan problem: unwillingness to address the real drivers of the debt by doing anything to adjust those programs to the demographics of America in the future.”
That is code for wanting to tackle entitlement programs like Medicare and Social Security, which Republicans say need to be reined in to address the ballooning federal deficit.
In the Capitol Hill language of indirection, Mr. McConnell’s response most likely served two purposes: to signal to his party’s base that, yes, deficits still make Republicans in Congress sad, but, no, the tax cuts are not to blame. President Trump has shown little interest in taking on the programs that are swelling as the baby boom ages — Social Security and Medicare — and Mr. McConnell further signaled inaction.
“There’s nothing on our agenda to do that unless we have an agreement with the Democrats that we can all sign on to,” he told reporters later.
Still, Mr. Trump’s top economic adviser, Larry Kudlow, said in a recent interview that the administration had to be tougher on spending and would begin to consider “the larger entitlements” — Social Security and Medicare are the two biggest social insurance programs — “probably next year.”
Medicaid would be the likeliest target
Even if the Republicans maintain control of Congress, they are likely to lack the votes to make major overhauls to the big entitlement programs, especially without the president’s support. So they would have to turn to the budget process trick — most likely in the first half of 2019 — that allows the Senate to pass legislation with only 51 votes.
There are limits to that process, but Republicans’ myriad efforts to repeal the Affordable Care Act provide a guide. The bill, which ultimately failed, would have turned Medicaid, the health care program for the poor, into block grants to the states while slowly rolling back its expansion under the Affordable Care Act and squeezing overall spending on the program.
“Last year when we were taking a run at repealing Obamacare, there was a very serious effort to reform Medicaid,” said Senator Patrick J. Toomey, Republican of Pennsylvania. “We got close to uniting Republican senators on the idea that not only do we need to change the architecture of the program but also long-term growth of the program.”
This would be their easiest play, especially if the Republican majority expands in the Senate.
“If Republicans keep the House, I have no doubt they will redouble their efforts to repeal the Affordable Care Act and slash funding,” said Representative Frank Pallone Jr. of New Jersey, the highest-ranking Democrat on the Energy and Commerce Committee, which oversees the program, in an email. Indeed, if Republicans keep control of Congress, they might view this as a mandate from voters.
Social Security is probably, but not entirely, secure
Republicans have long toyed with the notion of allowing some private investments in Social Security, but there has been no serious legislative attempt since President George W. Bush was smacked down when he tried to change the program in 2005.
President Barack Obama offered some cuts in Social Security in exchange for new revenues in the “grand bargain” he pursued with the House speaker at the time, John Boehner, toward the end of both of their terms. But House Republicans rejected that notion, and it collapsed under the weight of partisan brawls.
Further, the retirement program is generally considered less of a threat to fiscal solvency than Medicare since its outlays are not expanding as fast as the health programs.
And given the political polarization, Democrats and Republicans are unlikely to agree on a plan to overhaul the program, which would be necessary for any major changes.
Medicare tweaks are likely to be geared toward drug pricing
The Republican agenda still officially calls for turning Medicare into a voucherlike program that would give recipients a choice of whether to get subsidies to buy private insurance or maintain traditional coverage.
Again, Mr. Trump has made it clear that he does not want to make changes to this program for older Americans, though he has spoken frequently about trying to lower the costs of drugs in Medicare, including by increasing the government’s power to negotiate prices.
Well, congressional Republicans don’t want the government to negotiate drug prices — that’s an idea pushed by Democrats. Congress has already made modest moves on the drug-pricing front.
“The tax cuts kind of poisoned the well on this,” said Brian Riedl, a senior fellow in budget, tax and economics at the conservative Manhattan Institute for Policy Research. He noted: “It’s hard to cut taxes for corporations and then cut Medicare. The optics for that can be brutal.”
On Thursday, Mr. Trump released his latest drug-price ideas, which would essentially base the costs on those paid by other industrialized nations.
Democrats are seizing on the Republican threat to the safety net
“If Republicans retain the Senate, they will do everything they can to take away families’ health care and raise their costs,” Senator Chuck Schumer, the minority leader from New York, said in response to Mr. McConnell. “Americans should take Senator McConnell at his word.”
Right away, the comments became the subject of ads; Priorities USA Action, the largest Democratic Party “super PAC,” dumped an immediate $2 million into the effort, and others joined the fray.
Expect to see more of this as Democrats try to turn their closing message before the midterm elections back to health care, as they had already been trying to do
But could Republicans use the farm bill to cut safety net programs?
Yes, Republicans are embracing legislative efforts that would allow states to employ work requirements to lower the food stamp rolls. They will get a lot of pushback from Democrats, whose votes they need to pass the bill.
So with a 60-vote threshold in the Senate and an almost certain shrunken majority in the House, Republicans will still find a somewhat steep hill to climb.
