House GOP unveils budget plan that attaches major spending cuts to coming tax reform bill

WASHINGTON – House Republicans unveiled a 2018 budget plan Tuesday that would pave the way for ambitious tax reform legislation – but only alongside a package of politically sensitive spending cuts that threaten to derail the tax rewrite before it begins.

GOP infighting over spending, health care and other matters continues to cast doubt on whether the budget blueprint can survive a House vote. Failing to pass a budget could complicate leaders' plans to move on to their next governing priority as hopes of a health-care overhaul appeared to collapse late Monday in the Senate.

The House Budget Committee blueprint, which is set for a Thursday committee vote, sets out special procedures that could ultimately allow Republicans to pass legislation over the objections of Senate Democrats who can normally block bills they oppose. GOP leaders in the House, as well as top Trump administration officials, hope to use those procedures – known as reconciliation – to pass tax reform later this year.

The instructions in the draft budget, however, go well beyond tax policy and set the stage for a potential $203 billion rollback of financial industry regulations, federal employee benefits, welfare spending and more. Those are policy areas where Republicans have, in many cases, already passed legislation in the House but have seen Democrats block action in the Senate.

House Budget Committee Chairman Diane Black, R-Tenn., said the spending proposal is "not just a vision for our country, but a plan for action."

"In past years, our proposals had little chance of becoming a reality because we faced a Democratic White House," she said in a statement Tuesday. "But now with a Republican Congress and a Republican administration, now is the time to put forward a governing document with real solutions to address our biggest challenges."

Like the spending blueprint released this year by President Trump, the House plan envisions major cuts to federal spending over the coming decade, bringing the budget into balance by relying on accelerated economic growth to boost revenue. Under the House plan, defense spending would steadily increase over 10 years while nondefense discretionary spending would decline to $424 billion – 23 percent below the $554 billion the federal government is spending in that category this year.

Unlike Trump's budget, the House proposal cuts into Medicare and Social Security – entitlement programs that the president has pledged to preserve. The House plan also makes a less-rosy economic growth assumption of 2.6 percent versus the 3 percent eyed by the Trump administration. Both, however, exceed the 1.9 percent figure eyed by the nonpartisan Congressional Budget Office in its most recent economic estimates.

The House blueprint won a strong endorsement from White House Budget Director Mick Mulvaney, who served on the House Budget Committee before joining the Trump administration.

"It is a bold effort that follows the leadership of President Trump in Making America Great Again," he said in a statement. "Critically, this budget lays a pathway for Congress to pass, and President Trump to sign pro-growth tax reform into law."

[Two more Senate Republicans oppose health-care bill, leaving it without enough votes to pass]

But under congressional budget rules, a tax bill drafted to comply with the House budget proposal would have to include much more than tax provisions.

The Ways and Means Committee, which is drafting the tax bill, would be instructed to find $52 billion in deficit savings over the coming decade. House Speaker Paul D. Ryan, R-Wis., and the panel's chairman, Rep. Kevin Brady, R-Texas, have said they intend to pursue a deficit-neutral reform bill, meaning the savings would have to be found in other programs under the committee's jurisdiction – such as Medicare, disability aid, Temporary Assistance for Needy Families and unemployment compensation.

The Oversight and Government Reform Committee, which has explored cuts to the federal workforce and to federal employee benefits, would be required to find $32 billion in deficit savings.

The Financial Services Committee would be ordered to produce $14 billion in savings – a figure that could allow Republicans to repeal large parts of the Dodd-Frank financial reform law. The Congressional Budget Office found earlier this year that the Financial CHOICE Act, a Dodd-Frank repeal bill passed by the House last month, would produce about $24 billion in deficit reduction over the next 10 years.

And the Judiciary Committee would be responsible for $45 billion in deficit reduction, which is roughly the amount of savings produced under the Protecting Access to Care Act, a medical-malpractice reform bill that also passed the House last month.

Both bills have little support among Democrats and would likely be blocked in the Senate under typical procedure. Reconciliation rules could allow Republicans to avoid that barrier.

The more profound barrier could be Republican divisions over the budget proposal itself. The effort to write a budget has been stalled for months as defense hawks, deficit watchdogs and appropriators have sparred over where to set spending levels, and while there appears to be a working accord on the House Budget Committee, it remains unclear whether the blueprint can survive a floor vote.

Members of the hard-right House Freedom Caucus have been pushing for more aggressive long-term spending cuts in reconciliation. The group's leader, Rep. Mark Meadows, R-N.C., told reporters last week that the numbers in the draft budget could not pass the House, calling the proposed $203 billion in mandatory spending cuts over the coming decade a relative pittance in a federal budget that already approaches $4 trillion in yearly spending.

Conservatives are also pushing House GOP leaders for more specificity on the tax reform bill – in particular, an assurance that a proposal to tax imported goods known as border adjustment will not be included.

Moderates, meanwhile, are staging a revolt of their own. Twenty members of the centrist Tuesday Group signed a letter last month objecting to even $200 billion in mandatory spending cuts, arguing they are "not practical" and would "make enacting tax reform even more difficult than it already will be."

They are also pushing for budget talks with Democrats, who maintain significant leverage in federal spending: Republicans are proposing to exceed defense spending caps enacted under the 2011 Budget Control Act each year until the measure expires in 2021. Adjusting those caps will require a bipartisan agreement to pass the Senate.

Senate Republicans have yet to draw up a budget blueprint of their own.

House Republican leaders have whistled past questions about the practicality of the spending levels they are proposing and instead have made the case to rank-and-file House members that passing the budget resolution – because of the reconciliation instructions – represents the only way to ensure a successful tax bill.

"We can move forward with an optimistic vision for the future, and this budget is the first step in that process," Black said. "This is the moment to get real results for the American people. The time for talking is over, now is the time for action."

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Damian Paletta contributed to this report.