Breaking News Emails
It's become a staple of Democratic attacks on the Republican tax bills in the last week: A vote for the GOP's $1.5 trillion tax cut is a vote to cut Medicare by $25 billion a year.
The House bill "forces a $25 billion cut in Medicare" warn a series of digital ads targeting vulnerable Republicans by the progressive group Save My Care. Democratic members have regularly raised the issue in speeches, interviews and on social media.
The claim is technically accurate, but the political reality is more complex. It is unlikely Medicare spending will actually be reduced next year as an immediate consequence of the tax bill — in fact, doing so could require Democrats to insist on cuts over Republican objections.
The Medicare cuts stem from the current iteration of PAYGO, a law that requires Congress to offset increases in mandatory spending or reductions in tax revenue so that they don't increase the deficit. If Congress violates the provision, the bill makes automatic cuts elsewhere unless the House and Senate vote to waive the requirement.
Breaking News Emails
In a letter to Democratic Whip Steny Hoyer of Maryland, the Congressional Budget Office confirmed that the House's nearly $1.5 trillion tax bill would indeed trigger these cuts, highlighted by a $25 billion annual reduction in Medicare spending, or 4 percent, the highest allowed under the law.
"All of the spending cuts under PAYGO sequester are strictly defined by law with very little discretion," Ed Lorenzen, a senior adviser for the Committee for a Responsible Federal Budget, which advocates for fiscal discipline, said in an e-mail. "Medicare cuts would reduce payments to all providers as well as Medicare Choice plans and Medicare prescription drug plans by the percentage reduction."
CBO pegs the cost at offsetting the tax bill at $136 billion, but there aren't enough additional programs on the chopping block to pay for it. Only $85 to $90 billion is available through PAYGO beyond the Medicare cuts. This means a variety of smaller programs addressing a range of issues, from border security to farm investments, would be defunded.
But Congress has broken the PAYGO caps before without triggering cuts. That's because the law has an off switch: Lawmakers can decide to waive the requirements.
They can’t do it in the tax bill itself for procedural reasons since the House and Senate are using a budget reconciliation bill to avoid a Democratic filibuster. But they could include the waiver in a separate bill that would need 60 votes to pass in the Senate. That would require significant Democratic support, which might be necessary on the House side as well, depending on which bill is the vehicle for the waiver.
There's no indication at all that House or Senate leaders plan on pursuing automatic cuts via their tax bill. A senior House GOP aide flatly predicted that would never happen. If Republicans do decide to waive the PAYGO cuts, it would put Democrats in the tough position of having to oppose the measure themselves in order for the cuts to go into effect.
"It’s a difficult political situation," Paul Van de Water, a senior fellow at the left-leaning Center on Budget and Policy Priorities, said. "On the one hand, the situation is clearly being teed up by the Republicans' desire to add $1.5 trillion to the deficit, which many of us think is a serious problem. On the other hand, these automatic cuts would potentially do real damage."
House Democratic aides told NBC News that Democrats plan to make Republicans take responsibility for triggering PAYGO cuts and take the first steps in offering a solution. But, as one noted, there will be multiple opportunities to use the looming cuts as leverage in other policy talks.
In the next few weeks, the House needs to pass legislation to fund the government, raise the debt ceiling and potentially protect DACA recipients, who are facing deportation after President Donald Trump announced he would end the program.
Hoyer, the recipient of the CBO letter, hinted at a bipartisan solution in a statement even as he kept his focus on the current tax fight.
"While it is possible to avoid the PAYGO enforcement cuts triggered by their added deficits, Republicans would need Democratic votes to do it, requiring them to abandon their go-it-alone partisan strategy, which is only leading them on a path to failure and to putting our country in danger," Hoyer said. "I urge them to abandon their disastrous tax bill and instead work with Democrats on real, bipartisan, permanent tax reform that won’t balloon our debt or trigger cuts under PAYGO."
Even if the PAYGO provision is waived, it isn't the end of the debate. Critics of the GOP tax plan argue that driving up the deficit with tax cuts is a prelude to Republicans' demanding deeper spending cuts later, like those included in the White House budget. But for now, odds are slim that Medicare will face automatic cuts as part of the tax fight.