November 15, 2017 10:10 GMT by nytimes.com

Republicans May Target Entitlement Programs to Reduce Deficit

Republicans May Target Entitlement Programs to Reduce Deficit

The possibility appeared more likely after the Congressional Budget Office warned that the tax bill could set off a rule that would make cuts to Medicare over the next decade.

WASHINGTON — Republican lawmakers have largely dismissed concerns about how their $1.5 trillion tax cut will add to the federal deficit. Now, some Democrats are warning the tax rewrite will ultimately be financed by gutting entitlement programs like Social Security and Medicare.

The possibility of cuts to safety net programs appeared more likely on Tuesday, as the Congressional Budget Office warned that the tax bill could set off an arcane budget rule that would make deep cuts to Medicare over the next decade.

Republican lawmakers have turned a blind eye to the effect of the tax bill on the deficit, saying the tax cuts will essentially pay for themselves through increased economic growth.

But the party of deficit hawks is beginning to once again squawk about the ballooning federal deficit, suggesting that spending cuts must be enforced to reduce the national debt, which has surpassed $20 trillion.

At a town hall-style event in Virginia on Tuesday night, Paul D. Ryan, the House speaker, said the most important steps that could be taken to reduce the national debt were spurring economic growth and making changes to entitlement programs.

“You cannot get the national debt under control, you cannot get that deficit under control, if you don’t do both — grow the economy, cut spending,” said Mr. Ryan, Republican of Wisconsin.

The Republican tax plan, he said “grows the economy. We’ve got a lot of work to do in cutting spending.”

Democrats said the tax bill was opening the door to the kind of entitlement cuts that Republicans had long wanted to pursue.

“This is a nasty, two-step strategy that has long been the holy grail for hard-right Republicans,” said Senator Chuck Schumer, Democrat of New York and the minority leader. “If this bill passes, you can bet the Republicans will immediately sharpen the knives for middle-class benefits.”

The Congressional Budget Office said on Tuesday that a law passed in 2010 would necessitate cuts to Medicare of as much as $25 billion next year. The pay-as-you-go law requires that legislation that adds to the federal deficit be paid for with spending cuts or other offsets. If that does not happen, automatic cuts to programs like Medicare kick in. The Medicare cuts, which are capped at 4 percent of the program’s annual spending, could reach almost a half trillion dollars over 10 years, according to the nonpartisan Committee for a Responsible Federal Budget.

The cuts can be averted through bipartisan legislation, though it is unclear whether Republicans would go along with such workarounds.

Senator Ron Wyden of Oregon, the top Democrat on the Finance Committee, said previous Republican tax cut efforts had paved the way for sweeping spending cut proposals after the red ink reared its head. After President George W. Bush signed tax cuts in 2001 and 2003, his administration sought to overhaul Social Security and Medicare in hopes of cutting costs.

“I can’t believe how quickly the deficit hawks in the Republican Party flew away after they saw the $1.5 trillion,” Mr. Wyden said of the lost revenues that Republicans have approved in their tax plan. “We’re sure that they will start making their way back when we see the deficits.”

Fiscal conservatives in the House and the Senate have long wanted to rein in spending on such programs but have had to temper those desires this year now that President Trump, who promised as a candidate not to touch entitlement programs, is in office.

But Mr. Trump showed some flexibility on the matter this year when he supported a plan to repeal the Affordable Care Act that would have cut Medicaid funding. And in recent weeks, Republican leaders have quietly started to indicate that if they succeed in passing tax cuts, they will, in fact, look to overhaul government welfare programs.

Representative Kevin Brady of Texas, the chairman of the Ways and Means Committee, said this month that tax overhaul “alone won’t get us back to a balanced budget.” He said that House Republicans would soon turn toward “welfare reform and tackling the entitlements.”

Some Republican senators have also expressed interest in turning to spending cuts afterward.

“Yes, we waste an enormous amount of money in the federal budget,” said Senator Mike Crapo, Republican of Idaho. He said that government personnel should be cut along with Medicare and Social Security.

Top White House officials have also suggested that the administration is willing to get on board with entitlement changes. In an interview with CNBC last week, Gary D. Cohn, the director of the National Economic Council, said that the president was focused on taxes, deregulation and infrastructure and that changes to safety net programs would follow.

“I think when he gets done with those, I think welfare is going to come up,” Mr. Cohn said.

If Republicans pass their tax bill and their optimistic projections about economic growth do not come to pass, they will face pressure to address the deficit and cut spending.

Michael Strain, an economist at the conservative American Enterprise Institute, said that he was concerned about the effect of the tax bill on deficits and that it added to the urgency to scale back programs like Medicare.

“Tax reform is looking like it will make our long-term debt more problematic, and the long-term driver of our debt is increases in entitlement spending,” said Mr. Strain, who argued that it was a better use of resources to cut corporate taxes than to increase funding for entitlements.

If Republicans decide to try to circumvent the pay-as-you go rule, it could be taken as a sign that they are not serious about deficit reduction. For Democrats, it could be enticing to show the public the consequences of Republican-driven tax cuts, but it would be difficult for them to essentially support cuts to a government program that provides health insurance for the elderly.

“At the end of the day, it is somewhat akin to the debt limit that no one actually wants to let it happen,” said Ed Lorenzen, a senior adviser for the Committee for a Responsible Federal Budget, who noted that spending would eventually have to be addressed if Republicans used the deficit to finance tax cuts.

For now, Republicans are playing down the likelihood that Medicare cuts will come to pass.

“No such thing is going to be triggered automatically,” said Senator Patrick J. Toomey, Republican of Pennsylvania.

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