Republican leaders are giving assurances to Sen. Susan Collins (R-ME) that their tax bill will not trigger an automatic $25 billion cut to Medicare, after a report from the Congressional Budget office said it could do just that.
Republicans are trying to pass a $1.5 trillion tax cut — which the CBO said could trigger automatic budget cuts across major mandatory spending programs, like Medicare, federal student loans, and agriculture subsidies, and even some funding for customs and border patrol.
It all comes down to the “pay as you go,” or PAYGO, rule, a 2010 law that says all passed legislation cannot collectively increase the estimated national debt.
If Republicans want to pass a tax cut, the law requires they pay for it with mandatory spending cuts. (Inversely, if Congress boosts funding for entitlement programs, it has to increase taxes.)
If Congress violates this law, the Office of Management and Budget, which keeps the deficit scorecard, “would be required to issue a sequestration order within 15 days of the end of the session of Congress to reduce spending in fiscal year 2018 by the resultant total of $136 billion,” the CBO said in a letter to Minority Whip Rep. Steny Hoyer (D-MD).
The way Congress can get around this is by passing a law that wipes the scorecard clean for the year.
Collins, concerned about the possible impact a sequester could have on Medicare, wrote a letter to leadership asking for assurances that the tax bill wouldn’t trigger cuts.
“Critics of tax reform are claiming the legislation would lead to massive, across-the-board spending cuts in vital programs — including a 4-percent reduction in Medicare — due to the Pay-Go law enacted in 2010,” Senate Majority Leader Mitch McConnell and House Speaker Paul Ryan said in a joint statement. “This will not happen.”
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