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The third of four parts

For eight years under President Obama, Republicans repeatedly cited runaway spending, large deficits and rapidly accumulating debt as a national crisis requiring immediate solutions to fend off economic collapse or mortgaging the next generation’s future.

Now, with control of Congress and the White House, Republicans are grappling with a simple reality: When it comes to bringing sanity back into the federal government’s fiscal policies, campaigning is easier than governing. No sound bite will fix two decades’ worth of avoiding hard choices.

The health care bill currently being debated and revised in the Senate would trim the projected budget deficit by $321 billion over 10 years, according to the Congressional Budget Office, largely due to significant rollbacks in Medicaid spending (much of the overall reduction in spending is offset by ending certain taxes in the Affordable Care Act). By contrast, the House bill that passed in May would reduce the deficit by only $119 billion over that time frame.

Potential changes to the bill, intended to win over recalcitrant votes, could diminish the deficit reduction aspect of the legislation even further. But even then, with their conference divided and Democrats united against it, Republicans face a steep hurdle getting the necessary 50 senators to vote for it.

Meanwhile, House Republicans have repeatedly delayed action on this year’s budget as they’ve run  up against conservatives’ push for significant mandatory spending cuts over the next decade. The committee is weighing $200 billion in mandatory cuts, while conservatives are pressing for a much higher number. Most of the savings would come from welfare programs, including to food stamps, prompting resistance from committee chairs and moderate GOP lawmakers.

The proposed cuts would be passed through budget reconciliation, a process that allows the Senate to sidestep a filibuster and pass legislation with just a simple majority. Republicans are using the same process for their health care bill, and plan to use the 2018 budget reconciliation for tax reform as well.

Conservatives consider the cuts essential, mostly as a way to offset higher military spending. The decreases would only slash deficits by $20 billion a year over a decade, while most Republicans are poised to increase in military spending by more than $28 billion for 2018 alone.

Speaker Paul Ryan, in an interview with RealClearPolitics shortly before the July 4 recess, said he didn’t think the mandatory cuts were all that significant.

“It’s a $43 trillion budget over 10 years. $200 billion? I don’t think it’s that much,” Ryan said. Asked why there were such strong disagreements over the spending numbers, he said it’s because, in part, Republicans know they have the power to enact the changes.  

“I think it’s because people know this is real,” the Wisconsin lawmaker said. “People see this as a real deal and so they’re focusing on it intently and I think the authorizers realize, ‘This is my jurisdiction, I want to think about this carefully and cautiously.’”

The hesitation from some in the conference has frustrated budget hawks, many of whom have railed against higher spending since joining Congress during the Tea Party waves of 2010 and 2012. Rep. Mark Walker, the chairman of the conservative Republican Study Committee, said it was “hypocritical” to preach fiscal responsibility but back higher spending. He polled dozens of RSC members before the Fourth of July recess and said the vast majority backed at least $200 billion to $300 billion in mandatory cuts.

“We haven’t gotten anything in 20 years. If we don’t do it now, then when?” Walker said. “Election year next year. Other than that, it gets more complicated as you move forward.”

“We haven’t gotten [cuts] in 20 years. If we don’t do it now, then when? Election year next year. Other than that, it gets more complicated as you move forward.”

Rep. Mark Walker

To some, however, the proposed mandatory cuts are misguided. They could imperil GOP efforts on tax reform, cause trouble down the line on other legislative priorities, and force difficult votes for members in an already turbulent year in Congress. In a letter to Ryan before the break earlier this month, 20 moderate Republicans called the cuts “not practical” and said they should be put off. But moving those cuts in an election year would likely be an even tougher vote for GOP lawmakers to take.

Reconciliation has been used to change programs under mandatory spending in the past: The welfare reform signed by President Clinton in 1996 was a budget reconciliation act; Republicans trimmed mandatory spending by around $40 billion through a reconciliation bill targeting Medicare, Medicaid and student loans in 2005, a measure that required Vice President Cheney to cast a tie-breaking vote in the Senate.  

Some Republicans are skeptical their party can rally this year.

“I have no confidence that they’ll do it this year,” said Rep. Justin Amash, a libertarian often at loggerheads with GOP leadership.

“It is intellectually dishonest” for Republicans to run on spending cuts but not address mandatory spending this year, Amash said.  “There might be a couple hundred people here who would be interested in working on that, but there’s probably not a majority right now, sadly.”

For some Republican lawmakers, the main issue is the limited mandatory cuts being proposed. The committee has reached a tentative agreement with committee chairs at $200 billion, according to a Republican aide. Freedom Caucus members, including Chairman Mark Meadows and former Chairman Jim Jordan, are looking for around $400 billion. Still, some hold out hope that by debating smaller levels of mandatory spending, other budget priorities can be addressed going forward.  

 “That’s certainly the argument,” added South Carolina Rep. Mark Sanford. “If we begin to train ourselves in small pieces of mandatory reduction, we can get bigger ones.”

But whether they can get enough support to pass the budget in committee, let alone on the House floor, remains to be seen. This week, for the third time, the committee delayed a markup because they lacked consensus. And as Republicans have learned in the past, it’s often easier to rally support for unspecified cuts in budget proposals than it is to whip votes for specific cuts.

Amid all this, House Republicans have already tackled one of their longest-term goals – scaling back Medicaid spending and shifting the program from an open-ended resource for health care to a per capita system that allots only a specific amount for each individual. This change was perhaps the most significant portion of the health care legislation that passed, 217-213, in May.

But as the Senate struggles to complete its version of that legislation, the most significant spending reductions likely in this Congress face an uncertain future. This week, senators returned to Washington well short of the 50 votes they would need to pass their health care bill. What’s more, Majority Leader Mitch McConnell indicated that, if they fail, negotiations with Democrats will be needed for bipartisan health care proposals, where cuts would be even harder to achieve.

If their legislation passes, however, it actually has a greater budgetary impact than the House measure – cutting the deficit by about $200 billion more over a decade, according to the Congressional Budget Office. (That number is expected to shrink as changes to the bill are adopted.)

“If we begin to train ourselves in small pieces of mandatory reduction, we can get bigger ones” eventually.

Rep. Mark Sanford

But in the long term, there are significant differences. The Senate’s proposal would cap Medicaid growth at the rate of inflation, while the House version would use the medical inflation rate, which is generally higher. CBO projected Medicaid spending would be reduced by 26 percent after a decade under the Senate plan compared to current law, but that reduction would increase to 35 percent by 2036.

To some Republicans, the lower inflation rate and long-term spending reductions are among the most meaningful impacts of the legislation. Sen. Pat Toomey, in particular, has pushed for the provision.

“If we hold that reform, a combination of the architectural changes that the House made and the growth rate changes that we made, that is a very, very important step to putting us on a sustainable fiscal path,” the Pennsylvania lawmaker told RCP.

Others senators, especially ones from states that have expanded Medicaid under Obamacare, have pushed back on the lower growth rate. Politico reported in June that Ohio’s Rob Portman – a former White House budget director under President George W. Bush – clashed with McConnell over the growth rate. McConnell questioned Portman’s commitment to entitlement reform, and Portman argued that GOP leaders had overreached on the Medicaid provisions. 

Sen. Dean Heller expressed opposition to a lower growth rate in early June. Sen. Shelly Moore Capito of West Virginia, in a late-June statement, said the legislation “cuts traditional Medicaid too deeply.”

One senior GOP aide, speaking on condition of anonymity, said part of the concern with the lower inflation rate is that it’s too drastic a change and could imperil other Medicaid reforms when it kicks in come 2025. 

“If you set up cliffs, or go too far too fast, you make it that much easier that the politicians will buckle and Democrats will be able to reverse it much more easily,” the aide said.

For some, the inflation rate is the least of the issues. Sen. Susan Collins of Maine told RCP in an interview that the inflation rate would be “devastating” to rural hospitals in her state, and could force some to close, causing job losses and making hospital access more difficult. But she also questioned the decision to use Obamacare repeal for larger Medicaid reforms in general.

“This has become a convenient vehicle for those that want to rewrite a major entitlement program and I don’t think that you do that without having public hearings to fully explore what the implications are, what the consequences would be,” Collins told RCP. 

Democrats have panned the Medicaid cuts, and, because health care is an emotional and personal issue for many voters, the spending aspects of the legislation have largely devolved to arguments about health coverage. If Republicans succeed in passing their legislation, the debate will likely focus on the coverage loss projections and how many people can afford insurance under their plans. But GOP lawmakers will have taken a significant step in their stated goal of restricting federal spending on entitlement programs.

Asked by RCP if his conference was doing enough to back up its campaign rhetoric on spending, Ryan was unequivocal. “You can’t do more to help lower the debt trajectory and prevent a debt crisis than reform health care entitlements. We will do two of the three of them this year,” he said, referring to Medicaid and the Affordable Care Act subsidies.

And if the tax code is also reformed, “it would be the most productive Congress since I’ve been alive,” Ryan added.

That goal, however, remains on shaky ground. Over the recent recess, the prospects for the Senate health care bill have dimmed, as it’s unclear whether leadership will be able to thread the needle to win passage of a revised plan. Just three weeks remain before the annual August recess, a likely make-or-break deadline for the legislation.

Some Republicans acknowledge that if they do fail – particularly since they attempted to bypass Democrats entirely in their efforts – it will be a blight on their spending rhetoric of the last decade. 

“We said for eight years that the biggest single issue that was facing America was the debt,” said Rep. Raul Labrador, a Freedom Caucus conservative running for Idaho governor next year. “That it was the single biggest threat to our security, to our prosperity, to our future. And all of the sudden I’m not hearing Republicans talking about that, and that’s a shame. Let’s make sure we don’t believe that just when Obama is president but when our party is in power as well.”

Tomorrow: The third rail

James Arkin is a congressional reporter for RealClearPolitics. He can be reached at jarkin@realclearpolitics.com. Follow him on Twitter @JamesArkin.

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