Donald Trump’s economic advisers and congressional Republicans are discussing possible cuts to Medicaid, food stamps and other government welfare programmes to cover the costs of extending the president-elect’s multitrillion-dollar 2017 tax cut.
The cuts could mean new work requirements and spending caps, according to the Washington Post, citing sources involved in the talks, including aides in Trump’s transition team.
Extending the tax cuts – most of which are due to expire next year – could add $4tn to the national debt, which already stands at $36tn.
But Republicans fear triggering a political backlash by slashing programmes that serve an estimated 70 million Americans to pay for a tax cut that disproportionately benefits the wealthy.
The 2017 tax cuts were criticised for being skewed in favour of the rich, with households in the top 1% income bracket receiving a reduction of $60,000 in 2025, compared with less than $500 for those in the bottom 60%, according to the Center on Budget and Policy Priorities.
Trump campaigned on extending the 2017 reduction while also vowing to abolish taxes on tips for restaurant workers.
Republicans support the extension but worry that the loss of revenue could add to government borrowing – prompting them to search for savings in others areas.
In addition to safety net programme cuts, some Republicans are considering re-purposing clean energy funds passed by Democrats.
The GOP has warned that the costs of Medicaid – whose claimants can include low-income people, newborns, people who are blind or disabled, and those suffering from certain illnesses – has ballooned with the expansion of the Affordable Care Act, also known as Obamacare.
Jodey Arrington, the chair of the House of Representatives’ budget committee, told reporters that a “responsible and reasonable work requirement” could save $100bn in Medicaid costs, while another $160bn could be cut by checking eligibility more than once a year.
The Paragon Health Institute, a rightwing thinktank, published a study in the summer proposing other reductions that it said could save $500bn over a decade. It said rule changes to Medicaid recently enacted over the past year by the Biden administration could cost up to $135bn nationally and between $46.3bn and $82.3bn at state level over the next five years.
Alterations to food stamps – officially known as the Supplemental Nutrition Assistance Program – could take the form of limiting which items recipients can purchase with benefits or broadening work requirements. The latter proposal was floated in the Heritage Foundation’s Project 2025 blueprint for radically overhauling US government.
Qualifying criteria are tailored to assist the poorest households, with eligibility determined by income and household size. A single person with no dependents needs to be earning less than $1,354 a month to qualify. A household with two or more people but earning $1,800 per month would also be eligible.
The projected cuts to welfare entitlement programmes come as the Republicans prepare to control the White House and both chambers of Congress following this month’s election.
It also coincides with Trump’s choice of Elon Musk, the Tesla and Space X entrepreneur, to head a newly formed Department of Government Efficiency along with Vivek Ramaswamy, his former Republican primary opponent, with the brief of slashing waste from federal spending. Musk has spoken of making around $2tn in spending cuts.
The US is currently running a budget deficit at around 6% of its gross domestic product. The national debt held by the public is currently worth around 97% of the national economy.
The non-partisan Committee for a Responsible Federal Budget has argued that, without major spending reductions, the deficit would widen significantly in the next 10 years, while the US national debt could soar to 143% of the economy.
Source: US Politics - theguardian.com
