Freedom Caucus Digs in on Spending Cuts, Tax Reform

Before they’ll back a budget, House conservatives want their demands met on mandatory spending and changes to the tax code.

With one le­gis­lat­ive day be­fore the Ju­ly 4 re­cess, the House Free­dom Caucus re­mains far from sup­port­ing a budget be­ing pushed by Re­pub­lic­an lead­ers, with some mem­bers de­mand­ing not just massive cuts to man­dat­ory spend­ing but also as­sur­ances on tax re­form.

Re­cog­niz­ing that their polit­ic­al lever­age in the budget pro­cess may nev­er be great­er than it is now, Free­dom Caucus mem­bers are tuss­ling with their own lead­ers while also try­ing to shad­ow­box with Sen­ate Minor­ity Lead­er Chuck Schu­mer.

They are push­ing for lead­er­ship to force com­mit­tees to set up a pro­cess for cut­ting en­ti­tle­ment pro­grams, such as food stamps and Medi­caid, and ask­ing that lead­ers lay out spe­cif­ics on how they plan to re­write the tax code be­fore agree­ing to ap­prove a House budget.

The group’s chair­man, Rep. Mark Mead­ows, said he wants lead­ers to identi­fy ex­tra man­dat­ory spend­ing cuts in a House product in an­ti­cip­a­tion of a budget­ary coun­ter­of­fer from Schu­mer and his Sen­ate Demo­crats in a sweep­ing budget deal. Some in the Free­dom Caucus have said they want to see $400 bil­lion in man­dat­ory spend­ing cuts, but Mead­ows in­dic­ated that the group would likely settle on less as long as it is over $200 bil­lion.

“We could come to a hard num­ber as soon as we had a hard num­ber of what we knew would come back from the Sen­ate on the budget,” Mead­ows said. “We’re work­ing on man­dat­ory spend­ing cuts that hope­fully would raise the num­ber and be a po­ten­tial off­set for what we ex­pect to come back from the Sen­ate. We’re not there yet, but we’re mak­ing good pro­gress.”

Mead­ows said the group is the­or­et­ic­ally fine with the dis­cre­tion­ary-spend­ing num­bers the budget com­mit­tee has laid out: $621.5 bil­lion for de­fense spend­ing and $511 bil­lion for do­mest­ic spend­ing. But the sup­port is con­tin­gent on find­ing more man­dat­ory spend­ing cuts. So far, House Budget Com­mit­tee Chair­wo­man Di­ane Black has iden­ti­fied some­where between $150 bil­lion and $200 bil­lion in those sav­ings.

Moreover, Mead­ows said he be­lieves it would be im­possible for Re­pub­lic­ans to uni­lat­er­ally raise dis­cre­tion­ary spend­ing levels above caps man­dated by the se­quester, which pegs de­fense spend­ing at no more than $549 bil­lion. Mead­ows said such a budget would be sub­ject to a Sen­ate point of or­der un­der the Byrd rule be­cause it raises spend­ing above se­quester levels.

In prac­tic­al terms, that means it would need 60 votes to pass, in­stead of the usu­al 51 for a budget or re­con­cili­ation bill, which means Demo­crats could with­hold votes while ask­ing for high­er budget num­bers.

“We’re look­ing at high­er off­sets be­cause we be­lieve that the nondefense dis­cre­tion­ary is go­ing to be high­er than $511 [bil­lion],” Mead­ows said.

GOP lead­ers, however, do not be­lieve that the budget would run afoul of Sen­ate rules. The dis­agree­ment led to a frank ex­change between Mead­ows and Speak­er Paul Ry­an on the House floor last week.

Even if lead­ers and con­ser­vat­ives can over­come that dis­pute, tax re­form re­mains a stick­ing point in passing a budget. Lead­ers want to pass tax changes through the budget-re­con­cili­ation pro­cess, mean­ing they could avoid a Demo­crat­ic fili­buster, but they need a budget to do that.

Some lead­ers be­lieve the pro­spect of passing tax re­form is enough to en­tice Free­dom Caucus mem­bers to vote for a budget. But in fact, the con­trary is prov­ing to be true. Free­dom Caucus mem­bers are ask­ing lead­ers to make clear that they will not pur­sue cer­tain tax policies be­fore any agree­ment can be reached on a budget.

In par­tic­u­lar, the much-re­viled bor­der-ad­just­ment tax, or BAT, re­mains a point of con­ten­tion. Lead­ers have long wanted to pay for cor­por­ate tax cuts in part with that tax, which would put a levy on im­ports rather than ex­ports. Con­ser­vat­ives, along with a wide cross sec­tion of mem­bers, do not want to see that policy en­acted, and so some Free­dom Caucus mem­bers want as­sur­ances that it won’t be be­fore they agree to the budget.

“The only way we stop and make sure there is not a new tax—BAT—put on people, and the only way we can make sure we’re not dra­mat­ic­ally in­creas­ing spend­ing, is to con­trol this re­con­cili­ation pro­cess,” former Free­dom Caucus Chair­man Jim Jordan said. “The key is un­til the budget gate is opened, tax re­form can’t hap­pen. So we’re say­ing if we’re go­ing to open that gate, we want real re­form, real sav­ings on man­dat­ory spend­ing. And frankly, me per­son­ally, I want to make sure the BAT is gone.”

Rep. Dave Brat, who sits on the Budget Com­mit­tee, said the at­tempt at passing health care changes through the re­con­cili­ation pro­cess left a bad taste in his mouth. So now he wants to see a rough out­line of how lead­ers want to lower cor­por­ate tax rates be­fore agree­ing to a budget.

“We can all com­prom­ise if we know what the policy goal is, but right now I have no idea what tax policy we’re aim­ing at. I have wish­ful think­ing. I had wish­ful think­ing on Obama­care re­form, and now we’ve got a Sen­ate product, which I’m not in love with at all,” he said. “A bill des­cen­ded from heav­en that we had three weeks to con­sider. … I don’t want to have a sur­prise on this. … I can’t take a vote in blind faith.”