Freedom Caucus Digs in on Spending Cuts, Tax Reform

Rep. Mark Meadows speaks about health care during a news conference on March 7. He is joined by (from left) Reps. Mark Sanford and Louie Gohmert, and Sens. Mike Lee and Rand Paul. Rep. Mark Meadows speaks about health care during a news conference on March 7. He is joined by (from left) Reps. Mark Sanford and Louie Gohmert, and Sens. Mike Lee and Rand Paul. Susan Walsh/AP

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.”

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