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.”