Conservative House Republican budget would cut $7.1T

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A conservative budget released by the House Republican Study Committee (RSC) on Monday would balance in five years by cutting $7.1 trillion in spending over the next decade.

The cuts are much more than the $5.5 trillion in proposed cuts included in the main House GOP blueprint unveiled last week by Budget Committee Chairman Tom Price (R-Ga.).

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The RSC budget, prepared by RSC and Budget Committee member Marlin Stutzman (R-Ind.), would increase spending for the Pentagon. 

In fiscal 2016, it would give the Pentagon a $570 billion base budget, much more than the $523 billion the Pentagon would have under the House GOP budget. It would also meet President Obama’s nearly $51 billion request for the Defense Department’s war fund, known as the overseas contingency operations (OCO) account.

By contrast, the House GOP budget keeps a Pentagon baseline set by a 2011 budget deal that introduced spending ceilings known as sequestration. To boost defense spending, that budget is expected to pump up the OCO account to $96 billion for next year. It would require no offsets for that spending.

The RSC blueprint would lower nondefense discretionary spending for domestic programs next year to $405 billion, $88 billion below the baseline set by the 2011 deal.

Altogether, discretionary spending next year would total $975 billion under the RSC’s budget, much lower than the $1.018 trillion top-line number established by the 2011 law. Over the 10-year window, the RSC budget would cut nondefense spending by $1.3 trillion and increase defense spending by $435 billion.

Between 2016 and 2025, the budget would reduce “unnecessary mandatory spending” by $1.7 trillion. This amount excludes cuts to Medicare, Medicaid and Social Security.

The RSC plan would repeal ObamaCare through a budget tool known as reconciliation.

Besides repealing ObamaCare, the bill would allow people to purchase insurance across state lines, a reform Republicans argue would lower healthcare costs. It would reform the tax code so families and individuals can deduct healthcare costs and increases the amount of pre-tax dollars people can deposit into portable Health Savings Accounts.   

The conservative budget seeks the same sort of reforms to the tax code embraced by previous Ryan budgets but dropped this year by Price — like installing two individual tax brackets instead of the current seven, and reducing the top individual and corporate rates to 25 percent.

It would also roll back tax increases won by President Obama, such as the hike to the top dividend rate from 15 percent to 20 percent. And it would make changes to programs like the earned income tax credit, a tax break for the working poor that Republicans believe has too much fraud.

The RSC recommends that Congress pass the Tax Code Termination Act from Judiciary Committee Chairman Bob Goodlatte (R-Va.), which would sunset the current tax code at the end of 2019, pressuring lawmakers to pass a tax reform plan by then.

Similar to Price’s plan, the RSC budget would reform Medicare by 2020 by converting it to a premium-support system that would offer a range of coverage options to people born in 1955 or after. The plan would gradually phase in an increase in the eligibility age for those born in 1960 or after and would raise it by two months each year until the eligibility age reaches 67.

The budget would also transform Medicaid by combining it with the Children’s Health Insurance Program (CHIP), which expires later this year, and providing states with block grants.

The RSC budget would reform the nation’s welfare system by restoring work requirements for the Temporary Assistance for Needy Families program. In 2012, the Department of Health and Human Services decided it would consider state waivers for welfare work requirements. The budget would also reform the government’s food stamp program, the Supplemental Nutrition Assistance Program, by calling on the House Agriculture Committee to offer legislation that would convert it to a block grant.

For Social Security, the RSC blueprint would eventually raise the full retirement age to 70 and would impose chained consumer price index (CPI) for Social Security benefit calculations. The proposal, which Obama had offered in previous budgets and then dropped, would result in lower benefits.

To address infrastructure issues, the budget calls for shifting the authority to state and local governments, and phase out the federal government’s authority over five years. The plan also says Congress should lower the federal gas tax, which currently funds the Highway Trust Fund.

To balance the budget through cuts, the RSC proposes eliminating or repealing a slew of government programs such as the Consumer Financial Protection Bureau (CFPB), the Election Assistance Commission, the National Endowment for the Arts and National Endowment for the Humanities, the National Labor Relations Board and a program that taxes Christmas trees.

The plan would also reduce funding to the Environmental Protection Agency, the IRS and foreign governments.

GOP leaders normally allow votes on RSC budgets, but the GOP-led House has rejected their blueprints over the last several years. Last year, for example, it failed in a 133-291 vote.

The House and Senate are scheduled to vote on the main GOP budget blueprints by the end of the week.   

— Bernie Becker contributed.

— This story was updated at 11:43 a.m.