CBO: The Republican Tax Bill Will Trigger $136 Billion in Automatic Budget Cuts Next Year

Tom Williams/Congressional Quarterly/Newscom via ZUMA

We already know this about the Republican tax bill:

  • It must increase the deficit no more than $1.5 trillion over the next ten years.
  • It must not raise the deficit at all beyond ten years.

But there’s always been a third requirement too, and I’ve been waiting for that shoe to drop. Today it did:

  • On net, PAYGO requires that all spending for the year must be deficit neutral. CBO estimates the tax bill will balloon the deficit to about $136 billion next year, which means other spending has to be cut $136 billion.

These cuts are not optional. OMB is required to automatically sequester both domestic and defense spending in order to meet PAYGO requirements. However, the following programs are exempt:

  • Medicare (limited to $25 billion cut)
  • Social Security
  • All low-income programs (Medicaid, SNAP, SSI, CHIP, TANF, Pell Grants, etc.)
  • VA programs
  • Military personnel accounts
  • Refundable tax credits
  • Federal retirement accounts
  • Medicare Part D (prescription drugs)
  • Federal salaries
  • Anything already legally committed
  • Etc.

In addition, a bunch of other programs are subject to special treatment. According to CBO, the exemptions are so broad that the total amount remaining is only about $90 billion, which means it would be impossible to sequester the required sum. As a result, we can say that Medicare would lose $25 billion and—what? I guess a bunch of other programs would get zeroed out completely.

It sure would have been interesting if CBO had named those programs, wouldn’t it? But I imagine someone will get around to that pretty quickly. An awful lot of people are suddenly going to be very, very mad when that list comes out.

POSTSCRIPT: There’s a gotcha here: sequestration is under the control of the Office of Management and Budget, which is part of the White House. If OMB produces different estimates of the deficit using dynamic pixie dust, it might claim that no sequestration is needed. Or Congress could wait until January to pass the bill, which would kick the sequestration can into 2019. Alternatively, OMB could just decline to trigger the sequester and dare someone to sue them. In the Trump era, who knows?

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