House Republicans face massive debt problem

House Republicans have a problem. They want to pass a massive agenda for President-elect Trump, preferably in his first 100 days of office. And they don’t want to add to the federal deficit.

That looks impossible.

Trump’s agenda includes an extension of his 2017 tax cuts, with possible plus-ups that include no taxes on tips and the possible elimination of a ceiling on state and local tax deductions. It also includes energy reform and changes to the border and rules on immigration.

Republicans don’t agree on exactly what should be in the package.

And they also don’t agree on whether it’s OK if this agenda adds to the deficit.

Conservatives in the House Freedom Caucus are demanding the effort by budget neutral, arguing the country simply can’t afford to tack on additional deficits after years of fiscal red ink. They’d cut spending to pay for some of Trump’s priorities. But that could erode support from more moderate Republicans.

Caught in the middle are Speaker Mike Johnson (R-La.) and his leadership team, who are scrambling to find the delicate balance that satisfies all camps for the sake of enacting Trump’s top campaign promises — a challenge made all the more pronounced by the GOP’s hairline House majority, which allows for virtually no defections.

Heading into the debate, Johnson is already committing to certain elements of the process, like the use of a procedural gambit, known as reconciliation, to elude a Senate filibuster. But on the thorny question of budget neutrality, he isn’t committing one way or the other. 

“That is one of the things that we’re trying to ensure,” Johnson said Thursday. “[But] I can’t commit to any final proposition in the moment because we are making this a bottom-up, member-driven proposal, and the elements of the reconciliation package are coming together.”

Some conservative deficit hawks are much less equivocal. They’re up in arms that the federal debt has now topped $36 trillion — a result of policies adopted by both parties over a course of decades — and warning GOP leaders that they’ll oppose any reconciliation package that adds to deficit spending.

Asked if deficit neutrality is essential to win his support, Rep. Chip Roy (R-Texas) didn’t skip a beat. 

“Yeah, or better. I want it to be deficit-reducing,” he said. “But a red line is actually — truly — deficit neutral.”

Roy is pushing for some tax hikes as part of the effort to achieve budget neutrality, and he’s castigating those fellow Republicans who continue to maintain that all tax cuts pay for themselves by increasing economic activity in the private sector.

Such ultimatums are posing a headache for Johnson and other GOP leaders, who are hoping to adopt a mammoth package of Trump’s priorities before the summer, to include an expansion of domestic fossil fuel production, tougher border security, funds to deport undocumented immigrants and an extension of Trump’s 2017 tax cuts, which are set to expire at the end of the year. The tax portion alone is projected to cost $4 trillion. 

Democrats are expected to oppose the effort overwhelmingly, leaving Johnson with the challenge of uniting his fractious conference behind it. 

“They are trying to cut a deal to hurt the American public,” said Rep. Pete Aguilar (D-Calif.), head of the House Democratic Caucus, who accused Republicans of pushing tax cuts for the wealthy at the expense of federal programs benefiting low- and middle-class Americans.

Before figuring out how, if at all, to make the reconciliation legislation budget neutral, however, Republicans are debating a more fundamental question: Should the undertaking be one bill, or split into two measures?

The matter has emerged as a spirited debate on Capitol Hill, with House GOP lawmakers, led by Johnson, pushing for a single measure and Senate Republicans, with Majority Leader John Thune (R-S.D.) at the helm, advocating for two separate measures. Johnson has argued that moving one measure would have a better chance of passing the slim House majority, since some hardliners would hold their nose on the deficit spending to support border policy.

Trump has found himself at the center of the debate, making it clear that he prefers “one big, beautiful bill” — which he pushed for during a private meeting with Senate Republicans on Wednesday — while also keeping the door open to a pair of measures.

“We had a great meeting. There’s great unity. Whether it’s one bill or two bills, it’s going to get done one way or the other,” Trump told reporters in the Capitol.

Republicans on Capitol Hill have a long track record of inconsistency when it comes to deficits and debt, typically depending on which party controls the White House at the time. 

Under former President George W. Bush, for instance, GOP leaders championed two rounds of tax cuts, funded two wars and expanded Medicare to include a prescription drug program — all of which helped to turn a projected multi-trillion-dollar surplus into a multi-trillion-dollar deficit. 

Under former President Obama, GOP leaders changed their tune, framing deficit spending as an existential threat to the republic and demanding that the Democratic president rein in federal programs.

When Trump entered the White House in 2017, they again abandoned their demands for austerity, backing the 2017 tax cuts — which added roughly $2.5 trillion to the federal debt, according to the Committee for a Responsible Federal Budget — and spending increases adding another $2.3 trillion. (Another $3.6 trillion in deficit spending under Trump came from emergency spending in response to the COVID-19 pandemic.)

As Republicans now weigh their approach to a reconciliation package, some lawmakers said budget neutrality is preferable, but suggested GOP leaders might ultimately revert to the old model of downplaying deficit concerns for the sake of adopting highly sought legislation.

“I don’t know how serious we’re going to be about it,” said Rep. Keith Self (R-Texas), a member of the conservative House Freedom Caucus.

Rep. Byron Donalds (R-Fla.), another member of the group, made his desire for budget neutrality clear but stopped short of throwing down a red line, alluding to the sensitive nature of the negotiations.

“That is an aspiration I would like to achieve, yes, but we have a long way to go. I just want to make sure we get everything in the right space before I comment further,” Donalds told The Hill. “I’m not using red lines on this, it’s too early for that.”

Despite the Republicans’ past willingness to accept deficits under Republican presidents, this year might be different as hard-line conservatives warn that they are ready to hold Johnson’s feet to the fire.

In a letter to House GOP lawmakers last week, minutes after the Speaker election, the 11 board members of the House Freedom Caucus said they backed Johnson for the top job despite “sincere reservations” regarding his leadership, laying out a series of demands for the Louisiana Republicans in the coming months.

Among the points on that list is, “Cut rampant inflationary spending significantly to guarantee deficit reduction and a rapid path to a balanced budget.”

“Now,” the Freedom Caucus members wrote, “Speaker Johnson must prove he will not fail to enact President Trump’s bold agenda.”