GOP lawmakers running out of options to pay for Trump’s costly agenda

Republican leaders are rapidly running out of ways to pay for President Trump’s agenda as GOP lawmakers shoot down various proposals to cut spending or increase revenues.

Without finding some new ideas, the GOP risks adding trillions of dollars to future deficits by passing Trump’s agenda, something many conservatives are loathe to do.

Outside observers are expressing pessimism the Republicans will land on ideas that have enough support to get passed into law.

“I just don’t see them getting the money. There’s no ‘there’ there, to be quite honest about it. If they want to spend money, they’re going to end up putting it on the debt,” said former Sen. Judd Gregg (N.H.), who previously served as the Republican chair of the Senate Budget Committee.

“They’re not going to get it out of tariffs, either. You have [White House trade adviser Peter] Navarro running around saying they’re going to get $600 billion in tariff revenue. That’s absurd. It’s basic economics. You raise the price on it, people stop buying it,” he said.

“It’s all a joke, to be honest with you, when it comes to money saving and reducing debt,” he added. “This president doesn’t care too much about debt.”

Maya MacGuineas, the president of the Committee for a Responsible Federal Budget, said lawmakers need to steel themselves to political blowback and make significant cuts, even though it will reduce some benefits.

“If you take all the big pots of money off the table, it becomes very hard to find enough savings to offset $4, $5 — or more — trillion in tax cuts, let alone bring the debt down, which is the stated goal of many members,” she said.

“People say you can’t touch benefits for anything, you can’t raise taxes. OK, then we’re going to have a debt crisis. That is the result of not talking about benefits and/or taxes,” she warned.

The most ambitious plan floated so far, to reduce Medicaid spending by hundreds of billions of dollars, now appears all but dead after a dozen House Republicans informed their leadership this week that they would not support a bill that includes any reduction in Medicaid coverage to vulnerable populations.

Republicans who have balked at Medicaid cuts say they’re willing to support new work requirements for the program, which would save an estimated $109 billion over 10 years, and to root out “fraud.” But that would achieve limited savings.

Budget experts say the proposed discretionary spending cuts recommended by Elon Musk’s Department of Government Efficiency (DOGE), which would still need to be approved through a vote by Congress, will end up saving relatively little money over the long term compared to the huge projected cost of Trump’s agenda.

So far, Musk hasn’t come close to finding the $1 trillion in cuts he initially said he would find. Even if his DOGE team cut all nondefense, discretionary federal funding — just about all the money appropriated by Congress outside the Pentagon on an annual basis — he would still fall $50 billion short of his goal.

Musk has since significantly pared back his budget-cutting goal for next year, saying he now anticipates savings of $150 billion from the reduction of waste and fraud.

“This DOGE group is throwing up a lot of smoke but is basically doing it with a small candle,” Gregg said. “They’re going after marginal discretionary events, which basically generate very small savings. So they’re not going to get it out of the discretionary accounts. They’ll get some, but it’s not going to be big.”

He called the whole exercise “a lot of flamboyance and very little substance.”

Trump has ruled out making substantial cuts to the two biggest drivers of the federal debt — Social Security and Medicaid — and cuts to veterans’ health programs and military retirement pay are also considered off limits.

Some Trump allies are floating the idea of raising the rate for the top income tax bracket from 37 percent to 39.6 percent or creating a new 40 percent bracket for people earning more than $1 million, but those ideas are running into stiff opposition from Senate Republicans.

“I am strongly opposed to raising taxes,” Sen. Ted Cruz (R-Texas) said last week when asked about raising taxes on the wealthy.

Speaker Mike Johnson (R-La.) and Senate Majority Leader John Thune (R-S.D.) pledged at an April 10 press conference that they would seek at least $1.5 trillion in deficit reduction in the budget reconciliation bill they hope to pass to secure the border, plus up defense spending and extend the 2017 Trump tax cuts.

They made that promise to assuage fiscal hawks in the House led by Reps. Chip Roy (R-Texas) and Andy Harris (R-Md.), who threatened to vote against the Senate-modified budget resolution.

Extending Trump’s expiring 2017 tax cuts would add an estimated $4.6 trillion to the debt over the next decade.

In addition, the House and Senate Republicans are calling for the federal government to spend between $200 billion and $350 billion to secure the nation’s borders and between $100 billion and $150 billion to beef up defense spending.

Then there are the new tax relief proposals Trump has put on the table, such as exempting tipped income from taxes, which would cost between $150 billion and $250 billion over 10 years, and shielding Social Security benefits from taxes, which is projected to cost $1.5 trillion over a decade.

Budget experts say negotiators will have a very difficult time finding $1.5 trillion in savings.

“I don’t see where you can do $1.5 trillion unless you’re actually getting into Medicare and real benefits,” said William Hoagland, a senior vice president at the Bipartisan Policy Center who previously served as the Republican staff director of the Senate Budget Committee. “I don’t know how you do it.”

He noted that implementing new work requirements for Medicaid would save only an estimated $109 billion over 10 years.

And he warned “it’s extremely hard to define what waste, fraud and abuse is.”

“If you define wasteful spending to be something like the provider tax,” he said, referring to a budget gimmick states use to secure more federal Medicaid funding by taxing and reimbursing health care providers, it could produce big federal savings but would draw a lot of political opposition.

“That can be a big number, it could be well in $500 billion to $600 billion [in savings], but I think most people would say that would result in a reduction in benefits so I think the provider tax is off the table,” he said.

The Committee for a Responsible Federal Budget estimates that banning so-called Medicaid provider tax gimmicks would save $720 billion over 10 years.

Limiting those taxes to 2.5 percent of provider revenue would save $285 billion while limiting them to 10 percent of state general funding would save $350 billion, according to the group’s projections.

Sen. John Cornyn (R-Texas), a member of the Senate Finance Committee, has talked about eliminating tax “expenditures” or niche tax breaks that benefit special constituencies, such as the mortgage interest deduction.

But each of those special tax breaks have vocal constituencies, and the bigger the tax breaks, the more powerful the special interests that lobby for them.

Republican negotiators are most likely to eliminate the electric vehicle (EV) tax credit, a signature accomplishment of President Biden’s clean-energy agenda. The $7,500 consumer tax credit for EVs was identified in November by Trump’s transition team as an offset for tax reform.

Other clean-energy tax credits that were enacted by Biden’s Inflation Reduction Act (IRA), such as the renewable electricity production tax credit, the energy investment tax credit, the clean electricity tax credit and the production tax credit could be eliminated as well to pay for Trump’s tax priorities.

But even those tax breaks, which were thought to be low-hanging fruit, have supporters in the GOP.

Four Republican senators, John Curtis (Utah), Thom Tillis (N.C.), Lisa Murkowski (Alaska) and Jerry Moran (Kan.), sent a letter to Thune this month warning that repealing energy tax credits from the IRA would hurt businesses and jobs.

“While we support fiscal responsibility and prudent efforts to streamline the tax code, we caution against the full-scale repeal of current credits, which could lead to significant disruptions for the American people and weaken our position as a global energy leader,” they wrote.

Large cuts to defense spending also face staunch opposition on Capitol Hill.

Senate Armed Services Committee Chair Roger Wicker (R-Miss.) has insisted on providing at least $150 billion in new spending for the Pentagon to maintain U.S. defense capabilities.

One Senate Republican source said the $150 billion in new defense funding is a “minimum” for the budget reconciliation package.

Another potential pot of savings could come from cracking down on so-called improper payments in Medicare, Medicaid and other parts of the government.

But tracking down and eliminating those improper payments would require big federal expenditures up front to fund personnel to do the labor-intensive work.

The Government Accountability Office, for example, found $51.1 billion in improper payments in Medicare and $50.2 billion in improper payments in Medicaid in 2023.

Hoagland said policymakers could find about $2 in savings for every $1 spent on rooting out improper payments.

But it’s still hard to find a way to find $1.5 trillion in savings over 10 years without impacting benefits.

Hoagland said the House Energy and Commerce Committee, which has been tasked by the joint budget resolution with finding $880 billion in deficit reduction, will “have to look at other things besides health care” to reach that target.

He said it will have to look at selling federal assets, such as radio frequency spectrum.