By Richard Cowan and Gabriella Borter
WASHINGTON (Reuters) – President Donald Trump’s Republicans are trying to pass a tax cut extension that would reduce federal revenue by about $4.5 trillion over the next decade, while cutting about $2 trillion in spending over that timeline.
The plan, which is now under consideration in the Senate after the House of Representatives passed a measure advancing it, does not currently include much detail of where spending will be cut. But it offers some clues and Democrats and advocates warn that social programs, including Medicaid and food aid for low-income Americans, could be targets.
Republicans hold narrow majorities in the House and Senate and are attempting to push as much of Trump’s agenda through without the support of the Democrats, although the Senate may make some changes and Democratic votes could be needed on aspects of this plan should some Republicans defect.
HOW WILL FEDERAL HEALTH INSURANCE BE IMPACTED?
House Republicans directed the committee that oversees the federal health insurance programs Medicaid and Medicare, which serve elderly Americans, to find some $880 billion in spending cuts over 10 years.
The federal government spent about $607 billion on Medicaid alone in the fiscal year ended Sept. 30. The program was expanded under the 2010 Affordable Care Act to guarantee more citizens’ coverage, and the Department of Health and Human Services estimates some 45 million people rely on that expanded coverage.
Republicans say they cut healthcare spending by targeting waste and fraud. Federal agencies reported $236 billion in improper payments in the 2023 fiscal year, with the bulk of it coming in claims for Medicaid, Medicare and unemployment payments, according to the Government Accountability Office.
Democrats say that cutting fraud alone is unlikely to generate the volume of savings needed, contending that the cuts will likely force states to bear the burden of reimbursing healthcare providers and may leave many vulnerable patients uninsured, unable to afford medical treatments and strapped with medical debt.
Over 79 million Americans were enrolled in Medicaid or the Child Health Insurance Program known as “CHIP” as of October 2024.
WHAT ABOUT FOOD ASSISTANCE PROGRAMS?
The House plan orders the Agriculture Committee to find $230 billion in spending cuts over 10 years, which Senate Democratic leader Chuck Schumer and House Budget Committee Democrats like Representative Brendan Boyle have warned could target the SNAP food aid program for low-income Americans.
SNAP cost the government $112 billion in fiscal year 2023 and gave some 42 million Americans an average of $211 monthly for food, according to Department of Agriculture data. Children make up more than a third of SNAP participants.
Cuts would force states to pick up the slack on food assistance. If states lack the resources to meet the population’s needs, they could tighten eligibility requirements or remove people from the program as a result.
WHAT WOULD HAPPEN TO LOCAL SCHOOLS?
The plan calls for $330 billion over ten years in cuts in education and labor, notable as Trump has also called for outright closing of the Department of Education.
If he succeeds, federal grants for public schools and programs in poor communities could suffer. Also unclear: whether schools’ curricula would meet national standards, what would happen to the $1.6 trillion in student loans the agency oversees and whether protections against sex discrimination in education would wither.
In fiscal year 2024, the department received $79 billion in federal funding to oversee around 100,000 public and 34,000 private schools.
The popular $30 million Pell Grant program that helps low-income students pay for college with grants ranging from a minimum of $740 to a maximum $7,395 in the 2025-2026 academic year could face cuts.
WHAT ABOUT THE ‘THIRD RAIL’ SOCIAL SECURITY PROGRAM?
Trump campaigned on a promise of not cutting the Social Security or Medicare programs for the elderly.
Social Security is the largest single item in the federal budget, accounting for over 20% of expenditures.
In fiscal year 2024, $1.5 trillion was spent on the program.
The federal pension and disability program currently serves around 73 million people and is growing with the aging “Baby Boomer” population. It is known as the “third rail” in American politics: Touch it by cutting benefits and you will get electrocuted because it is so popular.
That said, the House Budget Committee last year and some senators separately weighed the establishment of a “fiscal commission” to study ways to stop the dramatic growth in the national debt, which now stands at $36.5 trillion. Such an effort would be separate from Congress’ regular budget and appropriations process, depending on how such a commission was structured.
Without a replenishment of the Social Security Trust Fund, it will run out of reserves in 2037 or even sooner, meaning benefits could be cut by some 24% as tax revenues would then provide the only source of income. Heading that off could mean raising the retirement age or making other savings in the shorter-term.
(Reporting by Gabriella Borter and Richard Cowan; Editing by Scott Malone and Aurora Ellis)
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