House Republicans' (bad) plan for America

A higher retirement age, a national abortion ban, less health insurance

Many people who served in the Trump administration, including many at a very senior level, warn that Donald Trump is a dangerous threat to American values and the future of American democracy.

There’s a good chance that Trump will win in November, and if he does, there’s a good chance that we’ll look back on these warnings as the most significant aspect of the campaign. But as I wrote at the beginning of the month, I think the most under-covered and underrated aspect of the campaign is still the “boring” stakes.

And that’s why it’s worth talking about the Republican Study Committee.

Once upon a time, the RSC was something like the Freedom Caucus — a smallish right-wing factional organization in the House. But its ranks grew, to the point where it became the default caucus for a safe seat Republican in a House where the vast majority of members have safe seats. The Freedom Caucus came into being as the domain of the true die-hards, and today’s RSC counts 80 percent of House Republicans as members. In other words, it very much represents mainstream Republican Party thinking.

The group put out an annual budget proposal, and the proposal loops in a lot of non-fiscal stuff as well.

In it, the RSC endorses a Ronnie Jackson bill to prevent active duty service members from getting abortions, and a Michael Cloud resolution to prevent the Department of Veterans’ Affairs from performing abortions, and a Chip Roy bill to bar campus health services providers from financing or performing abortions. Which might seem superfluous because they endorse Mike Kelly’s bill enacting a nationwide six-week abortion ban, which itself is probably a bit superfluous since they also endorse Alex Mooney’s bill to endow embryos with the 14th Amendment rights of a person at the moment of conception.

The point isn’t that all of these bills will pass — it’s 80 percent of House Republicans, not 100 percent — but the mainstream GOP policy agenda previews the menu from which a new GOP governing agenda will be drawn. And it shows the kind of thinking and aspirations that will motivate a new Trump administration. If Republicans win tiny congressional majorities, they’ll only enact a few of the ideas off this fiscal menu. But if they win big majorities, they’ll enact a lot of it.

So it’s worth understanding what’s on the menu.

Huge cuts to low-income health care

The US government spends the most money on the military and on taking care of retirees. As Republicans have grown increasingly leery of cutting spending on those two big things, but remain as enthusiastic as ever about cutting taxes, their fiscal planning has come to focus more and more on cutting health care provision to families of modest means.

As a result, the real centerpiece of the RSC’s agenda for “fiscal sanity” is a 54 percent cut to Medicaid, CHIP, and ACA marketplace subsidies.

To make it hard to characterize who, exactly, will lose health care under this scenario, they also propose turning Medicaid into a “block grant.” So instead of getting fairly generous federal matching funds with a bunch of minimum coverage rules attached, states will get way less money but a lot more flexibility in terms of deciding exactly who gets screwed. One interesting wrinkle is that the current matching rate (FMAP) is designed to be more generous to poorer states. That reflects Great Society-era politics and also progressive instincts, but today that is a feature of Medicaid that is mostly friendly to Republican governors and state legislators. Nonetheless, House Republicans want to replace it with a flat FMAP.

Part of the logic here, I guess, is that red states like Mississippi already have very stingy Medicaid programs compared to a state like Massachusetts, so the big cut mechanically falls harder on Massachusetts than on Mississippi. Still, the reality is that they’ve structured this as a tougher blow to the finances of Michigan and Maine than to Maryland and Massachusetts.

A broad rule of thumb is that Medicare is for the elderly and Medicaid is for the poor. But in practice, Medicaid also covers long-term health care needs, which mostly go to the elderly. Long-term care is expensive, so even though the elderly and disabled account for only 20 percent of Medicaid enrollment, they are 46 percent of the spending.

Now, at least based on those figures from 2019, you technically can enact a 54 percent Medicaid cut without touching the elderly and disabled, it just requires zero benefits for anyone else. I doubt any state would actually do that, though. In practice, you’re going to see cuts to all classes of beneficiaries, plus — in some states — higher taxes and reduced spending on education to make up the gap.

Cuts to programs for the elderly

To the extent that the RSC proposal has gotten any media attention, it’s primarily been for endorsing an increase in the retirement age. They are a little vague as to what exactly they have in mind here. Which is odd, because this is consistently one of the worst-polling ideas in American politics, and I’d think a prudent political party would just not mention it at all unless they have a firm, precise, and specific reason for doing so.

The RSC tries to reassure seniors, quoting RSC Chair Kevin Hern as saying “we WILL NOT adjust or delay retirement benefits for any senior in or near retirement.”

But how near is near? Back 10-15 years ago, when Paul Ryan was putting out plans, he structured it such that anyone 55 or older would be spared the pain of his proposed cuts. Of course, anyone who was 55 during the era when Ryan was putting out those budget roadmaps is 65-70 today. The problem with the “we’re cutting Social Security but not for anyone who’s old” posture today is that the Social Security Trust Fund faces exhaustion in 2032, which is only eight years in the future. If the Trust Fund is exhausted. Then by law everyone gets a benefit cut of maybe 23 percent. What’s more, if Republicans succeed in their immigration crackdown, then the trust fund will be exhausted even sooner.¹ So this retirement age idea, while provocative and politically toxic, really can’t contribute to the fix unless it’s accelerated.

We also know that Donald Trump doesn’t agree with this. His plan is to make no changes to Social Security, run off the exhaustion cliff, and then everyone’s benefits are exhausted. This has been widely reported in the press as Trump opposing benefit cuts, but the status quo plan, in fact, cuts benefits. One of the best things about the RSC budget is it makes this point, except for some reason they got confused and attributed it to Joe Biden: “President Biden’s plan would cut benefits by 23 percent in 2033.”

Biden, in fact, has a plan to extend the life of the Trust fund by raising taxes, and I would note that in the higher theoretical universe where Biden’s comprehensive immigration reform policy ideas passed, that would also help because we’d have more people paying into the Trust fund. Clearly, though, by attributing Trump’s plan (let Social Security go broke and cut benefits by 23 percent) to Biden, the RSC is hoping to talk Trump into adopting their plan, which involves making inflation adjustments stingier, raising the retirement age, and enacting various cuts to disability benefits.

They also resurrect a version of Ryan’s old plan to replace Medicare with a “premium support” program that would work like the Affordable Care Act. The way the ACA works is that people buy insurance plans in a regulated marketplace and some people (like me) pay the full price of that plan out of pocket while those earning up to 400 percent of the Federal Poverty Level get subsidies on a sliding scale. To me, the big problem with making Medicare work more like this has always been that Medicare’s unit costs — the price paid for a doctor visit or other specific health service — are lower than the prices paid by private insurance plans. So while shifting Medicare to the ACA model would cost the government less per patient, it wouldn’t just shift costs from the government to the patient, it would raise the costs and create a windfall for providers.

I could see a case for converging the Medicare and ACA models: The ACA marketplace could add a public option and piggyback on Medicare’s aggressive price-setting. Eventually ACA marketplaces could cover seniors, too, so the government would get out of the business of subsidizing rich retirees’ premiums. But Republicans still want to eliminate the ACA, not enhance it, and then turn Medicare around in a way that generates tons of extra revenue for America’s doctors and hospitals, but really hurts patients.

What it’s all about

The point of all this is that Republicans have about $5.5 trillion worth of regressive tax cuts they want to enact or extend, which is a lot.

Trump took office in the wake of years of overly-austere fiscal policy from the Obama administration. So he did a big tax cut. And he didn’t reform Social Security or Medicare. And he signed big increases to non-military discretionary spending. And he also signed big increases to military spending. And he ultimately didn’t achieve his dream of repealing the ACA. And even though the deficit increases that resulted from this were large, it was all totally fine.

Biden’s big fiscal stimulus in the wake of Covid ended all that, and we are now in a world where inflation and interest rates are a problem.

In the year 2024, that is mostly a political problem for Joe Biden, who is the incumbent and who I think would be wise to pivot a bit to austerity. But if Trump is president in 2025, it becomes his problem. And if Trump enacts his plans, inflation and interest rates are going to get a lot worse. Pairing these fiscal ideas with an immigration crackdown further exacerbates inflation, just as it further exacerbates Social Security’s insolvency.

The RSC plan, though sloppy and vague on key questions,² is an attempt to wrestle with this reality in a more serious way than Trump does in his sporadic musings. After (or in tandem with) blowing up the deficit and forcing interest rates up further, the plan is to defray those costs by slashing health benefits and gutting the retirement system. It’s challenging to get people to think of these as among the issues at stake in 2024, because Trump was already president and people don’t think of the Trump years as dominated by these kind of big fiscal debates. But his first order of business in 2017 really was ACA repeal, and he followed it up with a huge tax cut. And as I keep saying, the fiscal circumstances have changed. I am much more open to the idea of some spending cuts than I used to be, but also much less open to giant tax cuts.

If you want these big tax cuts that Trump is pushing for, then you need something like the enormous spending cuts the RSC is proposing.

1. Critics sometimes analogize Social Security to a “pyramid scheme” which I think is unfair, but it is true that population growth, including via immigration, makes it more sustainable. Also note that while there are a lot of problems with illegal immigration and good reasons to want to reduce it, illegal immigrants working with fraudulent documents are especially valuable to Social Security because their employers pay taxes into the system but the immigrants don’t collect benefits.

2. Though extremely specific about the national abortion ban thing!