House Budget Committee proposes boosting defense spending, reshaping welfare programs – CNBC

The House Budget Committee on Tuesday unveiled a spending proposal that would boost defense funding but dramatically reshape social welfare programs such as Medicare and food stamps.

The fiscal 2018 budget which the committee said would result in a $9 billion surplus after a decade reflected compromise between defense hawks and fiscal conservatives, but risked alienating moderate Republicans loathe to embark on the politically perilous process of reforming popular entitlement programs.

In fact, the budget ran into its first roadblock even before it was officially released Tuesday. The proposal assumes $204 billion in deficit reduction over a decade from the passage of the House bill to repeal and replace the Affordable Care Act. But the bill appeared to die in the Senate on Monday evening after Republican Sens. Mike Lee of Utah and Jerry Moran of Kansas came out against it.

The collapse of the health-care bill could place even more pressure on GOP lawmakers to pass a budget not just to keep the government running, but also because Republicans plan to use the process to push through what is arguably their top agenda item: tax reform.

"The budget resolution is no longer a theoretical outline with little chance of implementation," Budget Committee Chairwoman Diane Black said. "It is the major governing document of the 115th Congress, and it is the concrete fulfillment of our promise to the American people."

The proposal calls for $621 billion in defense spending in fiscal 2018, including money for President Donald Trump's signature border wall. That is more than the White House had requested, but it is still below the $668 billion that the conservative Republican Study Committee would like. The budget also outlines $203 billion in spending reductions to social safety net programs an amount that GOP Rep. Charlie Dent of Pennsylvania, head of the moderate Tuesday Group, has signaled is too steep.

The House proposal mirrors the White House budget in imposing new work requirements for programs like food stamps. But it goes beyond the administration's blueprint by also outlining changes to Medicare one of the programs that Trump vowed on the campaign trail not to touch. Among the reforms detailed in the budget are limiting Medicare benefits for wealthy seniors and allowing more private insurers to compete for coverage.

Although the House budget does not address Social Security retirement, it does call for changes to the disability insurance program, such as barring recipients from also collecting unemployment benefits.

"Mandatory spending must be addressed in this budget resolution and in budget resolutions to come," the document says.

The study committee plans to propose additional cuts to mandatory spending programs later this week. The group supports a bill introduced last year by Rep. Sam Johnson of Texas that would raise the age of eligibility for Social Security. Study Committee Chairman Rep. Mark Walker of North Carolina said his group plans to support the House budget but hoped that its proposals would become a blueprint for the future.

"Are we on a sustainable path?" he asked. "The truth is that overwhelmingly, both Republicans and Democrats would answer the same way. No we are not."

The House estimated that, if implemented, its budget would boost economic growth to an average of 2.6 percent annually over the next decade short of the Trump administration's often-criticized goal of 3 percent. Still, officials in both cases point to tax reform as the key to jump starting growth.

The budget proposal provides some broad guidance for how lawmakers should proceed, but substantial divisions remain within the GOP even over the framework.

The budget directs tax cuts to be deficit neutral, meaning that they could be offset by higher revenue elsewhere or spending reductions. House GOP leadership has previously said tax reform should be paid for only through higher revenues. Some conservative groups, such as the House Freedom Caucus, have argued that tax cuts should not have to be offset at all because they will spur economic growth.

"This budget cannot dictate to the [tax-writing] Ways and Means Committee how tax reform should be done," the document states.

The proposal also supports shifting the tax code to a "territorial" system, in which the individuals and businesses would only have to pay taxes on income earned in America. The United States is one of the only developed nations that taxes income earned in other countries as well.

One topic the budget does not appear to address is the federal borrowing limit. Lawmakers will have to vote to raise the debt ceiling by late summer or early fall or risk an unprecedented default. Some Republicans have called for the measure to be combined with vote over the budget. However, Treasury Secretary Steven Mnuchin has repeatedly called on Congress to pass a "clean" bill to lift the cap with no strings attached.

The House budget committee will mark up its proposal on Wednesday.

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House Budget Committee proposes boosting defense spending, reshaping welfare programs - CNBC