The House’s $2 Trillion in Spending Cuts Should Be an Absolute Minimum
The reconciliation instructions in the House’s Fiscal Year (FY) 2025 budget resolution – which allow up to $2.8 trillion of net borrowing through 2034 – would require at least $2 trillion of gross deficit reduction from spending cuts and reforms. These savings represent less than 2.3 percent of total spending over the budget window and fall well short of the $4.8 trillion in gross deficit increases allowed under the budget resolution. As lawmakers work to develop a concurrent budget resolution, they should expand rather than shrink this minimum savings target.
How Much Spending Would the House Reconciliation Instructions Cut?
Some press reports have described the House budget as requiring $1.5 trillion of spending cuts, while others have said it would require $2.0 trillion of spending cuts. The actual requirement is complicated, but more consistent with $2.0 trillion of gross spending cuts.
After leadership reportedly floated proposals for only $300 to $700 billion in spending cuts, the first public version of the House budget resolution set requirements for at least $1.5 trillion of combined deficit reduction from seven different House committees1 and included a non-binding policy statement that “the goal of this concurrent resolution [is] to reduce mandatory spending by $2 trillion over the budget window.”2 It also expressed the intent of the Budget Committee to allow for lower deficits from the Ways & Means Committee if that goal were not met.
The final House-passed budget resolution made this intent binding, by setting a $2 trillion aggregate deficit reduction target for the seven committees with deficit-reducing instructions without specifying exactly where the additional $500 billion should come from.
To enforce this target, the budget includes an instruction that states the chair of the Budget Committee “shall reduce the [$4.5 trillion] reconciliation instruction for the Committee on Ways and Means” dollar-for-dollar for any gross savings below $2.0 trillion. The budget conversely requires the chair to increase the Ways & Means deficit-increasing allowance for any gross savings in excess of $2.0 trillion.
Because the budget allows the Ways & Means instruction to adjust based on deficit reduction from other committees, the total gross spending cuts from reconciliation could be higher or lower than $2.0 trillion of intended cuts. The fact that the Ways & Means Committee has jurisdiction over a significant share of spending and that policies from the other committees can affect revenue allows for further flexibility in the actual amount of spending cuts.3 But the budget sets a clear process and enforcement to meet its $2.0 trillion spending cut target.
It is important to note that while the House’s $2.0 trillion savings requirement is currently binding, the body can waive its rules with a simple majority – and so while the aggregate deficit instructions are technically binding, they may have little force in practice. Reconciliation instructions in the Senate, by contrast, generally require 60 votes to override. Whether the $2.0 trillion floor is ultimately binding will thus depend on how it is written for the Senate’s reconciliation instructions and whether the Senate instructions reflect the House’s intent.
Is $2 Trillion of Spending Cuts Enough?
While $2.0 trillion of spending cuts would be a good start, it is not close to enough to offset the $4.8 trillion in gross borrowing the House budget resolution permits, and it’s a drop in the bucket relative to how much the federal government will spend over that time period.
Over the next decade, the federal government is projected to spend $86 trillion and $2.0 trillion represents just 2.3 percent of that. Spending under the budget’s reconciliation instructions would average about 23.5 percent of gross domestic product (GDP) – which is well above the 50-year historical average of 21.1 percent of GDP or the pre-COVID level of 20.9 percent of GDP – and would allow spending to continue to rise over time.4
Lawmakers should be able to find far more than $2 trillion in spending cuts and related deficit reduction. And savings in excess of $2 trillion should be used to reduce (or preferably reverse) the deficit impact of reconciliation – not to allow even more borrowing as in the current House budget resolution.
We’ve outlined tens of trillions of dollars of potential savings from reversing costly executive actions, ending Medicaid gimmicks, reforming student loans, and reducing other mandatory spending, among other sources. Additional spending cuts could come from the Ways & Means Committee, which has jurisdiction over Medicare, the Inflation Reduction Act credits, the Affordable Care Act subsidies, and a variety of welfare programs, on top of the Tax Cuts and Jobs Act and the entire tax code.
Under no condition should the concurrent budget resolution allow for more borrowing or less in spending reductions than the House budget allows. $2 trillion in spending cuts should be the absolute minimum.
1 Specifically, it required at least $880 billion from the Energy & Commerce Committee, $330 billion from the Education & Workforce Committee, $230 billion the Agriculture Committee, $50 billion from the Oversight and Government Reform Committee, $10 billion from the Transportation and Infrastructure Committee, and $1 billion each from the Financial Services Committee and the Natural Resources Committee.
2 This goal presumably refers to gross spending cuts by committees and does not net out spending from the up-to-$300 billion of deficit increases that would be allowed from the Armed Services, Judiciary, and Homeland Security committees nor any changes to spending as part of the $4.5 trillion of deficit increase allowed for the Ways & Means Committee.
3 While most taxes are under the jurisdiction of the Ways & Means committee, some smaller revenue sources are in the jurisdiction of other committees and some policy changes from those committees may indirectly effect income or payroll tax revenue. For example, Energy & Commerce may be able to meet some of its $880 billion instructions by reversing emissions-related regulations that in turn reduce revenue loss from Electric Vehicle credits. Furthermore, the Ways & Means Committee has jurisdiction over several spending programs, including Medicare, Supplemental Security Income (SSI), Temporary Assistance for Needy Families (TANF), the Affordable Care Act subsidies (which are mostly refundable tax credits), and others. The Ways & Means committee could achieve savings in some of these programs.
4 This assumes $2 trillion of gross spending cuts, $300 billion of gross spending increases, and over $500 billion of additional interest costs.
