Snip, snip: Spending cuts are coming

Republicans’ agenda of cutting taxes and increasing spending on their policy priorities depends significantly on identifying productive spending reductions. But just cutting spending will not be enough. Republicans must also explain how their tax and spending cuts will result in better outcomes for all Americans.

The federal debt has exploded to $36 trillion and annual deficits now approach $2 trillion for the foreseeable future. Just the interest on the debt totals almost $1 trillion per year, exceeding the cost of national defense. For Republicans, the underlying problem is simple: As Treasury Secretary Scott Bessent described in his recent confirmation hearing, “we do not have a revenue problem.” Instead, “spending is out of control.”

Upcoming bills threaten to make budget imbalances worse. Congress must soon pass legislation to prevent a government shutdown and increase the debt limit. Expensive relief for California wildfires is likely. And Republicans are planning a massive budget reconciliation bill to extend expiring tax cuts and increase spending on immigration enforcement, defense and other administration priorities.

Supporters rightly argue that allowing the tax cuts to lapse would harm everyday Americans. Ways and Means Chairman Jason Smith (R-Mo.) notes that would mean “40 million parents will have their child tax credit slashed in half.” Meanwhile, official scorekeepers project that extending current tax relief would increase deficits by over $4 trillion — more if campaign-promised tax cuts, along with spending priorities, are added.

The coming weeks will feature an intense debate over how much of those costs should be offset by other spending cuts. Deficit hawks have outsized leverage in that debate thanks to the ultra-thin partisan House majority.

Key details are yet to be decided, but House Budget Committee Chairman Jodey Arrington (R-Texas) recently circulated a short list of would-be savings totaling over $5 trillion, followed by a 50-page menu offering almost $15 trillion in nominal deficit reduction alongside more than $3 trillion in potential “sweeteners.”

If lawmakers agree to even a fraction of those savings, it will involve enormous figures. Just as the Biden administration floundered in promoting trillions in new spending, Republicans won’t be able to sell the country on dollar figures alone.

Opponents are already decrying “draconian” cuts. House Minority Leader Hakeem Jeffries (D-N.Y.) has criticized “massive tax breaks for billionaires and wealthy corporations” alongside policies that would make “working families and middle-class folks and the poor, the sick and the afflicted … pay for it.” Such criticism spotlights a key challenge: To define not only how reforms will yield savings but also better outcomes, including for those now collecting benefits.

There are strong arguments for reform, including eliminating unnecessary programs, ending benefits for those who entered the U.S. illegally, and reversing policies from the previous administration that contributed to rising inflation for everyone.

Other worthy arguments involve expanding work requirements for those receiving government assistance, which expect able-bodied benefit recipients to participate in work or job training. A generation ago, lawmakers in both parties applied work requirements to millions of mostly single mothers then collecting welfare checks, arguing they were needed to reduce dependence and increase work. Even then-Sen. Joe Biden (D-Del.) supported work requirements. The reforms worked; poverty and dependence on welfare checks fell sharply as more former and would-be recipients worked and their earnings rose.

Current polls suggest that large majorities — including most Democrats and independents — support work requirements for able-bodied individuals on welfare. For example, a 2023 ballot measure in swing-state Wisconsin found that 80 percent of voters support work requirements.

Yet beyond cash welfare, few welfare programs today regularly require recipients to participate in work or training. While receipt of welfare checks remains low, the Congressional Budget Office recently reported that in recent decades, other welfare programs — including the far larger food stamps and Medicaid programs — have grown rapidly.

That suggests reforms are needed to connect more welfare recipients with work. Programs should start with those most able to work — able-bodied adults with no dependents, who are best-positioned to progress from benefits to earnings and ultimately self-support. As they do so, benefit spending will fall.

Work requirements are just one part of the much bigger savings picture. Other pro-work reforms are needed. Not everyone can work, and even cash welfare work requirements apply to only half of those collecting checks. But lawmakers can and should expect and support more work for those collecting major welfare benefits.

This will help more people move off the sidelines and into the economic mainstream, where millions of jobs are open and millions more will now become available as illegal immigration is restricted. That will boost both families and taxpayers, while helping keep deficits in check.

Matt Weidinger is an AEI senior fellow and Rowe Scholar.

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