The upcoming challenge will be to maintain financial responsibility following the approval of the House of Representatives’ budget resolution for the 2025 fiscal year on Feb. 25.

This resolution paves the way for potential legislation that could bypass the Senate’s 60-vote requirement and pass with a simple majority. Although it doesn’t detail any specific alterations to spending or taxes, it identifies the House committees responsible for financing budget deficits in reconciliation legislation and specifies the amounts involved.

The budget reconciliation instructions for FY2025 issued by the House call for a reduction of $2 trillion in mandatory spending over the next decade. Out of this total, $880 billion is expected to come from the Energy and Commerce Committee, which oversees Medicaid – a health insurance program shared by the federal government and states that benefits 72 million low-income and disabled individuals. These benefits include various services such as nursing home care and premium assistance.

Congressional Republicans are prepared to address Medicaid, asserting that the program has veered from its original objective of aiding the poor and disabled to assisting able-bodied, working adults with lower incomes. President Trump’s stance on cutting Medicaid has been unclear, while House Speaker Michael Johnson (R-La.) has stated any cuts will focus on curbing fraud and abuse within the program.

Spending on Medicaid has surged since the implementation of the Affordable Care Act in 2010 and further increased during the COVID-19 pandemic of 2020. Under the Affordable Care Act, states were permitted to expand Medicaid coverage to adults with incomes up to 138 percent of the poverty level. This expansion continued during the pandemic, allowing individuals who lost their jobs and health insurance to qualify for Medicaid.

The future of Medicaid funding remains uncertain, with several proposals being considered by House Republicans. These include reducing federal match rates for new Medicaid enrollees under the Affordable Care Act and setting per capita limits. Furthermore, there is a suggestion to enforce work requirements for Medicaid recipients, although this is projected to result in minimal savings over the next decade.

Despite claims that Republicans aim to diminish Medicaid, the Wall Street Journal argues otherwise, projecting a considerable increase in Medicaid outlays through 2035. Therefore, even with reductions in Medicaid funding, spending on the program is set to rise in the coming years.

The mounting share of total federal spending attributed to mandatory programs like Medicaid emphasizes the need for Congress to establish limits on such programs. The combination of these programs and net interest expenses now account for a significant portion of total federal outlays, with this trend showing no signs of slowing down.

However, even if spending cuts proposed by Republicans are implemented, federal debt is still expected to rise over the next 10 years due to dwindling tax revenues. The Tax Cut and Jobs Act has provisions that are set to expire, calling for a reevaluation of key tax policies to ensure fiscal responsibility.

Looking ahead, the dialogue surrounding tax cuts should focus on their economic impact and distributional effects to ensure fair and equitable outcomes for all income groups. This requires a comprehensive review of the Tax Cuts and Jobs Act to determine the best course of action moving forward towards financial stability and economic growth.