Conservatives Revolt Against Trump's Budget Deal

Plus, Trump's new plan to slash drug prices

House Passes Two-Year Deal to Raise Spending and the Debt Ceiling

The House on Thursday afternoon passed a two-year budget deal that would raise spending, suspend the debt ceiling through July 2021 and add an estimated $1.7 trillion to the national debt over the next decade.

The vote was 284-149, with a large majority of House Republicans opposing the bill despite President Trump’s urging them to support it. Only 65 Republicans voted for the bill, while 132 voted against it.

“House Republicans should support the TWO YEAR BUDGET AGREEMENT which greatly helps our Military and our Vets. I am totally with you!” Trump tweeted Thursday morning.

But most conservatives decided they could not side with the president on the deal, which would boost domestic and defense spending by more than $320 billion over the next two years. The legislation would set discretionary spending budgets of nearly $1.4 trillion for each of the next two years, including $738 billion for defense and $632 billion for non-defense programs in fiscal 2020.

Both the Republican Study Committee and the House Freedom Caucus, two leading conservative groups, came out against the measure. “This is not draining the swamp — it’s feeding the swamp and entrenching the status quo,” House Freedom Caucus leaders wrote in a USA Today op-ed.

Opposition on the left was more muted, with progressive concerns over increased defense spending largely outweighed by satisfaction over securing additional funding for their priorities and bringing an end to spending caps imposed by the 2011 Budget Control Act, including $126 billion in automatic cuts that had been set to take effect next year.

“With this agreement, we can finally begin to end this harmful chapter of self-inflicted austerity,” the Congressional Progressive Caucus said Wednesday. “It’s not a perfect deal by any means. However, it will allow for major, long-overdue investments in domestic priorities – including housing assistance, food aid, education and job training.”

Just 16 Democrats voted against the measure.

The House is now set to adjourn for a six-week August recess. The Senate is expected to pass the budget deal next week.

The bottom line: The election politics behind the deal are clear. As Politico’s Nancy Cook and Burgess Everett note, in this budget fight, Trump chose the pragmatist (Treasury Secretary Steven Mnuchin) over the rabble-rousers (fiscal hard-liners like Mick Mulvaney, his acting chief of staff). The budget deal, once it passes the Senate and is signed into law, defuses the biggest potential fiscal fights remaining before the 2020 election, providing some certainty for the economy and markets.

Numbers of the Day

$4.1 Trillion: The Committee for a Responsible Federal Budget said Thursday that, if the budget deal becomes law, legislation signed by President Trump — including tax cuts and increased spending — is expected to add $4.1 trillion to the national debt between 2017 and 2029. Over a traditional 10-year budget window, laws signed by Trump will add $3.4 to $3.8 trillion to the debt.

$1.57: A new study from the Bipartisan Policy Center says that Medicare would save $1.57 for every dollar it spends delivering healthy food to elderly beneficiaries who have recently been discharged from the hospital. The savings would come from a reduction in the rate of hospital readmissions for patients suffering from a wide range of common ailments, including rheumatoid arthritis, congestive heart failure, diabetes and emphysema. “If you were going to offer meals to every Medicare beneficiary, it would be cost-prohibitive,” said BPC’s Katherine Hayes. “By targeting it to a very, very sick group of people is how we were able to show there could be savings.”

Trump Considering Executive Order to Lower Medicare Drug Prices: Report

President Trump is considering issuing a broad executive order to slash the prices of brand-name prescription drugs covered by Medicare Part D and other government programs, Reuters reports:

“The order under discussion would be much broader than the Administration’s previously disclosed proposal to lower prices on physician administered, or Part B, drugs by tying prices to lower costs in other countries.

“The administration is now looking at ways to use this or a similar method to lower prices in Medicare’s much larger Part D, which is for widely used prescription drugs patients take at home, such as for cholesterol and blood pressure, the sources said.”

The order reportedly could come within weeks, and it could cover the military health care plan as well as the Department of Veterans Affairs. But the administration may hold off if it looks like the drug pricing legislation put forth by Sens. Chuck Grassley (R-IA) and Ron Wyden (D-OR) gains bipartisan momentum (see below).

The federal government spent nearly $100 billion on prescription drugs through Medicare Part D in 2016, Reuters says.

Bipartisan Senate Drug Pricing Plan Advances

A bipartisan bill that would limit the increase in drug prices in the Medicare program moved forward in the Senate Thursday, advancing from the Senate Finance Committee to the full Senate by a vote of 19-9.

Spearheaded by Sens. Chuck Grassley (R-IA) and Ron Wyden (D-OR), the "Prescription Drug Pricing Reduction Act of 2019" would restrict price increases for drugs covered by Medicare Part D to the rate of inflation and require pharmaceutical companies to refund revenues generated by price hikes above that level.

The bill, which the Congressional Budget Office said would save more than $100 billion over a decade, would also cap out-of-pocket expenses for Medicare beneficiaries, reform Medicare’s prescription drug benefit, and tweak Medicaid rebate rules, among other provisions.

A symbolic victory: It’s significant that the bill passed through the committee, given fierce opposition from the pharmaceutical industry. Stephen Ubl, head of the lobbying group PhRMA, argued against the legislation earlier this week, claiming that the bill “fails to meet the fundamental test of providing meaningful relief at the pharmacy counter for the vast majority of seniors.”

But a tough road ahead: Although there is widespread agreement that Congress must do something about drug prices, the bill is unlikely to pass the Senate in its current form give the opposition of the powerful pharma lobby and resistance from some Republican lawmakers. Republicans accounted for all of the no votes in committee Thursday, with several GOP senators arguing that the limit on price increases amounts to the imposition of government price controls that violate free market orthodoxy. Sen. Pat Toomey (R-PA) tried unsuccessfully to strike the price limit mechanism from the bill. An amendment that would allow Medicare to negotiate drug prices was struck down.

What’s next: Senate Majority Leader Mitch McConnell has not yet indicated whether he will bring the bill to the Senate floor for a vote. But Sen. John Cornyn (R-TX), the majority whip, said Thursday that the “bill is not anywhere near action on the floor.”

Trump’s Medicare Chief Says Public Option Is a Bad Idea

Seema Verma, the administrator of the Centers for Medicare & Medicaid Services, has come out strongly this week against the idea of a “public option” — a government-run insurance plan that would provide an alternative to private coverage. The idea has been promoted by a number of Democrats, including former Vice president Joe Biden, as an alternative to a more sweeping transition to a single-payer Medicare for All system that could involve the elimination of private insurance.

Advocates for a public option say it would lower prices by competing with private insurers while still allowing Americans who like their private plans to keep them. But Verma argues that a public option would force private insurers to flee the market, ultimately leaving a single-payer government-run system.

“The secret of the public option is that it’s only cheaper because it uses the force of government to strong-arm doctors and hospitals into accepting below-market payment rates. But the government cannot wave a wand and impose lower rates on some providers while holding everyone else harmless,” she said in a speech Monday. “Access will be compromised for patients, and reimbursement cuts in the public plan will shift more pressure to employer-sponsored plans to make up the difference, driving up costs for 180 million Americans with private insurance. Make no mistake – the public option is a Trojan horse with a single payer hiding inside. It would use the force of government price setting to crowd private insurers out of the marketplace altogether, and achieve the true policy goal of a government-run single payer healthcare system.”

Verma, who has also criticized Medicare for All, followed up with an op-ed in The Washington Post based on her speech.

“Millions of Americans rely on Medicare and Medicaid. We made a promise to our nation’s most vulnerable to ensure they have access to health coverage. There is something deeply unjust in dumping millions more onto these programs, which are already on an unsustainable fiscal path,” she wrote. “Instead of introducing even more government intrusion into the markets, we must strengthen and protect our existing safety-net programs and address the drivers of costs by fostering a competitive and dynamic private market in which plans and providers compete on the basis of cost and quality — not a system that makes promises that can’t be kept and leaves taxpayers to clean up the mess.”

Read Verma’s full op-ed at The Washington Post.

GOP Tax Law Is Boosting Investment Overseas: Report

The 2017 Tax Cuts and Jobs Act was supposed to motivate U.S. multinationals to invest more at home, but according to a new study being presented to the American Accounting Association next month, that isn’t happening. Instead, as Accounting Today reports, researchers found that U.S. multinationals that saw the biggest reductions in the cost of bringing overseas profits home actually increased their capital investments outside of the country. “Our results are consistent with foreign capital expenditures rather than domestic capital expenditures influencing the increase in investment post-TCJA, which is opposite of congressional intent,” the report says.

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Chart of the Day: No Love for Public Campaign Financing

If you didn’t check off the "Presidential Election Campaign" box on your tax form this year, you’re not alone. The percentage of filers who have elected to direct a few dollars to the Presidential Election Campaign Fund — at no cost to themselves — has been declining for years, falling from about 28% in 1976, when the option was first offered, to 4% in 2018.

The election fund is unique, Erin Huffer and Aravind Boddupalli of the Tax Policy Center say, because it’s “the only element of the US system of taxation and budgeting that gives the public direct control over how their tax dollars are spent.” And even though it’s largely neglected by taxpayers, the fund maintains a surplus balance of $392 million, due to the refusal of presidential candidates to accept matching funds within the program (neither Hillary Clinton nor Donald Trump received general election funds in 2016).

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