New Budget: What it Means

The House of Representatives has passed its new spending bill, which would slash government outlays pretty much everywhere.  But it left many of the details to be worked out later.

The new budget blueprint would extend the 2017 tax cuts, which were due to expire at the end of the year, and add another $500 billion worth of additional tax freebies, including the exemption of tips from taxable income.  The total cost is estimated to be $4.5 trillion.

The bill would also raise spending on immigration enforcement (estimated cost: $110 billion), on customs and border inspection (up to $90 billion) and put additional money aside to pay the military to engage in border security (up to $100 million).  

The bill requires individual legislation that removes at least $880 billion from somewhere in the Energy & Commerce-related part of the government’s budget, which includes Medicare and Medicaid payments.  Some of those savings might come from a work requirement for Medicaid recipients who don’t have provable disabilities or young children, and some would come from additional paperwork required to stay enrolled (causing some recipients to get discouraged and stop filing for benefits).  

Other cuts include at least $330 billion from school nutrition programs for children of low-income families and ending many of the provisions of the student loan repayment plans.  The bill proposes deep cuts to the Supplemental Nutrition Assistance Program (SNAP)—the former food stamps program—and $562 billion in unspecified cuts that would have to be worked out later.

Interestingly, those tax cuts might be reversed; the bill mandates that if the House fails to find $2 trillion in deficit reduction somewhere in these unspecified goals, then taxes would be raised by a commensurate amount to offset the difference.  This bill could wind up creating tax increases.

But assuming all goes as planned, lowering taxes would cost the government $4.5 trillion in revenues, and all those cuts would purportedly save $2 trillion.  The estimated impact on the government deficit is not promising; over the next ten years, the bill, as written today, would add $2.5-$2.8 trillion to the deficit side of the ledger.  Now the legislation goes to the Senate.

Sources:

https://www.forbes.com/sites/saradorn/2025/02/26/house-passes-budget-bill-trump-touts-big-first-step-for-mike-johnson/ 

https://www.usnews.com/news/national-news/articles/2025-02-24/whats-in-the-house-budget-bill-and-whats-delaying-it

https://www.yahoo.com/news/the-biggest-spending-cuts-in-trumps-new-budget-bill--and-how-they-could-affect-you-172157094.html