The GOP's Huddle on Its 'Big Beautiful Bill'
26:27 Share

ADP knows any big thing, any small thing, any trendy thing. Even a trendy thing that everyone knows isn't a great idea, but management just wants us to give it a try for a bit can change the world of work. From HR to payroll, ADP designs forward-thinking solutions to take on the next anything. From the opinion pages of The Wall Street Journal, this is Potomac Watch.

Republicans are huddling this week on their big, beautiful bill to extend the 2017 tax cuts and more. But how much movement does there seem to be? And is it in the right or the wrong direction? And when might President Trump expect a bill to land on his desk? Welcome, I'm Kyle Peterson with The Wall Street Journal. We're joined today by my colleagues, editorial board member Kate Batchelder-Odell and columnist Alicia Finley.

Senate Republicans this morning are having a policy retreat at the Library of Congress across from the Capitol. The Senate Majority Leader John Thune saying this is an opportunity for us to get everybody together to talk about the upcoming agenda. Obviously, we'll be heavily focused on reconciliation.

That is the big, beautiful bill, as Trump often calls it, that is intended to pass the GOP's agenda without having to go through the Senate filibuster and get 60 votes. House Republicans, meantime, have been meeting at the Capitol. Speaker Mike Johnson on Tuesday night had a meeting with GOP moderates. That discussion focused mainly, it seems, on the Medicaid debate within the Republican Party on what should be in this bill.

Kate, all these discussions are geared toward passing the Republican agenda, including but not limited to those 2017 tax cuts that are soon expiring. But it seems to me that there are many real and divisive policy questions that are still outstanding for the GOP. Kate, what is your sense of the latest?

the progress that Republicans are making on the big, beautiful bill and what is left to do. So the House is making some progress. They've moved eight of 11 pieces of the bill through committees. But the outstanding issues really are Medicaid, food stamps,

and the tax piece, renewing the tax cuts from 2017. So you might have noticed that those are all the really big items that are still in negotiations, but there have been some progress like advancing on a bipartisan basis and $150 billion increase to the defense budget. So there has been some progress. Focus in first on Medicaid because that is proving, I think, to be one of the toughest parts of the bill. Some of the lawmakers have a lot of trauma from trying and failing to repeal Obamacare in 2017.

And there is a lot of reticence to touch Medicaid on the GOP moderate side. But I really think the big disappointment overnight has been that it looks like Republicans are going to be reluctant to touch superpowers.

something known as a Medicaid match rate. And that is a policy jargon for basically the federal government pays a lot more money for able-bodied men who are eligible under Obamacare than they do for pregnant women, low-income children, and other kind of traditional Medicaid populations.

This original sin comes from the Affordable Care Act. It comes from Obamacare. It was a bait to get states to expand their programs and take this cash. And so it's been a good argument, I think, for Republicans to say, look, the federal government should not be spending more money on able-bodied men than they do pregnant women. And that, I think, is both a political high ground and something that would actually start to get at some of the structural problems in Medicaid and some of its fiscal drivers that are making it unsustainable.

But right now, the moderates are very, very hesitant to go there. States are worried about having to pick up a greater share of these costs. And so I'm concerned about potentially missing a generational opportunity to reform Medicaid. And just by the way, real quick, I mean, there's so much discussion over Medicaid cuts.

because the House is trying to come up with $880 billion in savings. But we're talking about keeping Medicaid growing 3% a year. I mean, we're not talking about cuts. We're talking about reorganizing it to better priorities and slowing the rate of growth. So I think that's important to keep in mind here as there's a lot of press accusations that what Republicans are doing are slashing and burning Medicaid. And that is just not an accurate picture.

Alicia, is your sense also that the Republicans seem to be backing away from real substantive Medicaid reforms? One other observation I would throw out here is part of the difficulty, I think, in the GOP is there is an absence at times of leadership on these nitty gritty policy questions. If you had a president that was involved in this process and said, this is what I think we should do on Medicaid, it would help coordinate the

Republicans, particularly House Republicans and Senate Republicans, the moderates, the MAGA Republicans, it would get everybody on the same page. And that seems to be part of the difficulty here. One of the quotes that jumped out at me from Politico's reporting on this debate is from Republican Congressman Juan Siscamani of Arizona. Here's what he told reporters on Tuesday. We have to make sure that we know where the president is on this and also where the Senate is.

We can't be just unilaterally moving this without knowing where they're going to be and then have some surprises there at the end.

And so, Alicia, what would help here maybe is some presidential leadership, some White House leadership helping get all Republicans on the same page and finding a line that they can take that they can then go out and defend the reforms that they want to make to their constituents. I would agree mostly with that, though I also think the presidential leadership could be a double-edged sword in terms of what exact reforms they are pushing.

For instance, the White House is now floating an idea for most favored nation drug pricing scheme for Medicaid modeled off of what the administration proposed in its final months for Medicare Part B. Part B, by the way, drugs are administered in physician offices.

Now, the way that this would work is it would essentially be price controls that the government would require drug makers to give Medicaid the best price that is offered to any other country or economically developed country, or at least that's how the

plan was proposed in his first administration. And what this would effectively do is require private insurers to further subsidize Medicaid. And the reason for this is what has been happening is Medicaid prices or drugs are already steeply discounted owing to these rebate formulas. And the result is that drug makers have been jacking up prices in the private markets to offset that.

There's only a certain amount that they can do with that because of this kind of wonky change that Democrats made in 2021 that removed any caps on these rebates. So to some extent, they'll either have to, again...

raise prices in the private market, or cut back on R&D. And you're already seeing drug makers cut back on R&D because of uncertainty and the cost of the IRA price controls, both the inflation adjusted rebates and the black law, as well as the Medicare negotiation. So this isn't exactly a free lunch. I also have questions about

how much savings you would actually achieve, given that prescription drug spending only makes up less than 4% of Medicaid spending total. So drugs aren't driving the increase in Medicaid spending. It's really hospitals that are the biggest driver and states spend about 10 times more on hospitals than they do for prescription drugs.

An additional reason why all this is relevant is because the hospital lobby has been among the biggest opponent of any kind of reforms. That includes the reforms that Kate was mentioning to the match ratio or rate for able-bodied adults, capping that as well as any kind of changes to these provider taxes that are becoming a money laundering scheme for states in which they impose these taxes on

on hospitals and then basically kick back to get more money out of the feds and then kick back all that money to the hospitals and more, and then use some of the change to expand the program in other ways, like California has used it to cover undocumented immigrants.

But the hospital industry, which has been just raking in money over the years from both Medicare and Medicaid, has pushed back against any kind of reforms. And they've been using this argument that, oh, you're going to harm not just low-income people, but Trump voters.

This is something you often hear and it's being echoed by Steve Bannon and some on the populist right and that we can't do anything on Medicaid because it will end up harming Trump voters, which is absolutely not true. As Kate pointed out, you need some structural reforms to improve Medicaid. Medicaid is essentially junk insurance for people who are really sick and disabled. It doesn't provide the care that they need. They don't get access to the best hospitals, best treatment and all that.

And even for the, you know, able-bodied, you know, it would be better to get them on to private insurance. It's much more efficient and effective both for taxpayers and they get better care. So it's really unfortunate that Republicans are ceding this to Democrats. And in fact, sometimes you hear making the same arguments that Democrats made in 2017, 2018, you know, right after Republicans tried but failed to repeal the Affordable Care Act.

Hang tight. We'll be right back in a moment. I'm Kim Strassel from the Wall Street Journal editorial board, and you may know me from my weekly column, Fox News or the Wall Street Journal's daily podcast, Potomac Watch. I'm excited to tell you that my own weekly podcast, All Things with Kim Strassel, has its very own podcast feed, one that I'm really hoping that you'll hit the button and subscribe to.

It's been a great success so far, featuring Trump officials, members of Congress from both the right and the left, pollsters, policy geeks, all of them with news, insights, and debate that you couldn't get from anywhere else. All Things with Kim Strassel, the podcast now in its own feed. You can find it at WSJ.com, Apple, Spotify, and all your favorite podcast outlets.

Isn't home where we all want to be? Reba here for realtor.com, the pros number one most trusted app. Finding a home is like dating. You're searching for the one. With over 500,000 new listings every month, you can find the one today.

Download the Realtor.com app because you're nearly home. Make it real with Realtor.com.

Welcome back. What about the debate over the food stamp program, often called SNAP, Supplemental Nutrition Assistance Program? Here at the White House on Monday, let's listen to Agricultural Secretary Brooke Rollins talking about reforms being planned. I think it's really important also to understand that on SNAP and on food stamps, in the last administration, we had a massive influx of dollars, almost a 35 to 40 percent increase of

the SNAP program under the Biden administration. That didn't necessarily mean more money to families. It just meant a massive new layer of bureaucracy, of NGOs, et cetera. So as we are realigning and reforming the SNAP program in partnership with our great friends, GT Thompson, John Bozeman, others on the Hill, that ensuring that as we are looking at that, the money goes to what it was intended. And that is a supplemental nutrition program for American families that need it the most. And that's what we're really focused on.

Kate, what's your view of how the debate over SNAP is playing out on the Hill? Well, I think it's important to stipulate up front that despite all the headlines you see everywhere, which are basically that Republicans don't care about poor people or children and whether they have enough food, that's just completely

completely corrosive and so disconnected from the actual debate in Washington. Food Stamps covers about 41 million Americans, 12% of the population. The roles, they don't shrink when the economy gets stronger, which you would expect it to do. You'd expect people to fall on hard times and need that social safety net and then move off of it. That doesn't happen. You see that people are staying on it longer over time. I saw some recent data that

half of participants are on it for 20 months or more. You have millions of able-bodied adults on it. And the data that we have suggests that they're not working very much. They don't have much earned income. These are some of the problems that Republicans want to get after. I think

appropriately. So one of the things that's under discussion that I think will survive in the eventual bill is building on the work requirement in the program. Right now, if you're an able-bodied adult without dependents, you need to work part-time or you'll lose benefits after three months. Republicans want to build on that in a couple ways. One is that states

try to get these waivers from the federal government to basically waive the work requirements so that they don't have to get anybody back into the workforce. And so that's one reason why you have this social safety net that wants people to work, but in practice, you don't have folks working very much.

So Congress may crack down on that waiver system. But second and more substantively, there's discussion in Congress about applying that work requirement not just to people who don't have any dependents at home, but people on food stamps who have children who are old enough to be enrolled in school.

I don't think that should be politically controversial that if you have a child who is above, say, six or seven, that you need to work 20 hours a week and that if you can't find work, you can train for work, you can volunteer at a local institution. All of that counts. All of that can be fulfilled while your child is at school. I think that is an important change in the program because it's

It gets portrayed as being cruel to people who are struggling to make ends meet while they raise children. But some of the academic evidence that's out there is really compelling that children really need to grow up around adults who work to have a great shot at upward mobility. That has been found to be a real driving force in a child's chance at success. And so

These modest changes in how the program is connected to work, I think, will be in the best tradition of the party's 1990s welfare reform.

Real fast. I know that's a lot to digest. But one fight that's going on now is just that Congress wants to make states share some of the cost of food stamps. Right now, the federal government pays 100 percent of the benefits price. And so states are just trying to get more federal dollars in the door. They don't have a lot of incentive to manage. Improper payments in the program are 10 percent. I mean, the enormous amount.

So Congress wants to say, hey, you know, you states need to pick up a share of the tab for benefits, similar to how states do for Medicaid. And that is hitting some rocky ground. But again, I think most voters understand that these are eminently reasonable proposals that try to get the program back to being something that people need temporarily as a supplement. And that doesn't keep them out.

out of the labor force and keep families from being upwardly mobile. Alicia, that point about making states pick up some of the tab strikes me as a fundamental reform, but one that would go at the kind of dysfunctional incentives. If you have a system where states manage the SNAP program, but the federal government is on the hook for 100% of the cost of the benefits,

then states don't have real skin in the game and deep incentives to manage the program well and to do everything they can to ensure that SNAP is only a supplement for people who fall in hard times. And I understand why states and governors who are looking at their own budgets would not

love the idea of the federal government demanding or requiring that states pick up some of the cost of this program. But that strikes me as a pretty basic and conservative reform. Right. And some states have higher improper payment rates than other states because of the incentives.

So some have done a really good job about, one, enforcing the work requirements and also ensuring that people who are on food stamps meet the income requirements and such, and others not so much. And so you actually have excessive federal spending in certain states. And this doesn't actually necessarily fall across partisan lines. Some Republican states haven't been great, like Alaska, on reducing these improper payments by removing people who are to

eligible. Some of these Republican states haven't enforced employment and training requirements for able bodied adults, but providing some states skin in the game could actually encourage them to do so. I mean, then this in turn would end up saving the federal government money both ways by encouraging states to actually kind of crack down on abuses to enforce the work requirements while also holding states on the hook for a share of the payments.

One other thing that I'm a little disappointed that didn't end up in the bill, and I understand why or what they're not considering, is rollback of the Biden thrifty food plan, which was basically an increase in the benefit payments that were going out about 27% on average. And the way that the Biden administration did that is they calculate food stamps based on like what people are expected to eat, buy, nutrition, how much nutrition they require.

And the Biden administration basically estimated that, well, people need more calories because they're getting fatter and maybe they're exercising more, even though they're not, in order to provide a bigger boost in benefits. I mean, this is why that the average payment right now or benefit for an individual is about $190 a month.

which is up from about 130 in 2019. Now, these benefits are also inflation adjusted, understandably, but this Thrifty plan provided a major benefit boost that is costing the federal government an additional several billion dollars a year. Hang tight. We'll be right back in a moment.

Optimism isn't sunshine and rainbows. It's fixing things, changing the way we fix things. It's running the world on smarter energy. Because if optimism never stops, then change can't either. G.E. Vernova, the energy of change. Don't forget, you can reach the latest episode of Potomac Watch anytime. Just ask your smart speaker. Play the Opinion Potomac Watch podcast. From the opinion pages of The Wall Street Journal, this is Potomac Watch.

Welcome back. The final place where there are arguments within the Republican Party is going to be on the tax portion of this big, beautiful reconciliation bill. Kate, some of that has to do with provisions of the 2017 tax code where there are Republicans who want changes to them. The obvious one is the SALT deduction, the state and local tax deduction, where people who are taxed by a blue state, for example, at high rates,

then are allowed to deduct that off of their federal taxes. It used to be unlimited. The 2017 reform capped that at $10,000. There's a handful of Republicans in New York, mostly, but also New Jersey, California, who are saying that they are going to hold out for a

pretty significant increase in that salt deduction. One of them is Nick Lolota of New York, and he said recently that there are five of us who are most salty, most resolved to withhold our votes until we get an accommodation from our party.

And so it does not seem like there is a resolution that has been floated inside the GOP to that question. And, Kate, that's before we even get to some of the real controversial stuff like President Trump's promise of no tax on tips, no tax on overtime. Who would those apply to? Would they be capped? Would there be phase outs? Would it be only available to people below certain income thresholds?

I don't know if you have seen those questions being answered by Republicans or with proposals floated in the press yet, but I'm still waiting to see the exact details of what this bill is supposed to look like. Well, a quick point on the SALT politics. Some of the moderate lawmakers who are demanding an expanded SALT cap and have not been willing to take yes for an answer, even on expansion for married couples, for instance, it's

they seem to want quite a bit of SALT expansion. And that is obviously a tax subsidy for high income earners in blue states. And so it's bad tax policy. But I mentioned that because some of the same lawmakers who are demanding this blue state wealthy subsidy are also

the same ones who don't want to touch Medicaid and are driving the negotiations away from Medicaid reform. And look, this is a live negotiation. They have 220 in the majority. So what are they willing to give? And what is going to be the equal and opposite reaction from the conservatives who want real Medicaid reform?

So I do think you could still see some horse trading here that hopefully goes in a constructive direction because while we're hearing a lot from the moderate lawmakers who want their salt deduction, don't want to do anything on Medicaid, there is a countervailing group of lawmakers who won't tolerate less than $1.5 trillion in spending cuts. So that bill's got to be paid somehow. On the specifics of the tax bill, you do have an attempt to get some of these measures that the president wants, like no...

taxes on tips and overtime pay. I think the thinking should be to try to introduce these in the least damaging way possible. To your point, when you put new benefits in like this, you introduce complexity into the code. When you write in nobody over this earning amount,

can take this deduction, you create a disincentive for certain people to work more. There are lots of pitfalls in how you write these deductions. And that's one reason why you shouldn't write them at all. You should focus on clean, permanent tax policy. There does appear to be some concession to reality that the White House wants something on these. And so it seems like the effort now should be to try to write them with as minimum damage to the code and complexity as possible.

You know, another thing is that they also need to look at the top rate. That is another way that they could provide relief to some people who are hit by salt in a way that is a lot cleaner to the code and better for the incentive to work. But anyway, very active negotiation on ways and means and you're going to see some disappointing provisions as political reality. But I think it will get done because you know, the alternative is a $4.5 trillion tax increase.

But Alicia, the timeline seems like it keeps moving. There's been talk lately about a Memorial Day deadline. And that was part of the initial debate this year over whether Republicans should do one big, beautiful bill or whether they should move swiftly on the things that they agreed with and then do a second reconciliation bill to deal with this controversial stuff later in the year. And Alicia, I mean, do you see this?

Going into Memorial Day, or is that an unrealistic deadline given how much of this stuff seems to still be unsettled, even within Republicans who are going to try to pass it on a party line basis without requiring Democratic votes to get through the send a filibuster?

I do think it's going to go past Memorial Day, but they have made progress on some important issues like the defense order, as well as student loans. And these are important reforms and provisions or parts of the tax bill that need to advance. But there are a lot of still things that need to be settled within the caucus. You know, Kate talked about the SALT and we've been discussing Medicaid, though there seems to be some congealing consensus on Medicaid, even if it's not

for the good. There's still a lot of discussion about the Inflation Reduction Act tax credits for green energy with the renewables lobby pushing back pretty hard against any changes to those. And that still needs to be settled in the House Waste and Means Committee. So I think this will...

probably take at least another month, though I'm actually impressed by how fast it is moving. It looked like it could go into the fall earlier this year. Now it does seem like it'll be settled by the summer, and that is good news. Thank you, Alicia and Kate. Thank you all for listening. You can email us at pwpodcast at wsj.com. If you like the show, please hit that subscribe button, and we'll be back tomorrow with another edition of Potomac Watch.

Isn't home where we all want to be? Reba here for realtor.com, the pros number one most trusted app. Finding a home is like dating. You're searching for the one. With over 500,000 new listings every month, you can find the one today.

Download the Realtor.com app because you're nearly home. Make it real with Realtor.com.