On February 25, the House voted to advance H. Con. Res. 14, a budget resolution blueprint that sets spending and revenue targets or the federal budget. Budget resolutions do not actually set funding levels and do not have the force of law. However, they are an important first step toward the process through which Congress can begin to appropriate federal funds. By passing this resolution, the House will be able to continue the process of passing a budget reconciliation bill. A reconciliation bill can only focus on budget-related measures, but it’s a powerful tool because it only needs a simple majority of votes to pass the Senate, bypassing the 60-vote threshold needed to advance most other legislation. 

The budget resolution, H. Con. Res. 14, includes budget guidelines for Fiscal Year 2025 through Fiscal Year 2034 by providing instructions for spending and cuts to Congressional committees with jurisdiction over particular federal spending and programs. The budget resolution instructs committees to identify cuts to federal spending in several areas of domestic spending. Notably, the House budget would allow for up to $880 billion in cuts to Medicaid, the publicly-funded health insurance program for low-income Americans. While President Trump and some Republicans have claimed that there will not be direct cuts to Medicaid coverage or services based on this budget resolution, it would be impossible to cut the amount of spending as directed in the resolution without severely slashing Medicaid. Analysis from EPI determined that this budget resolution would reduce incomes for the bottom 40 percent of U.S. households by income. Meanwhile, the budget resolution also would allow the House to pursue the extension of the tax cuts passed in the 2017 Tax Cuts and Jobs Act. If those tax cuts are deficit-financed rather than financed through harmful spending cuts, that would risk putting an additional drag on our economic growth going forward.

The House voted 217-215 to advance the bill, with all but one Republican voting in support and all Democrats opposed. The Senate also continues to advance their own competing version of a federal budget plan, having passed their resolution on February 21.

Impact:

• If tax cuts for the rich are financed by large cuts in federal spending, this would greatly damage current incomes and future opportunities for the most vulnerable families in the U.S. The bottom 20% of households would lose 7.4% of income due to the Medicaid cuts that would be enabled by this budget resolution, and would gain only 0.6% of income from an extension of the Tax Cuts & Jobs Act, while the top 1% of households would stand to gain 3.9% more in income due to extension of the TCJA.

• If Congress votes to finance these tax cut extensions through adding to the deficit (rather than paying for them through draconian spending cuts), cuts this large would also, all else equal, drag sharply on economy-wide spending, reducing it by roughly $600 billion, or around 2% of overall GDP.