New Byrd Violations Threaten Trump’s Beautiful Bill

Senators have a problem they may not be able to escape.

Parliamentarian Elizabeth MacDonough, the chamber’s referee, dealt a major blow to the Republican spending bill yesterday when she kicked out a key provision that would have generated hundreds of billions of dollars in service of tax cuts for the wealthy.

The proposal to strip federal money from states’ Medicaid programs by attacking their ability to tax hospitals and clinics violated the Byrd rule, MacDonough determined. This means it cannot be included in a budget reconciliation bill, where everything must primarily have a budgetary purpose. All states but Alaska finance part of their Medicaid programs with taxes on hospitals and clinics. States tax the provider, which then recoups the money from increased Medicaid reimbursement from the Federal government, allowing the provider to break even and the state to get more money for their Medicaid program.

The House version to crush that mechanism would have frozen the rates of existing provider taxes and forbidden states from creating new ones. But the Senate version would have taken it further, by cutting existing provider taxes for states that have taken the Medicaid expansion. Currently, the federal government and states may make providers whole for net patient revenue up to 6 percent. But under the Senate Finance Committee plan, starting in 2027, that number would reduce by 0.5 percent annually until the maximum threshold hits 3.5 percent in 2031.

It’s unclear how much money that would have generated to enrich the wealthy, as the bill has not been scored by the Congressional Budget Office. But private scores distributed by Republicans put it in the hundreds of billions of dollars. House moderates and many Senators had balked at the cut to existing provider taxes, asking for a separate fund to protect rural hospitals from closure as a result. But the parliamentarian threw out the entire provider tax proposal, including the freeze that the House had. That’s a huge loss to the budget savings that deficit hawks have demanded from the bill, to cover (at least in part) the enormous tax cuts.

Removing the provider tax provision threatens the very survival of the bill, because it had been expected to contribute significantly to Republican’s goal of slashing costs to fund tax cuts for the rich.

“There’s a lot of really bad stuff in there, but I don’t know that I’ve seen a bigger sticker price on anything else Byrded out yet,” said Samantha Sanders, director of government affairs and advocacy at the Economic Policy Institute.

“This seems like a big wrench, to be honest, maybe more than the other stuff so far. It’s more to figure out. Like they would either have to rewrite a ton of sections or just drop them altogether, so they won’t get the savings…I certainly hope this slows them down appropriately.”

MacDonough kicked out other provisions as well, including one that would have prohibited federal Medicaid and CHIP funding for gender-affirming medical care. She likewise trashed several anti-immigrant provisions, including ones revoking Medicaid enrollment eligibility from refugees, asylum seekers, and people with temporary protected status; prohibiting federal financial participation in Medicaid for adults and children whose citizenship, nationality, or immigration status could not be immediately verified; denying federal funding to states for Medicaid coverage for certain immigrants who aren’t citizens; and reducing the federal share for Medicaid expansion states who offer undocumented immigrants coverage.

The parliamentarian’s guidance “results in more than $250 billion in health care cuts removed from the Republicans’ big bad bill,” Senate Finance Committee Ranking Member Ron Wyden (D-OR) said in a statement.

That wasn’t the only hit to the spending cuts on Thursday. MacDonough also ruled that the Senate could not change student loan repayment plans for existing borrowers in the bill. The proposed changes would have given borrowers two options, neither of them good, rather than the more generous plans available today.

Bobby Kogan, senior director of federal budget policy with the Center for American Progress, estimates that throughout the Byrd bath (as the rulings for Byrd rule compliance is known), $587 billion in spending cuts over a decade have been removed from the bill. And keep in mind that the entire tax section of the bill has yet to be addressed by the parliamentarian.

Republicans have a bunch of options for dealing with this, but all of them have either been ruled out, would make the bill seemingly unpassable, or would need more time than they want to take.

First, Republicans can “cure” the Byrd rule problems by coming up with other language and negotiating with the parliamentarian to insert them back into the bill. The Senate Banking Committee already did this with new language on the Consumer Financial Protection Bureau. Previously the committee completely zeroed out funding for the CFPB by setting an existing “cap” on how much the Federal Reserve can transfer to the agency at 0 percent of total Fed funds. That was thrown out by the parliamentarian. Now, in the new text, the committee has changed that to 6.5 percent.

Senators are reportedly trying to go back with new provider tax language as well.

Republicans would also likely try to squeeze more blood from cuts that have already been allowed to stay, Sanders said. “The big thing hanging over them is specifically the instruction to cut Medicaid,” she said. “Exactly where this could come out of, I feel like they’d probably try to get deeper savings from existing Medicaid savings that are allowed to stay in, which might end up making them more harmful.”

The problem here is that all new text would have to go back to the parliamentarian for more haggling. A Hill source explained that the process could take weeks, and with each passing day, the bill gets less popular. That is why the White House wants the bill done by July 4. That would be next to impossible under a constant rewrite scenario.

Second, the Senate could simply ignore the parliamentarian, as several conservatives called for on Thursday, with a majority vote. That would essentially end the filibuster, which traditionally has been a problem for Democrats in getting things done. Killing the filibuster would make it easier to reverse the entire Trump agenda when Democrats took back power, though it would be a long year and a half to get there.

But the Senate leadership has already made its calculation on that. Majority Leader John Thune (R-SD) explicitly reaffirmed on Thursday that he would not overrule the parliamentarian. “That would not be a good option for getting a bill done,” Thune told Politico.

So what’s left? Republicans could try to pass the tattered shell of a bill they have. But that would be a heavy lift. Kogan estimates that at least $240 billion of spending cuts are definitively locked out of the bill. That means that it will cost much more than what passed the House, unless they have spending cuts sitting around that would be palatable to everyone. If they did, it would be likely to be in the bill already.

Freedom Caucus Republicans have piled up saying they wouldn’t pass anything that cost more money. But the bill as written is guaranteed to do so.

Republicans on the Senate side, meanwhile, remain skeptical about the bill, with many saying they wouldn’t vote for it. The provider tax was a main sticking point, and MacDonough has sort of solved that problem, but that just creates confusion about what the final plan will be. And there are numerous other sticking points, like the state and local tax deduction.

The Senate appears eager to just stick a bill in the House’s lap and dare them to vote it down. But that assumes they can get a bill over to the House at all. The buildup of parliamentarian rulings really does threaten the outcome.

One huge problem for Republicans is the debt limit, where something needs to be done to raise the nation’s borrowing cap by as early as August. There is a $5 trillion debt limit increase in the Senate version of the bill. If the impasse on the bill continues, Congress may have to split that out and pass a standalone version, which would almost certainly need Democratic support, where Democrats could dictate terms.

Under the timeline needed to pass the megabill by July 4, votes would need to begin today. There’s almost no chance of that happening. A press officer for Thune did not respond to an email request for information to say whether the Senate is operating under a new timeline.

You don’t want to say that a bill cutting taxes and spending simply cannot pass a Republican Congress. It doesn’t make much sense to say that. But that threat has grown much more real by the day.