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Congressional Republicans are struggling to agree on spending cuts needed to offset President Donald Trump’s multi-trillion-dollar tax-cut agenda, exposing deep divisions within the party. At the center of the debate is whether to reduce Medicaid funding, eliminate green energy tax credits, and adjust the state and local tax (SALT) deduction cap—all while navigating a looming debt ceiling crisis.
The House Freedom Caucus is pushing for $2 trillion in cuts over the next decade, including $880 billion from Medicaid, which covers 35 million people in states Trump won in 2024. However, moderate Republicans are resisting deep Medicaid reductions, instead proposing a more limited $250 billion cut, tied to new work requirements for beneficiaries.
Extending Trump’s 2017 tax cuts and introducing new cuts—such as those on tips and overtime pay—could add $11 trillion to the national debt over the next decade, according to the Committee for a Responsible Federal Budget. Additional spending on border security, military funding, and immigration enforcement would further strain federal finances.
The GOP also remains split over the SALT deduction cap, a key issue for lawmakers from New York, California, and New Jersey. Raising the cap would help Republicans retain House seats in Democratic-leaning states but would require additional spending cuts to maintain fiscal balance.
With a debt ceiling increase required by summer, Speaker Mike Johnson and Senate Republican leader John Thune have suggested tying it to the tax cuts to leverage deeper spending reductions. However, some hardline conservatives, including Senator Rand Paul, oppose any deal that increases the debt limit.
Democrats are firmly against the plan, arguing it prioritizes tax cuts for the wealthy at the expense of healthcare and essential services. House Minority Leader Hakeem Jeffries warned that the proposal would “hurt the safety, security, health, and welfare of the American people.”
As negotiations intensify, Republicans must reconcile their internal differences or risk stalling Trump’s economic agenda—while also averting a potential debt crisis that could shake financial markets.
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