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As federal debt surges, Colorado Dems say no to Trump tax plan, Medicaid cuts
Mike Murphy of the nonpartisan Committee for a Responsible Federal Budget (CRFB) visited Colorado late last month with a simple message for the state lawmakers and business leaders he met with: “Bad news flows downhill.”
As the Colorado Legislature faces the daunting task – mandated by the state constitution – of balancing a budget facing a more than billion-dollar shortfall, Murphy gently reminded Colorado policymakers that Congress has no such constraints and continues to borrow money at unsustainable levels, which is already impacting strained state coffers.
“Once one understands the challenges they’re facing at the federal level and what that’s going to mean in the coming years, it’s inevitably going to spill over into state budgets and is going to have significant ramifications on how states need to be thinking about planning and tightening their belts,” Murphy said in a phone interview. “It’s inevitable, right? Bad news flows downhill.”
As the CRFB’s senior vice president and chief of staff, Murphy came to Colorado to try to build support among groups of community, civic, and business leaders to draw attention to federal budget challenges and press federal policymakers to do something about it. The interest alone on the nation’s $36.2 trillion debt is approaching $1 trillion a year.
“[Annual interest] was over $900 billion last year; it’s going to very soon be over a trillion annually,” Murphy said. “It’s more than we spent annually on defense or Medicare last year. The second biggest line item in the budget is interest; only Social Security is higher annually.”
The federal deficit – the amount by which spending exceeds revenues – was more than $1.8 trillion in 2024, according to the U.S. Treasury.
With the two chambers of Congress reportedly not making much progress so far this week on reconciling two very different budget resolutions, Murphy said it’s key for Coloradans to pressure their federal lawmakers to rein in deficit spending in order to lower the federal debt.
Murphy notes both major political parties have increasingly used the budget reconciliation process to pass major policy priorities in recent years because the bills can be passed by simple, filibuster-proof majorities. President Donald Trump used reconciliation to pass sweeping tax cuts in 2017, and former President Joe Biden used the process to pass Covid relief and the health care and environmental policies of the Inflation Reduction Act during his four-year term.
Now the Senate has passed a bill calling for around $300 billion in new spending on border security and national defense, which they say will be offset by mandatory spending cuts. The House passed a bill that will do the same things but also would extend Trump’s signature 2017 tax cuts that are set to expire at the end of the year – offset partially by $2 trillion in mandatory spending cuts. The two chambers are currently conferencing to reconcile the two bills.
It’s estimated that extending the Trump tax cuts over the next 10 years will add $4.6 trillion to the ballooning federal debt.
“If they went with the House approach, you’re looking at adding potentially up to $2.8 trillion in deficits when we are already on an unsustainable track,” Murphy said. “We’re talking to people very actively about the House budget resolution because we think they’ve got to achieve more savings, to try and make this match up, or scale back their ambitions on the tax cut side.”
Democratic Colorado U.S. Sen. Michael Bennet, in an email comment via a spokesperson, made it clear where he stands on extending the Trump tax cuts:
“Sen. Bennet believes that in a time when income and wealth inequality in America is the worst it’s ever been, working people should not be expected to shoulder a dollar more of our national debt to pay for tax cuts for the wealthiest. The top 1% of earners would receive almost a quarter of the benefits from the Republicans’ tax plan, and the top 5% would receive almost half. That is an insult to hard-working Americans.”
Also a non-starter for most Democrats is the House bill’s mandatory spending cuts that will likely impact Medicaid beneficiaries, although Trump has said he won’t sign a bill that cuts Medicaid, Medicare, Social Security or defense, which combined make up about 85% of all federal spending.
“We know that there is fraud, waste and abuse in the system that we have to be able to find so that we can actually save Medicaid for the people that need it,” freshman Republican U.S. Rep. Gabe Evans of Fort Lupton recently told Axios, which also reported that an estimated 73,000 people in Evans’ 8th Congressional District could lose Medicaid for not meeting work requirements under the GOP cost-cutting plan.
Evans is one of four vulnerable Republicans in closely divided districts who serve on the House Energy and Commerce Committee that has been directed by GOP leadership to come up with $880 billion in savings in the budget bill.
The spiraling cost of Medicaid is a big part of Colorado’s $1.2 billion budget-shortfall problem, but Democrats – and apparently Trump — are loathe to take an axe to the federal health plan. But cuts to the program being considered by Republicans, according to some experts, far outstrip any sort of “fraud, waste and abuse.”
“The cuts in federal Medicaid spending under discussion among House Republicans dwarf the amounts of fraud, waste, and abuse in Medicaid,” writes Andy Schneider, a Research Professor at the Georgetown University McCourt School of Public Policy. “It is the proposed $2.3 trillion cut in federal Medicaid spending, not the amount of fraud, waste and abuse in Medicaid, that is ‘enormous.’
“$2.3 trillion is about 27 percent of the $8.6 trillion in federal Medicaid spending projected by [Congressional Budget Office] over the next 10 years … there is no state that will be able to absorb a 27 percent cut in federal Medicaid matching payments over the next 10 years by reducing waste, fraud, and abuse. It’s not even close,” Schneider adds.
U.S. Rep. Joe Neguse, a Lafayette Democrat who represents Colorado’s 2nd Congressional District, sent out an email blast on Tuesday explaining his “no” vote on the House budget bill.
“The resolution will ultimately lead to the enactment of a $4.5 trillion scheme that provides tax breaks to billionaires and increases the deficit, all at the expense of critical programs our communities rely on, including Medicaid, food assistance, and more,” Neguse wrote.
“The Republicans’ plan would strip 70,000 individuals in Colorado’s 2nd District alone — our neighbors — of their health care coverage,” Neguse added. “On average, local households covered under the Affordable Care Act would see their premiums increase by $210 per year.”
On Thursday, National Governors Association (NGA) Chair and Colorado Gov. Jared Polis, a Democrat, and NGA Vice Chair Oklahoma Gov. Kevin Stitt, a Republican, released the following statement on any looming Medicaid cuts:
“As governors representing the 55 states and territories, we are committed to advocating for a robust and efficient health and human services system, including Medicaid. NGA supports flexibility and waiver opportunities and funding for state and territory designed Medicaid, SNAP and TANF programs. Without consultation and proper planning, congressionally proposed reductions to Medicaid would impact state budgets, rural hospitals and health care service providers. It is necessary for governors to have a seat at the table when discussing any reforms and cuts to Medicaid funding.”
Murphy’s CRFB points out that all of this negotiation on additional spending, cuts and taxes comes as government funding is set to expire on March 14, meaning Congress will need to pass and Trump will have to sign appropriations bills for Fiscal Year (FY) 2025 (or a continuing resolution) by then to avoid a government shutdown.
That’s against the backdrop of the ongoing Department of Government Efficiency (DOGE) staffing cuts that will reduce spending marginally, while also reducing government services heading into the spring. Any meaningful reductions in the federal debt have to come from the big-ticket items of Social Security, Medicaid, Medicare and interest payments, Murphy said.
“You can cut almost all personnel in the federal government and you might save in the hundreds of billions of dollars,” Murphy said. “If you’re trying find big savings that are going to put a dent in the debt and deficit trajectory, you can find some within the bureaucracy, but it’s not going to get you to the big-ticket items.”
Editor’s note: This story first appeared on the Colorado Times Recorder website.
David O. Williams
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