Republicans tweak the social contract to ask more of states

Yahoo

20-05-2025

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An emerging reality of President Donald Trump's second term is that the federal government will be doing less and states will need to do a lot more on everything from disaster relief to health insurance.
The White House and Republicans in Congress are effectively trying to shift financial responsibility on multiple fronts away from Washington, DC, in what could amount to a rewriting of the American social contract.
In the 'big, beautiful bill,' which House Republicans are tweaking before a likely vote this week, individual tax cuts from Trump's first term are made permanent and paid for by adding trillions to the national debt, according to estimates, and requiring states to spend more on the safety net of welfare programs that feed and provide health insurance to the poorest Americans.
Trump traveled to Capitol Hill on Tuesday to pressure wavering House Republicans to support the bill. Even if GOP representatives can pass their House bill, they will need to work with senators on a version that can clear both chambers, meaning that much of what's below could change. CNN's Tami Luhby has a much more detailed look at the House Republicans' bill.
States, for the first time, would have to pay for a portion of food stamp benefits, which are now called the Supplemental Nutrition Assistance Program, or SNAP.
States and the federal government have long shared the cost of administering the program, but under the GOP proposal, states would go from paying nothing for SNAP benefits to being required to pay between 5% and 25%, as well as a larger portion of administrative costs.
A state whose residents had gotten $1 billion in benefits would have to find close to $100 million to maintain those current benefits if it suddenly needed to match 10%.
But if the state did not provide the full $100 million, according to an assessment by the left-leaning Center on Budget and Policy Priorities of the 2018 proposal on which this part of the current bill is based, the federal matching funds might also drop since the federal government would be prohibited from paying part of the state's percentage. A state that paid $75 million instead of $100 million could actually see its SNAP benefits drop by $250 million.
Changes like this would likely result in a reduction in the number of people – currently more than 40 million, or close to 13% of the US population – who are able to get SNAP.
Generally, people are only eligible for food assistance if they make less than $33,576 per year for a family of three. Enrollment in the program, and its cost, spiked during the pandemic.
In exchange for the cuts, the federal government could save nearly $300 billion over 10 years. Supporters argue that making states pay more for the program will incentivize states to control costs.
Medicaid is the program by which states and the federal government split the cost of providing health insurance to about 71 million Americans who live at or just above the federal poverty level.
Republicans are still haggling over the specifics of their plan, and some lawmakers in the Senate have said they would oppose any cuts.
On Capitol Hill, after giving Republicans a 'pep talk' behind closed doors, Trump talked to reporters and denied any of these cost savings are cuts.
'We're not touching anything. All I want is one thing. Three words. We don't want any waste, fraud, or abuse,' Trump said.
One major expected change is that for the first time there will be work requirements for Medicaid. There is some question over whether those requirements would kick in starting in 2027 or 2029 as Republicans work to finalize the bill.
Regardless, the bill achieves cost savings by assuming fewer Americans would have health insurance. A preliminary assessment of an early version of the bill by the Congressional Budget Office suggests Medicaid would cover millions fewer people by 2034. That figure would rise if work requirements are imposed in 2027.
Medicaid spending has eaten up an increasingly large portion of state budgets, rising from about 22% in 2010 when the Affordable Care Act was passed to nearly 30% in 2024, a figure that includes federal matching funds. Without the federal funds, states spend 19% of their budgets on Medicaid.
The Affordable Care Act expanded coverage to people making up to 138% of the federal poverty level – $35,997.50 for a family of three in 2025 – and the federal government footed most of the bill. Forty states and Washington, DC, have now expanded coverage.
Gov. Gretchen Whitmer of Michigan, a Democrat, told CNN's Pamela Brown last week that states would not be able to backfill cuts in Medicaid spending.
'The state can't supplant the federal dollars. That's the problem here,' Whitmer said, predicting 'pain in all 50 states, to Americans all across this country, if Congress goes forward with this.'
The federal government uses a complicated formula to determine how much of a state's Medicaid costs it will cover, and it picks up a larger percentage in states with lower average incomes. Proposals by fiscal hawks to change that formula and lower the federal government's contribution have so far been rejected.
The entire Medicaid program cost more than $880 billion in 2023 and the federal government paid more than $606 billion of that, according to KFF.
The current House proposal would also reduce federal funding to the 14 states that have used their own state funds to cover undocumented children.
A handful of states, notably California, have experimented with opening their Medicaid system even to some undocumented adults, but paying for that coverage entirely with state funds.
It has been an expensive effort. California Gov. Gavin Newsom indicated he will dial back on that program as he faces a multibillion-dollar budget shortfall paired with the threat of losing federal money for Medicaid. The state released an analysis of an early version of Republicans' bill that projected 3.4 million Californians would lose coverage.
California separately provides some subsistence aid to undocumented people who don't qualify for federal SSI benefits, but the Trump administration has threatened that program by launching a federal investigation.
The effort to shift burdens away from the federal government extends well beyond the tax bill.
Trump's administration has begun denying disaster relief to states and the administration is working to shrink FEMA's imprint, CNN has reported, which in the short term means the disaster relief agency is 'not ready for hurricane season,' according to an internal memo.
The longer-term effect of the changes would put more of a focus on state governments. That follows a March executive order in which the president called for states to be 'empowered' to do more to prepare for 'cyber attacks, wildfires, hurricanes, and space weather.'
Trump's plan for the Department of Education has been sold as a way to give states more power over education, but it would also significantly cut the amount of federal dollars going to schools. His budget proposal cuts $12 billion from the department.
At the same time, the administration has used federal dollars to pressure states to end diversity programs and guarantee that the undocumented are not accessing taxpayer-funded benefits.
Luhby noted that the tax and policy bill on Capitol Hill would also reduce federal spending on student loans by $350 billion. It would pare back on federally subsidized loans and cap the amount of federal aid a student can receive at the 'median cost of college.' It would also end economic hardship and unemployment deferments.
That's not directly asking states to do more, but it will have a knock-on effect in states if fewer Americans can afford to go to college.