The newly elected GOP Congress is looking to cut federal spending substantially to pay for a renewal of President Trump’s first-term tax cuts. The national debt burden will soon surpass its all-time high, and many Republicans have rejected making reductions to the costliest programs, Medicare and Social Security. Democrats are unlikely to offer much help. Is there any chance of Republican success in this effort?
“It’s hard for Republicans to pull off,” liberal commentator Matthew Yglesias recently noted, “because their House majority is very narrow.” He went on to suggest that it’s “unprecedented in recent history for the House rather than the Senate to be the ‘hard’ part of major partisan fiscal legislation, so the dynamics are difficult to predict.”
But this perspective ignores Republicans’ most successful fiscal retrenchment of recent decades. From 1980 to 1983, Congress reduced domestic discretionary spending from 5.1 percent to 4.1 percent of GDP—roughly a fifth. In 1981, Republicans’ fiscal policy objectives were similar to those today. The GOP held exactly the same number of Senate seats (53 out of 100) as it does now, and Republicans’ position in the House was even weaker (a minority of 192 seats out of 435, compared with their razor-thin 218 majority today). Even with the assistance of a few dozen moderate “boll weevil” Southern Democrats, Republicans’ control over Congress was slight back then.
How did they achieve this success?
The Reagan administration’s first budget proposed reining in benefits that had been expanded beyond congressional intent, consolidating grant programs to states, and cutting benefits for people with middle to upper incomes. It was part of a concerted strategy to stop “the drift towards the universalization of social benefit programs” while maintaining a “core of protection” for the elderly, the unemployed, the poor, and the nation's veterans.
Just as 1981 offered congressional Republicans a chance to cut the fat out of Great Society programs, 2025 similarly presents a target-rich environment for savings.
During the Covid pandemic and the Biden presidency, Congress enacted three major pieces of legislation (the CARES Act, the American Rescue Plan Act, and the Inflation Reduction Act), which substantially broadened eligibility for federal programs, often distributing funding through poorly targeted grants to states. Many of these increased expenditures have not yet become entrenched or even fully established.
More spending on “energy security and climate change” was the largest element of the Inflation Reduction Act. Much of this expenditure was a one-time appropriation, while Republicans have proposed to roll back various tax credits for “green energy.” In 1981, energy subsidies took the largest cut in federal expenditures of any major program (60 percent in real terms).
From 2019 to 2023, federal Medicaid spending surged from $409 billion to $615 billion—an expansion concentrated on high-spending Democratic states, which already dispensed much broader benefits. This largesse has put the program in cost-cutters’ sights, and reversing this spending boost accounts for almost half of expenditure reductions that House Republicans have proposed. In 1981, Congress trimmed Medicaid payments to states, though it fell short of an ambitious program overhaul.
After Democrats lost control of the House in 2022, Biden increasingly employed unilateral regulatory actions to grow federal spending dramatically without congressional approval (or consideration of associated costs). Most notably, he expanded subsidies for student loans, food stamps, and social services funded through Medicaid insurers—doing a poor job of targeting its assistance on those in greatest need. These expansions are all located prominently on Republicans’ chopping board.
In 1981, Congress maintained welfare benefit levels but tightened eligibility criteria to reserve funds for individuals with lower incomes. Lawmakers reduced aid for middle-class college students and reestablished means tests for student loans. They cut loosely structured development grants to state and local governments by 47 percent.
Viewed from one perspective, today’s political polarization may make it harder for Republicans to gain the support of moderate Democrats to cut spending. On the other hand, because the growth in expenditures during the Biden years was so concentrated on Democratic interest groups in blue states, it might prove easier for Republicans to cut them back.
Top Photo by Valerie Plesch/picture alliance via Getty Images
