Debt limit negotiators are debating spending ceilings to break deadlock
As negotiators for the White House and Republican House leaders struggle to reach an agreement on how to raise the country’s debt limit, a solution that harks back to old budget battles has re-emerged as a possible way forward: spending ceilings .
Placing limits on future spending in exchange for raising the $31.4 trillion borrowing ceiling could be key to striking a deal that would allow Republicans to claim big concessions from Democrats. It could also allow President Biden to claim his administration is fiscally responsible while not giving in to Republican demands to reverse one of his most significant legislative achievements.
The Biden administration and House Republican leaders have broadly agreed on some kind of ceiling on discretionary federal spending for at least the next two years. But they’re hanging on to the details of those limits, including how much to spend on discretionary programs in fiscal year 2024 and beyond, and how to distribute that spending among the government’s many financial obligations, including the military, veterans’ affairs, education. , health and agriculture.
What could a deal with a spending cap look like?
The White House’s latest bid would keep military and other spending — including education, scientific research and environmental protection — constant from the current fiscal year of 2023 to the next fiscal year, according to a person familiar with both sides’ proposals. That move would not reduce so-called nominal spending, which simply means the level of spending before adjusting for inflation. Republicans push for first-year nominal spending cuts.
One of the reasons the White House is willing to hold spending has to do with politics. Given that Republicans control the House, it would have been nearly impossible to get more money for discretionary programs outside the military. Congress would not have approved increases through the appropriations process, the normal way Congress allocates money to government programs and agencies.
Republicans have repeatedly said they will not accept a deal unless it leads the government to spend less money than it did last fiscal year. They have said that simply freezing spending at current levels, as the White House has proposed, will not lead to the kind of meaningful cuts that many in their party have long called for.
But Republican negotiators have shown some flexibility on how long they would need those spending limits. House GOP leaders now want to set spending ceilings for six years instead of 10 years. Still, that’s longer than the White House is proposing, with Democrats offering to cut spending for two years.
“The numbers are fundamental here,” Rep. Garret Graves, a Louisiana Republican and one of Chairman Kevin McCarthy’s chief negotiators, said Sunday. “The speaker has been very clear: one red line is spend less money and unless and until we get there, the rest is really irrelevant.”
The approach evokes a déjà vu of the debt limit.
If spending limits sound familiar to you, it’s because they were used during the last major debt limit battle in 2011.
During that period of crisis, lawmakers agreed to impose limits on both military and non-military spending between 2012 and 2021. The Budget Control Act caps were somewhat successful in controlling spending, but not entirely.
A Congressional Research Service report released this year noted that during the decade the limits have been in place, Congress and the president have repeatedly enacted laws that have increased spending limits. Certain types of spending — for emergencies and military assignments — were exempt from the limits, and the federal government spent $2 trillion over 10 years on those programs. And spending on so-called mandatory programs like Social Security was not capped, and they make up about 70 percent of total government spending.
Still, the Congressional Research Service pointed out that spending every year from 2012 to 2019 was lower than predicted before the caps were put in place.
The strategy is not a fiscal panacea.
Caps that limit spending around current levels will help slow government debt growth, but will not cure the government’s reliance on borrowed money.
The Congressional Budget Office said this month that annual deficits — the gap between what America spends and what it earns — are projected to nearly double over the next decade, totaling more than $20 trillion through 2033. That deficit will Forcing the United States to continue to rely heavily on borrowed money.
Marc Goldwein, the senior policy director of the Committee for a Responsible Federal Budget, estimated that $8 trillion in savings would be needed over 10 years to keep the national debt at current levels. However, he said that doesn’t mean introducing spending caps wouldn’t be worth it.
“We’re not going to solve this all at once,” said Mr. Goldwein. “So we have to do as much as we can, as often as we can.”
The group has called for spending caps accompanied by spending cuts or tax increases as a plan to reduce the national debt.
Spending ceilings are not the only problem.
Reaching agreement on the size and duration of spending limits will be a critical part of closing a deal.
But negotiators are still working to resolve several other issues, including whether to introduce stricter work requirements for social safety net programs, including food stamps, temporary assistance to needy families and Medicaid, and whether to accelerate permitting rules for energy projects, two key issues. Republican priorities for which White House negotiators have shown some openness.
Jim Tankersley reporting contributed.