Debt Limit Negotiators Debate Spending Caps to Break Standoff
As negotiators in the White House and House Republican leadership struggle to reach a deal over raising the national debt ceiling, a solution reminiscent of the budget battles of yesteryear is a potential path forward. floating again. That’s the spending limit.
Putting limits on future spending in exchange for raising the $31.4 trillion borrowing cap could be key to striking a deal that Republicans can claim has secured significant concessions from Democrats. It could also allow President Biden to defy Republican demands to backtrack on key congressional achievements and argue that the administration is meeting its fiscal responsibilities.
The Biden administration and House Republican leaders have largely agreed to impose some cap on federal discretionary spending for at least the next two years. But they have set limits on how much they will spend on discretionary programs beyond fiscal 2024, and how that spending will be distributed among the government’s many financial obligations, such as the military, veterans affairs, education, and education. attention to detail. health and agriculture.
What would a spending cap agreement look like?
The White House’s latest proposal would keep military and other spending—including education, scientific research and environmental protection—flat from fiscal 2023 through next, according to people familiar with both proposals. This measure does not cut so-called nominal spending, which simply means the level of spending before adjusting for inflation. Republicans are pushing for first-year nominal spending cuts.
One of the reasons the White House is trying to keep spending virtually flat has to do with politics. Given the Republican Party’s control of the House, it would have been nearly impossible to get increased funding for non-military discretionary programs. Congress would not have authorized an increase through the appropriations process, the normal way Congress allocates funds to government programs and agencies.
Republicans have repeatedly said they will not agree to a deal unless it results in less government spending than the previous year. They said a freeze on spending at current levels, as proposed by the White House, alone would not deliver the meaningful cuts that many in the party have long sought.
But Republican negotiators have shown some flexibility in how long they want these spending caps to continue. House Republican leaders are now considering setting the spending cap to six years instead of ten. Still, that’s longer than the White House is proposing, with Democrats proposing a two-year spending cap.
“The numbers are the foundation here,” said Louisiana Republican Rep. Garrett Graves, one of House Speaker Kevin McCarthy’s chief negotiators, on Sunday. “The speaker made it very clear: the red line is spending cuts, and unless we get there, the rest of it means nothing at all until we get there.”
This approach evokes the déjà vu of debt limits.
If spending caps sound familiar, it’s because they were adopted during the last major debt limit battle in 2011.
In this brinkmanship episode, lawmakers agreed to put limits on both military and non-military spending from 2012 to 2021. The Budget Control Act cap has had some success in containing spending, but not entirely.
A Congressional Research Service report released earlier this year found that Congress and the president repeatedly enacted legislation to raise spending limits during the decade when the cap was set. Certain types of spending, such as emergencies and military operations, are exempt from the cap, and the federal government spent $2 trillion on these programs over a decade. Also, there are no caps on spending on so-called mandatory programs such as social security, which account for about 70% of total government spending.
Still, the Congressional Research Service noted that spending from 2012 to 2019 was lower each year than projected before the cap was in place.
This strategy is not a financial panacea.
A ceiling that limits spending to around current levels would help slow the growth of the country’s debt, but it would not eliminate the government’s reliance on borrowed money.
The Congressional Budget Office announced this month that the annual deficit — the difference between what the United States spends and what it earns — is expected to nearly double over the next decade, totaling more than $20 trillion by 2033. This deficit will force the United States to continue to run a budget deficit. It relies heavily on borrowing money.
Mark Goldwine, senior policy director at the Committee for a Responsible Federal Budget, has estimated that $8 trillion in savings will be needed over 10 years to keep the national debt at current levels. But that doesn’t mean spending caps aren’t worth enacting, he said.
“We’re not going to solve it all at once,” Goldwine said. “So we should do as much as possible and as often as possible.”
The group is calling for a spending cap, accompanied by spending cuts and tax increases, as part of a national debt reduction plan.
Spending caps aren’t the only issue.
Finding agreement on the scope and duration of spending caps will be an important part of reaching agreement.
However, negotiators are skeptical about whether to introduce tougher working conditions for social safety net programs, including food stamps, temporary aid to needy households and Medicaid, and whether to expedite energy project permitting rules. Still working to fix some other issues. It’s a priority that White House negotiators have shown some positivity about.
Jim Tankerslee Contributed to the report.