As White House negotiators and House Republican leaders struggle to reach agreement on how to raise the country’s debt limit, a solution that dates back to longstanding budget struggles has resurfaced as a possible way forward: spending caps.
Putting caps on future spending in exchange for raising the $31.4 trillion borrowing cap could be the key to sealing a deal that would allow Republicans to claim they won big concessions from Democrats. It could also allow President Biden to argue that his administration is being fiscally responsible, while not giving in to Republican demands to roll back any of his primary legislative achievements.
The Biden administration and House Republican leaders have generally agreed to some kind of cap on discretionary federal spending for at least the next two years. But they’re stuck on the details of those limits, including how much to spend on discretionary programs in fiscal year 2024 and beyond, and how to divide that spending among the government’s many financial obligations, including the military, veterans’ affairs, education, health care and agriculture.
What would a spending limit agreement look like?
The latest White House offer would keep military and other spending — which includes education, scientific research and environmental protection — constant from the current 2023 fiscal year through the next fiscal year, according to a person familiar with the proposals from both sides. Such a measure would not reduce what is known as nominal spending, which simply means the level of spending before adjusting for inflation. Republicans are pushing to cut nominal spending in the first year.
One of the reasons the White House is willing to keep spending essentially flat has to do with politics. Given that Republicans control the House, getting increased funding for discretionary programs outside the military would have been next to impossible. 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 won’t accept a deal unless it results in the government spending less money than it did in the last fiscal year. They said simply freezing spending at current levels, as the White House has proposed, does not represent the kind of significant cuts that many in their party have long called for.
But Republican negotiators showed some flexibility over how long they would require those spending caps to last. House Republican leaders are now looking to set spending caps for six years instead of 10. Still, that’s longer than the White House is proposing, with Democrats offering to cap spending for two years.
“Numbers are key here,” Representative Garrett Graves, a Louisiana Republican and one of House Speaker Kevin McCarthy’s top negotiators, said on Sunday. “The speaker was very clear: a red line is spending less money, and unless and until we get there, the rest is really irrelevant.”
The approach is evoking debt-limit déjà vu.
If spending limits sound familiar, it’s because they were employed during the last big debt limit fight in 2011.
During that episode of recklessness, lawmakers agreed to impose limits on military and non-military spending from 2012 to 2021. The Budgetary Control Act limits have had some success in keeping spending in check, but not entirely.
A Congressional Research Service report published this year noted that during the decade the caps were in effect, Congress and the president repeatedly enacted legislation that raised spending caps. Certain types of spending – for emergencies and military engagements – were exempt from the caps, and the federal government spent $2 trillion over 10 years on these programs. And spending on so-called mandatory programs like Social Security has not been capped, and these make up around 70% of total government spending.
Still, the Congressional Research Service found that spending was lower each year from 2012 to 2019 than projected before the caps were put in place.
The strategy is not a fiscal panacea.
Caps that cap spending around current levels will help slow the country’s debt growth, but will not solve the government’s reliance on borrowed money.
The Congressional Budget Office said this month that annual deficits – the difference between what the United States spends and what it earns – are expected to nearly double over the next decade, totaling more than $20 trillion by 2033. That deficit will force the United States to continue to rely heavily on borrowed funds.
Marc Goldwein, senior policy director for the Committee for a Responsible Federal Budget, estimated that it would take $8 trillion in savings over 10 years to keep the national debt at its current levels. However, he said that doesn’t mean passing spending limits wouldn’t be worth it.
“We’re not going to fix everything all at once,” Goldwein said. “So we should do as much as we can, whenever we can.”
The group called for spending caps to be accompanied by spending cuts or tax increases as a plan to reduce the national debt.
Spending limits aren’t the only issue.
Finding agreement on the length and duration of spending limits will be a critical part of reaching an agreement.
But negotiators are still working to resolve a number of other issues, including whether to implement stricter work requirements for social safety net programs, including food stamps, Temporary Assistance for Needy Families and Medicaid, and whether to speed up work rules. permitting energy projects, two top Republican priorities to which White House negotiators have shown some openness.
Jim Tankersley contributed reports.