Debt ceiling negotiators debate spending caps to break deadlock

As White House negotiators and House Republican leaders struggle to reach an agreement on how to raise the national debt ceiling, a solution reminiscent of old budget fights has re-emerged as a potential way forward. next: spending limits.

Capping future spending in return for raising the borrowing limit to $31.4 trillion could be key to securing a deal that would allow Republicans to pretend they got major concessions from Democrats. It could also allow President Biden to make the case that his administration is fiscally responsible while not caving in to Republican demands to reverse one of his key legislative achievements.

The Biden administration and House Republican leaders have agreed in broad terms to some sort of discretionary federal spending cap for at least the next two years. But they’re hooked on the specifics of those caps, including how much to spend on discretionary programs in fiscal year 2024 and beyond, and how to allocate that spending among the government’s many financial obligations, including the military. , veterans affairs, education, health and agriculture.

What might a spending cap deal look like?

The White House’s latest offer would keep military and other spending — which includes education, scientific research and environmental protection — constant from the current fiscal year 2023 into the following fiscal year, one person says familiar with the proposals of both parties. The move 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 consider keeping spending essentially flat has to do with politics. Since Republicans control the House, getting increased funding for discretionary programs outside of the military would have been nearly impossible. Congress would not have approved the increases through the appropriations process, the normal way Congress allocates money to government programs and agencies.

Republicans have repeatedly said they will not agree to 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 proposed by the White House, did not enact the kind of meaningful cuts that many in their party have long called for.

But Republican negotiators have shown some flexibility on how long those spending caps last. House GOP leaders are now seeking to set spending caps for six years, rather than 10. Still, that’s longer than what the White House is proposing, with Democrats proposing a spending cap for two years.

“Numbers are fundamental here,” Rep. Garret Graves, a Republican from Louisiana and one of Chairman Kevin McCarthy’s top negotiators, said Sunday. “The speaker was very clear: a red line is to spend less money and unless and until we are there, the rest is really irrelevant.”

The approach evokes the deja vu of the debt limit.

If spending limits sound familiar, that’s because they were used in the last big fight against debt limitation in 2011.

During this episode of crisis, lawmakers agreed to impose limits on military and non-military spending from 2012 to 2021. The caps in the Budget Control Act were somewhat successful in controlling spending, but not entirely.

A Congressional Research Service report released this year noted that during the decade the caps were in place, Congress and the president repeatedly enacted laws that increased spending limits. Certain types of spending — for emergencies and military commitments — 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 such as Social Security was uncapped, and these account for about 70% of total government spending.

Still, the Congressional Research Service pointed out that spending was lower each year from 2012 to 2019 than was expected before the caps were put in place.

The strategy is not a budgetary panacea.

Ceilings that limit spending around current levels will help slow the growth of the national debt, but will not solve 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 expected to nearly double over the next decade, totaling more than $20 trillion. dollars until 2033. This 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 level. However, he said that didn’t mean enacting spending caps wouldn’t be worthwhile.

“We’re not going to settle this all at once,” Goldwein said. “So we should do everything we can, as often as we can.”

The group called for spending caps to be accompanied by spending cuts or tax increases as part of a national debt reduction plan.

Spending limits are not the only problem.

Agreeing on the scope and duration of spending caps will be a key part of getting an agreement.

But negotiators are still grappling with several other issues, including whether to put in place tougher work requirements for social safety net programs, including food stamps, temporary family assistance needy and Medicaid, and whether to speed up permitting rules for energy projects, two key Republicans. priorities to which the White House negotiators have shown a certain openness.

Jim Tankerley contributed report.