National Crisis Averted (For Now) as Lawmakers Raise Debt Ceiling

June 15, 2023 | Devon Page

Last month, lawmakers and President Biden struck a last-minute deal to raise the nation’s debt limit until 2025. While many are breathing a deep sigh of relief that a national crisis has been temporarily averted, this round of brinkmanship has exasperated members of both parties and left important questions unanswered concerning the future of the national debt and federal spending.

What’s the Deal?

Less than a week before the U.S. default date, President Biden signed the Fiscal Responsibility Act of 2023 (H.R. 3746) into law. Heightening the stakes of an already momentous 2024 election cycle, the law raises the debt ceiling through Jan. 1, 2025. The controversy, however, lies predominantly in the inclusion of several stipulations related to COVID-19 funding recissions and limits on federal spending.

The legislation rescinds approximately $27 billion in unobligated emergency supplemental funding to federal agencies designated for activities related to the COVID-19 pandemic. White House Budget Director Shalanda Young, a key negotiator of the deal, noted that Congress will redistribute these funds during the FY24 appropriations process to other parts of the federal budget. However according to Young, individual line items were not discussed.

Also unclear is precisely what dollars will be rescinded. While it appears that funding provided to the Infectious Disease Rapid Response Reserve Fund remains intact, it is currently difficult to discern which federal public health programs will be affected by the legislation. This is in part due to the unusual ways Congress appropriated COVID-19 funding, as well as various transfers between federal accounts and agencies.

The Fiscal Responsibility Act also caps discretionary spending for FY24 and FY25, intensifying already impacted fights for federal funding. Since the cap for non-defense discretionary spending (i.e., the pot of money used to pay for CDC, NIH, HRSA, FDA, Education, and other agencies) is essentially level for FY24 and allows only 1% growth for FY25, funding debates will take place within a zero-sum context: any increase will have a corresponding decrease elsewhere in the budget.

For these fiscal years, an automatic continuing resolution will take effect for bills Congress failed to approve by January, funding the bills’ programs at 99% of current levels. For instance: if the Labor, HHS, and Education FY24 bill is not passed by January 2024, then a continuing resolution will automatically fund Labor, HHS, and Education programs and activities for FY24 at 99% of FY23 levels. The same applies to any of the 12 annual appropriations bills. However, since the fiscal year begins on Oct. 1, Congress must still pass the appropriations bills or continuing resolutions to avoid a government shutdown in the last few months of the calendar year.

A “Win” for the Center

The vast majority of stakeholders are relieved to have avoided a U.S. default. Imperiling the economy would have negative consequences, both widespread and long-lasting. However, this relief must be qualified by the fact that some members of Congress feel uneasy with much of the deal’s content.

Some Democrats, and especially those in the more progressive wing of the party, are frustrated that negotiations happened at all. Others find fault in the outcome, dissatisfied with the final bill’s inclusion of key conservative policies and thus with the Biden Administration, who spearheaded negotiations for Democrats. Consequently, a number of prominent Democrats voted against the bill, including Rep. Jamaal Bowman (D-NY), Rep. Pramila Jayapal (D-WA), and Rep. Rosa DeLauro (D-CT).

Discontent is even more palpable across the aisle. Sen. Rand Paul (R-KY) says that he doesn’t think there’s anything “good or conservative” about the deal, adding that “the taxpayer and the citizens of the country” are a “clear loser.” House Freedom Caucus members are also critical of the legislation in the extent to which it fails to reflect conservative priorities. Senate Minority Leader Mitch McConnell (R-KY) attacked the bill’s modest—only 3%—increase in defense spending, a point reiterated around the Republican caucus. More than a few Republicans, in fact, expect Congress to take up a supplemental funding bill in the coming months to fill in gaps created by the deal.

Public polling reflects this sort of complexity regarding the outcome and process as well. A Reuters/Ipsos survey conducted shortly after approval of the legislation found that Democrats generally approved of the Democratic effort, whereas Republicans were less enthusiastic about Speaker Kevin McCarthy’s (R-CA) performance in the negotiations and the final bill’s content. Still, more than half of respondents failed to see a clear winner between Republicans and Democrats.

Some analysts contend that the deal represents a triumph of the political center, and in that context the dissatisfaction from the parties’ flanks is largely unsurprising. After all, moderates overwhelmingly offered support for the legislation and compromises tend to the middle.

What Now?

With the debt limit can kicked to 2025 and government funding running out in less than 100 days, Congress is turning to the more pressing matter of annual appropriations. House Appropriations Chair Kay Granger (R-TX) is resuming committee markups of FY24 appropriations bills. However, she is not without contention, as more conservative party members demand that the bills be written below the debt deal levels. With the provision involving an automatic continuing resolution that further tightens the timeline, passing a spending package seems increasingly onerous.

While House Republicans seek steeper cuts, Senate Republicans are working to circumvent the $886 billion cap set on defense spending. The possibility of an emergency supplemental package has been floated. But such a package would be sure to face some Republican opposition, and likely from Democrats as well. In a statement earlier this month, Appropriations Ranking Member DeLauro (D-CT) suggested that without defense-nondefense parity, Democrats might waiver to support an emergency supplemental bill. Indeed, any increases in funding beyond that permitted by the debt ceiling deal will have to be on an emergency supplemental basis.

While all are focused on FY24 appropriations, some are already eyeing the next debt fight. Similar to Senate Minority Leader Mitch McConnell’s (R-KY) 2011 proposal, Rep. Brendan Boyle (D-PA) and Sen. Dick Durbin (D-IL) introduced a bill titled the Debt Ceiling Reform Act to prevent debt limit standoffs by authorizing Treasury to pay the nation’s bills absent a disapproval resolution from Congress. Calls for the bill are bolstered by analysts’ claim that the debt ceiling process causes unnecessary political and financial disruption.

Whether this reform effort can garner sufficient steam to pass the split congress remains to be seen. The same applies to appropriations bills and emergency supplemental funding packages. Yet again, Congress finds itself in a peculiar and unpredictable position. While party fringes make their voice loud, it’s hard to deny a widespread thirst for normalcy, bipartisanship and stability. In any event, ASTHO’s government affairs team will be monitoring developments in each step of the way and advocating for the priorities and interests of state and territorial health officials and their agencies.