J. Scott Applewhite/AP Photo
Speaker of the House Kevin McCarthy talks with reporters about debt limit negotiations, at the Capitol in Washington, May 25, 2023.
[Editor’s Note: There is now more information out about the emerging deal. I made a Twitter thread about what we know; the spending caps only last for two years, which is pretty big for the White House. That said, the sequester-like element of it remains active, so you can read below with that in mind.]
There’s a certain type of newbie to politics who doesn’t get strong 2011 PTSD flashbacks every time the words “debt ceiling” come up. That flirtation with default eventually ended with something called the sequester: a series of random, debilitating, across-the-board cuts to social services (and, to be fair, the military as well) that were instituted after a failure to come to any agreement on what specific measures to take to reduce the deficit. It was useful to all parties involved, because they could fulminate about automatic budget cuts without having to put themselves on the record for having approved of the specifics. It was the ultimate in that classic Washington game, the deflection of responsibility.
If the rumors coming out of today’s debt ceiling talks are correct, then we’re going back to that well again, with House Republicans and the White House coming up with a sequester-like mechanism to put budget cuts into effect, without anyone getting their hands dirty by wielding the actual meat cleaver.
That’s the centerpiece of an emerging deal arising from negotiations that should never have been attempted, to solve a problem that is insoluble given the dynamics of the parties. Republicans are budget-cutters until you ask them what they want to cut. Democrats are defenders of federal programs until you ask them to take up the defense. The inevitable result of this hostage crisis is likely to be a deeply unsatisfying bundle of concessions, for the privilege of waiting two whole years to replay this crisis all over again for another set of shell-shocked political observers.
Republicans have been the ones announcing their optimism about movement toward a deal. According to Reuters, the parties are $70 billion apart on discretionary spending, though it’s unclear whether that means over ten years or just in the first year.
At issue is whether the baseline spending on the discretionary side of the fiscal year 2024 budget will be at the level of fiscal year 2022, fiscal year 2023, or somewhere in between. One idea that’s been discussed is fiscal year 2022 but adjusted for inflation. Within that, there will probably be a set number for military spending, which seems like it is moving toward the Biden level (which is still a 3.2 percent increase over fiscal year 2023, at $842 billion) rather than the even higher Republican number. If you need to hit an overall budget number that’s either a freeze or lower, a higher military budget by definition means a lower nondefense discretionary budget.
And this baseline is important, because after that there will be a cap of just 1 percent increases, magnifying whatever cuts happen over the life of the deal. That could be anywhere from two to six years, based on current negotiations.
Nondefense discretionary, by the way, is only 13 percent of the overall budget, forced to shoulder the entire burden of cuts, which by definition will have to be savage. Paul Krugman has famously called the federal government “a giant insurance company with an army.” Neither of those things—that is, the Pentagon plus Medicare, Medicaid, and Social Security—are subject to these cuts. Everything else is small by comparison, but critical for education, housing, food safety, the environment, financial regulation, and on and on.
Whatever the numbers, the emerging deal will not get into specifics. “The expectation is that negotiators will hammer out top line numbers,” Reuters writes, “but leave lawmakers to hammer out the fine details … through the normal appropriations process in the months ahead.”
Let’s be real; lawmakers are not going to hammer out those fine details. The implications of their actions are so dramatic that they don’t want to be responsible for them. An important piece from Jackie Calmes in the Los Angeles Times explains that Republicans on the House Appropriations Committee canceled votes this week on four appropriations bills, which would operationalize the topline numbers in the budget.
While Republicans claimed they needed to wait for the resolution of bipartisan negotiations, it’s clear they didn’t have the votes to pass what their budget calls for. “It is not surprising, given the divisions in our own party, that even coming up with a bill that can be satisfactory to all members is still a work in progress,” Rep. Steve Womack (R-AR) told Roll Call. And these were actually the easiest appropriations bills, the low-hanging fruit. They didn’t involve the necessary cuts to funding for Pell grants, or Meals on Wheels, or housing vouchers, or air traffic control, or opioid treatment, or cancer research, or staffing for the Social Security Administration.
So what happens when Congress can’t reckon with the cuts they bind themselves to in a debt ceiling deal? That’s where a new innovation comes in: the “automatic CR.”
CR stands for continuing resolution. Often, when Congress can’t reach agreement on a budget, they’ll pass a short-term continuing resolution that freezes spending at the current level until the real budget passes. According to Kevin McCarthy’s pals at Punchbowl, negotiators are devising a plan whereby, if Congress fails to pass its 12 spending bills that make up the budget by the end of the fiscal year (September 30), then a CR would automatically “snap spending to the agreed-upon caps.”
This is expressed in terms of “incentivizing” Congress to pass the spending bills, but clearly it relieves them of having to do so. Under this deal, the cuts will go through whether they pass a bill, and have to go on the record on specific trims, or not. That’s a similar mechanism as the sequester, with its across-the-board spending reductions to each program affected. It’s austerity without fingerprints.
The key to all of this, of course, is what baseline would be snapped in with a CR. If it’s FY2023, as the White House wants, the CR would just be what every CR is: a freeze at current levels. That would be a best-case scenario for Democrats, and House Republicans know it, which is why I don’t buy that it will happen.
If it’s FY2022, the House Republican vision, then it’s a deep cut. And if military and veterans programs are exempted, as the GOP wants, the impact on the nondefense discretionary budget is much higher. A return to FY2022 while exempting the Pentagon and the VA would be an effective 30 percent cut, according to Democrats on the Appropriations Committee. If it’s FY2022 adjusted for inflation, that cut is smaller but it’s still real.
To mitigate this, negotiators could apply the expected savings from adding work requirements, which really should be seen as schemes to throw vulnerable people off federal benefits through bureaucracy. Another way to mitigate is by undermining administration goals. About $30 billion in unspent COVID funds are likely to be clawed back, including a vaccine development program that could prevent future pandemics. And some of the $80 billion in Inflation Reduction Act funding to improve tax collection at the Internal Revenue Service could be given back to reduce the impact on the domestic discretionary budget.
That last bit is completely outrageous. The IRS was a functional agency this tax season. So we’re going to undermine that, and essentially allow tax cheats to break the law and thereby reduce incoming tax revenue, so everyone can pretend they’re cutting the deficit?
There’s a whole other component to this deal around permitting reform, which I’ll have to save for later. But the most important thing on the spending side is that no member of Congress who votes for this—and I’m told the vote could come as soon as next Wednesday—would have to affirmatively enact draconian cuts. It would all be done for them through an automatic trigger. That’s what will be attractive about it, in fact. It absolves politicians from taking responsibility for the consequences of their actions. That’s more valuable than gold in Washington.
