What are the FRA Discretionary Spending Caps and Potential Scenarios?

The Fiscal Responsibility Act (FRA) of 2023 established statutory caps on discretionary spending for fiscal years (FY) 2024 and 2025.

The caps place separate limits on both defense and non-defense discretionary budget authority. While the overall topline discretionary spending level is often discussed, the caps are only enforced separately on the defense and non-defense spending categories. Furthermore, spending in one category cannot be decreased to offset higher spending in the other.

It is important to note that the caps enforce a ceiling – not a level or a floor – on discretionary spending within each category.

FRA Spending Caps

Fiscal Responsibility Act Full-Year Caps Base Budget Authority (in billions of dollars)
FRA 2024
Full Year
FRA 2025
Full Year
Source: Author using information from the FRA

The FRA caps for full-year appropriations in FY 2024 would be $886.349 billion for defense and $703.651 billion for non-defense, adding to a $1.590 trillion topline base discretionary level.

For FY 2025, the caps would be $895.212 billion for defense and $710.688 billion for non-defense, adding to a $1.606 trillion topline base discretionary level. Thus, the FRA allows up to a one percent increase in the caps from FY 2024 to FY 2025 if full-year appropriations are enacted.

The caps for full-year appropriations have sometimes been referred to as the “Section 101 caps” after the relevant section of the FRA.

Alternative Cap In the Event of a Continuing Resolution (CR)

The FRA caps are based on the Budget Control Act of 2011, which was in effect from FY 2012 to FY 2021.

However, the FRA includes a twist to push lawmakers into enacting the full 12-bill regular appropriations process.

Because a continuing resolution (CR) is in effect on January 1, the FRA triggers modified caps that will replace the spending caps referenced above. This CR cap has been referred to as the “Section 102 caps” after the relevant section of the FRA.

Relative to the full-year FRA Section 101 caps, the Section 102 caps under a CR would reduce defense levels and increase the allowable non-defense levels. The overall topline would be slightly lower under the CR caps than the full-year FRA caps.

It is important to note that enforcement by sequester to the new CR cap levels would not occur until April 30. This means that there is no penalty on spending more than cap levels until April 30.

Comparing the Full-Year FRA Caps to Alternatives

The table and charts below compare the FRA full-year caps to other proposed funding levels, including the current “two-step” continuing resolution (CR), the Section 102 CR caps, and the proposed $1.471 trillion spending level.

FRA Spending Cap Comparisons

Comparing FRA Caps Base Budget Authority (in billions of dollars)
Two-Step CR
(Through Jan 17 and Feb 2)
FRA 2024 CR
(Effective Jan 1, 2024, enforced on April 30)
FRA 2024
Full Year Appropriations
FY 2024 at
FY 2022 Topline
Source: Author using information from the FRA.

Sequestration Enforcement

The FRA caps are enforced by sequestration.

If appropriations for the defense or non-defense category exceed their cap on a certain date, then the President would be required to cut spending within that category by a uniform percentage (i.e., “across the board”) so that the resulting spending level meets the cap.

If full-year appropriations bills are in place that exceed either cap, the President is required to make a sequestration order within 15 days after the end of a session of Congress (or by January 18 at the latest). As such, even if full-year appropriations bills are enacted, there won’t be an enforcement of the caps for up to 30 percent of the fiscal year.

If a CR is in effect that exceeds either cap, a sequestration order would be delayed until April 30. That means that if a CR is in place, there is effectively no enforcement of discretionary spending levels until the end of April – which means there is no enforcement for 63 percent of the fiscal year.

Controlling Discretionary Spending Should Be the First Step Towards Responsible Budgeting

Congressional Democrats say the statutory caps in the FRA should be ignored. They claim that in addition to the law, “side deals” were made to spend tens of billions extra on non-defense discretionary programs outside of the caps.

No actual evidence for such a deal has ever been produced outside of partisan talking points from the White House and Congressional Democrats. The former Speaker of the House who supposedly made the side deal is not even a Member of Congress anymore.

Spending tens of billions outside the lawful spending caps would undermine the rule of law and be completely irresponsible.

In contrast, resetting FY 2024 appropriations to FY 2022 levels would be a responsible first step to control runaway spending.

The FY 2024 House budget resolution and the House Appropriations Committee both call for the topline base discretionary appropriations for FY 2024 not to exceed the FY 2022 topline of $1.471 trillion. The House-passed Limit, Save, Grow Act originally included this spending level which would also comply with the FRA caps.

Providing budget authority up to the $1.471 topline would represent a modest step in controlling the growth of spending, particularly compared to the trillions in higher spending approved by Congress and President Biden which has resulted in high inflation. Actual FY 2023 spending was nearly $1 trillion above what CBO originally projected when Biden first came into office. In addition to advancing prudent FY 2024 appropriations, lawmakers would be responsible to begin taking concrete steps to control the growth of the real drivers of the unsustainable budget: autopilot spending (including massive entitlement programs) and the interest payments financing them.

About The Author