What’s Actually in the Spending Deal

Speaker Mike Johnson, Congressional Democrats, and President Joe Biden announced an agreement late yesterday to spend above the Fiscal Year 2024 Fiscal Responsibility Act (FRA) spending caps.

Both Sides Claim Different Spending Levels

The press releases from both sides made very different claims about what the FY 2024 appropriations bills would actually spend.

Speaker Johnson said the “topline constitutes $1.590 trillion for FY24 – the statutory levels of the Fiscal Responsibility Act. That includes $886 billion for defense and $704 billion for nondefense.”

However, Senate Majority Leader Chuck Schumer and House Democratic Leader Hakeem Jeffries claimed they had secured “$772.7 billion for non-defense discretionary funding”.

What We Know About the “Side Deal”

With information available at this time, it seems that there is an agreement to allow non-defense discretionary spending to rise about $69 billion above the statutory cap imposed by the Fiscal Responsibility Act. This deal for additional budget authority (BA) could allow spending on the federal bureaucracy to rise by about 10 percent above the statutory cap.

That is in addition to the $25.5 billion in adjustments to the base spending included in the FRA.

In total, FY 2024 discretionary budget authority could approach $1.7 trillion under the newly announced deal, much higher than most Members who voted for the FRA imagined.

Actual spending could be even higher than that, if the spending bills include other provisions, such as additional emergency designated spending. Additionally, this would not account for an emergency supplemental spending package.

It is important to remember that the statutory spending caps apply to net spending in the appropriations bills. Therefore, if the bill rescinds unused budget authority from previous legislation, additional new budget authority can be appropriated. This is important because, in many cases, that unused budget authority would not have been spent had it not been rescinded.

In this case, unused BA is not being cancelled, but rather shifted to non-defense discretionary priorities. This increases the deficit – and it does so by using the shifted BA on Democrats’ priorities, as implied in the Schumer-Jeffries statement. Those are likely to include priorities like regulatory agencies, welfare, climate programs, and other accounts that Republican Members may not support.

The scoring guidelines also allow changes in mandatory programs (CHIMPs) to offset additional new budget authority. CHIMPs are often used in omnibus appropriations bills as gimmicks to increase net spending. Again, many CHIMPs would actually increase spending relative to current law even though budget authority does not change. This is because many CHIMPs that have been historically used are those that would have limited outlay impacts in their original construction but significant budget authority impacts. This means that by changing these particular mandatory programs, budget authority is freed up for real spending elsewhere that was never actually expected to be spent in the first place.

These types of CHIMPs allow both sides to claim a victory based on a half-truth. Some can say that they’re reducing spending (when they are only reducing budget authority while increasing spending relative to what it would have otherwise been), while others can say that they are not harming any constituent groups because they’re reallocating resources to where they could be used.

Some of the reported CHIMPs and rescissions in this deal represent important reductions to overspending, including $20 billion for the Internal Revenue Service expansion and $6 billion from COVID programs. However, these cuts should be used to reduce spending and the deficit, not increase other harmful bureaucratic programs.

For example, the spending reductions associated with IRS funding mostly come from future years. Therefore, eroding the IRS funding will not have a profound effect on the IRS’s overall budget especially if the appropriations bills use those out-year savings today. In essence, limiting the IRS’s budget also requires a commitment to reducing funding as part of the appropriations process which is much more controversial than borrowing funds from the future to pay for new spending today.

However, even if the IRS’s budget is adequately constrained, there will be additional funding to be spent on increasing the size and scope of the bureaucracy elsewhere. The same is true for the $6 billion from COVID programs. This money was temporary and allocated specifically to help combat the effects of COVID. By clawing it back and using it to fund higher domestic discretionary levels, the one-time recission inflates the level of domestic spending that can be used to expand the bureaucracy.

Another challenge with the $6 billion COVID slush fund cut is that these dollars are characterized by Democrats as already being returned to the Administration as “recently recovered funds,” largely because states had not been able to use them by the deadline. Now, rather than these dollars staying within health use, they are opened up for any non-defense discretionary priorities the White House and Congressional Democrats may have. This $6 billion is also minimal in scope to what could have been rescinded from still-lingering COVID-era programs, like the Bidenomics Slush Fund.

Still Unknown:  Allocating Funding and Policy Riders – And Passing Appropriations Bills

While the Speaker and Democrat leadership claim a deal on spending levels, the deal leaves out many important details.

Four appropriations bills will lapse after January 19, with the remaining eight expiring after February 2.

The House and Senate should consider each of these bills individually, allowing individuals Members the opportunity to review and understand the proposed legislation before voting to spend tens of billions of taxpayer dollars.

Furthermore, Congress should aggressively use its power of the purse by including policy riders and restrictions to protect taxpayers and American values.

Still Unknown:  Foreign Aid Supplemental Spending

Left unaddressed by this spending deal is President Biden’s $105 billion request for supplemental funding to provide foreign aid to Ukraine and Israel.

In November, the House approved a bill to provide assistance to Israel offset by $14.3 billion of reductions in IRS spending. However, the Senate tabled this measure on November 14. Congressional Democrats have now reportedly agreed to rescind $20 billion of IRS funding.

Any additional supplemental spending should be fully offset with real spending reductions.

Still Unknown: Border Supplemental Spending

Also unaddressed in this spending deal is the crisis along the U.S.-Mexico border. House Republicans have insisted on H.R. 2 as the only path forward, which Senate Democrats and the White House strongly oppose.

The Senate continues to negotiate on the border security package. With it unaccounted for in this weekend’s deal, a significant question remains on the table as to how much it will cost and if it will be part of a larger supplemental spending package, added onto the Homeland Security appropriations bill, or considered separately. As this is a stated key priority for Congressional Republicans, a border deal is a necessary part of the overall spending conversation.

Implications for 2025 and Beyond

If this agreement is carried out, it would wipe out much of the claimed savings from the Fiscal Responsibility Act. The CBO originally estimated that the FRA would reduce FY 2024 outlays by $69.5 billion.

The Fiscal Responsibility Act established caps for FY 2025, which are one percent higher than the FY 2024 statutory caps. However, if this deal to shift budget authority is carried out and sets a precedent that Congress will just sidestep spending controls, the starting point for the FY 2025 appropriations bills could be much higher than what was intended. 

Spending in FY 2023 was nearly $1 trillion higher than projected before President Biden’s polices took effect. Real wages for the average American worker are 4.5 percent lower today than they were in January 2021 as a result of high inflation. It is vital for Congress to control spending, not increase it beyond the statutory spending caps.

Smoke and Mirrors Begs for Transparency

The gimmickry around the FY 2024 appropriations process should give way to an important reform to shine the light of transparency on the spending bills considered each year.

Unlike other legislation, the Congressional Budget Office does not provide formal cost estimates for appropriations bills. This is due to a loophole in the Congressional Budget Act.

Because Congress is not able to rely on the non-partisan scorekeeper, different sides have been able to hide costs of the appropriations bill and only talk about certain aspects while ignoring others.

Lawmakers should end this loophole and require CBO to provide detailed cost estimates for appropriations bills so that everyone can understand the full implications of important spending legislation.