An influential House Freedom Caucus member wants Speaker Mike Johnson to ignore “side deals” in the debt limit suspension law that would bolster nondefense spending and use a backstop mechanism in that law to force automatic cuts if Democrats won’t agree.
Rep. Chip Roy, R-Texas, the Freedom Caucus’ policy director, wrote in a Washington Examiner op-ed Tuesday that Johnson “can and should” reject an extra $54 billion in nondefense spending negotiated during the debt limit talks that would be funded on top of regular discretionary limits.
If Democrats don’t accept that, Johnson should trigger across-the-board cuts known as a “sequester” by passing a full-year continuing resolution, Roy wrote.
Under the current continuing resolution, funding for four of the twelve fiscal 2024 spending bills runs out Jan. 19, with the remaining eight expiring Feb. 2.
The debt limit law negotiated between President Joe Biden and then-Speaker Kevin McCarthy, R-Calif., set a $886.3 billion cap for defense with a $703.7 billion cap for domestic and foreign aid programs. But “agreed-upon adjustments,” as the White House characterized them at the time, would increase spending on the nondefense side of the ledger by $54 billion using budgetary gimmicks that do not violate the caps.
For example, the law parked $22 billion in the Commerce Department’s “nonrecurring expenses fund,” with $11 billion available this year and again in fiscal 2025. The two sides also agreed to take $10 billion from mandatory IRS funding appropriated in the 2022 climate and health care package in each of the two fiscal years. Remaining “adjustments” would designate regular appropriations as emergency funding, which is exempt from caps, and dip into available mandatory funding to offset more discretionary funds.
‘Budgetary gimmicks’
However, the side deal is not specified in the law’s text, which Republicans like Roy are attempting to capitalize on. House Appropriations ranking member Rosa DeLauro, D-Conn., expressed concerns about this possibility early on, pointing it out in a May 31 statement announcing she would vote against the debt limit package.
“It forces domestic investments to rely on budgetary gimmicks that will not only disappear in two years, but are not guaranteed in the bill, and instead are covered in a non-binding side agreement,” DeLauro said at the time. “Meanwhile, the Pentagon will not be forced to rely on a single gimmick.”
Senate appropriators on both sides of the aisle have embraced the higher spending in the debt limit agreement, and have tacked on an additional $14 billion in emergency spending, with $8 billion of that for the Pentagon. Appropriators in that chamber and House Democrats are urging negotiations at the level laid out in the law with the side deal factored in.
“It is the law of the land, that is what we should be following,” DeLauro said at a Rules Committee meeting earlier this month.
During that meeting, Roy pointed out the $54 billion in the side deal is not in the legislative text, to which DeLauro argued Republicans should abide by the agreement their former leader negotiated. But Roy wrote Tuesday that Johnson is not bound by what his predecessor may have negotiated, and encouraged the new speaker to use the threat of automatic cuts to secure conservative wins in the final appropriations bills.
“Our message should be clear: House Republicans will combat inflation and the woke and weaponized federal bureaucracy by securing gimmick-free spending cuts and conservative policy riders through the passage of individual appropriations bills,” Roy wrote.
Pain on both sides
The debt limit law included a mechanism intended to impose pain felt on both sides of the aisle if by next spring Congress is still passing temporary CRs for the fiscal year that began Oct. 1, 2023. It would impose a 1 percent sequester on both defense and nondefense spending appropriated for fiscal 2023 if full-year appropriations are not settled by April 30.
[Backstop in debt limit law flips script on spending endgame]
But depending on scoring of future short-term CRs, the cuts could be much deeper on the nondefense side. And it’s not entirely clear if a stopgap bill covering the rest of the fiscal year would be considered full-year appropriations and turn off the across-the-board cuts.
But under one reading of the law, a full-year CR could lead to as much as $73 billion in total cuts to nondefense spending — using Congressional Budget Office estimates of the last two stopgap laws as a baseline — since that category drops to $703.7 billion under the debt limit law.
In this scenario, lawmakers could actually boost defense and related spending by $28 billion, since that category’s cap increased by 3 percent for fiscal 2024.
In his op-ed, Roy wrote that the scenario he favors would keep those defense increases in place while cutting nondefense by at least $40 billion — the difference between the new statutory cap for fiscal 2024 and what CBO scored at the time the fiscal 2023 omnibus was enacted. If the departments of Veterans Affairs and Homeland Security are exempt from cuts, the rest of the nondefense agencies could face 8 percent cuts on average in that scenario.
However, an alternative interpretation would be that a stopgap covering the rest of the fiscal year is technically a part-year bill, which would leave the sequester-level cuts in place, bringing the defense topline way down from the fiscal 2024 cap while boosting the nondefense ceiling. This would be much harder for Republicans, especially defense hawks, to swallow.
The White House budget office implements any automatic cuts under the law, and administration legal experts could try to get creative in how cuts are applied.
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