President Joe Biden’s delayed budget for the upcoming fiscal year due Thursday will kick off what’s expected to be a lengthy battle over spending levels and priorities, with the debt ceiling deadline looming this summer casting a pall over the entire process.
Biden is expected to call for healthy increases on both the defense and nondefense side of the ledger, drawing a sharp contrast with House Republicans who are pushing for significant cuts.
At the same time, Biden’s budget would also reduce deficits by nearly $3 trillion over a decade, more than what the president initially previewed in his State of the Union address last month. That’s expected to include hefty tax increases on wealthier households and corporations that Republicans are almost certain to reject. But it’s intended to draw a sharp contrast with potential GOP cuts that could fall on lower-income households.
Speaker Kevin McCarthy, R-Calif., promised that the House would write fiscal 2024 appropriations bills at the fiscal 2022 levels during his lengthy fight to attain the speakership. This would mean a cut of more than $130 billion, which Senate Democrats have vowed to oppose.
House GOP appropriators have balked at the notion of cutting defense spending, and cuts to other nondefense programs will be even more severe if defense and potentially veterans programs are spared.
The upcoming debt limit “x date” will add additional pressure, as appropriations talks almost always drag out until late in the year. Analysts predict the Treasury Department will run out of borrowing room this summer, with estimates ranging from early June to mid-August.
While House Republicans have not issued specific demands for raising the debt limit, discretionary spending curbs tied to the appropriations process are expected to be on the table. Democrats have vowed not to negotiate, setting up a high-stakes showdown this summer.
The conservative Republican Study Committee issued a memo Wednesday that laid out options that could be part of a debt limit deal. These include setting a single cap on overall discretionary spending and cutting next year’s spending down to fiscal 2022 levels, as well as pursuing 10 years of discretionary spending caps.
Democrats so far have rejected any GOP demands on the debt limit, arguing it would be irresponsible not to raise the borrowing cap to accommodate budget decisions made in previous years under both parties’ control.
CBO briefing
Deficits skyrocketed under both the Trump and Biden administrations, as a presentation to House members from Congressional Budget Office Director Phillip L. Swagel made clear Wednesday.
According to slides Swagel showed lawmakers, cumulative deficits from 2017 through 2027 grew by nearly $8 trillion, or almost 80 percent, since the nonpartisan agency’s January 2017 forecast. That’s driven by pricey legislative changes, from appropriations bills to the 2017 tax cuts to various pandemic relief packages, offset somewhat by other factors like faster economic growth.
And the budget picture is getting more dire: Trust funds financing highway programs, Medicare hospital payments and Social Security benefits are expected to run dry within a decade. And interest payments on the debt alone are expected to surpass $10 trillion during that time.
Ways and Means Chairman Jason Smith, R-Mo., said after the briefing that $10 trillion statistic had a particular effect on lawmakers. “You could basically hear people be like, ‘Wow, so the average is about … $1 trillion a year, just interest on our debt,’” he said.
House Budget ranking member Brendan F. Boyle, D-Pa., said lawmakers had a “good bipartisan discussion” with the CBO director, but the negative budget outlook doesn’t mean the debt limit should be the vehicle for change.
“Let’s be clear when we’re talking about the debt ceiling: That is about past spending, it is not about future spending,” Boyle said. “I voted when Donald Trump was president to raise the debt ceiling. I didn’t hear any of this conversation from my Republican colleagues when there was a Republican in the White House.”
McCarthy told reporters after the briefing he was happy Democrats attended and that he hopes to have more bipartisan gatherings, but that their position of not negotiating on the debt limit was untenable.
He said Biden hasn’t reached out for another meeting since an initial discussion they had over a month ago, though he thinks “eventually” the call will come.
“I have not seen his budget. I do not believe raising taxes is the answer. I had this conversation with the president personally,” McCarthy said, arguing that tax revenue is at a historic high and spending is the primary debt driver.
One option to buy time is one or more short-term debt ceiling suspensions to go along with stopgap funding measures, so lawmakers and the White House can keep talking without triggering an economic calamity in the event of a debt limit breach.
Budget blueprint
The first step on the House side after the Biden budget comes out is production of a budget resolution, which will lay out a topline discretionary funding target for appropriators.
Budget Chairman Jodey C. Arrington, R-Texas, said Wednesday that it is “safe to say” that the committee will not meet Congress’ statutory April 15 deadline to adopt a budget resolution, pointing to Biden’s delayed submission.
“It will be in the near future, but it won’t be until we appropriately assess, analyze the president’s priorities in his budget,” he said. “Our focus is, tomorrow, the president submits his budget, and we have to unpack that.”
Appropriators are hoping to start marking up bills in committee in May and June before moving them across the floor, the panel’s vice chair, Tom Cole, R-Okla., said Wednesday.
But House Republicans will face challenges passing the bills through the House, which McCarthy has vowed to do. If they feature significant cuts, moderates may squirm — and if they don’t, conservatives may not support them.
Cole said subcommittee chairs have not yet received instructions on what level to write their bills to. But only the Defense panel, led by Rep. Ken Calvert, R-Calif., is expected to be spared cuts, Cole said.
The “four corners” of Appropriations leadership are working to schedule a meeting that will follow the release of Biden’s budget, but hasn’t done so yet, said House Appropriations ranking member Rosa DeLauro, D-Conn.
“I hope that [Biden’s budget] will build on where we are for 2023,” she said. “That will be bold, and moving forward in all the areas. We had serious public investments in the last go-round.”
The Senate is considered unlikely to do a budget resolution of its own this year. Budget Chairman Sheldon Whitehouse, D-R.I., said Tuesday he is undecided if his committee will produce one and will wait until after Biden’s budget and the House’s budget are released before making a decision.
“If we are satisfied with the Biden budget, then process for process’ sake doesn’t seem to add much value,” Whitehouse said. “If we can assert ourselves in ways that are important to the caucus by doing a separate budget, then that changes things a little bit.”
‘Slash and burn’
The new Senate Appropriations leaders — Patty Murray, D-Wash., and Susan Collins, R-Maine — are vowing to mark up bills in committee and move them on the floor.
Murray said Tuesday that the Appropriations Committee will be “darn busy,” starting with hearings, and then markups of bipartisan spending bills. Last week, Murray said she and Collins are negotiating a topline that will serve as the starting point.
Murray said she expects Biden’s budget request to “draw a sharp contrast with the extreme slash-and-burn rhetoric we are seeing from House Republicans.”
Senate Republicans will push for spending levels lower than Biden will request, Minority Leader Mitch McConnell, R-Ky., said Tuesday.
“The president’s budget is replete with what they would do if they could,” McConnell said. “Thank goodness the House is Republican. Massive tax increases, more spending, all of which, the American people can thank the Republican House for, will not see the light of day.”
Collins didn’t go as far, saying she did not want to prejudge Biden’s budget before she saw it. She did say the Appropriations Committee has already started its work, and the budget release will kick-start the hearings with agency heads in coming weeks.
The White House is expected to seek tax increases on wealthy Americans and corporations, including quadrupling a tax on corporate stock buybacks to 4 percent and a minimum tax on the richest households that covers regular income and the value of unsold assets. Biden also wants to raise payroll and investment income taxes on households making more than $400,000 to help extend Medicare’s solvency.
The Senate Finance Committee’s top Republican, Michael D. Crapo, said he expected the proposal would raise taxes, lack “substantive reforms” in response to fiscal issues and that any claimed deficit reduction would be a result of budget gimmicks.
Crapo, R-Idaho, also took issue with the Biden administration’s pledge not to raise taxes on anyone making under $400,000 per year. He said that threshold would still allow for tax increases on most small businesses when it’s applied to pass-through entities, which see income taxed at the individual level for business owners.
David Lerman, Paul M. Krawzak and Niels Lesniewski contributed to this report.
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