Read more on the debt ceiling
House Republican demands are severe and would cut funding for essential programs
Last week, Speaker Kevin McCarthy (R-CA) laid out a set of demands in exchange for allowing the United States to continue to pay its bills. Among his demands are budget caps that result in reduced purchasing power over time. Speaker McCarthy called for setting total discretionary funding for the coming fiscal year at the same level it received in 2022, with a statutory limitation to increase thereafter at just 1 percent per year for the next nine years. Under this formula, funding would significantly lag behind inflation and population growth.*
While the bill text limits only total discretionary funding, Speaker McCarthy has repeatedly called to preserve discretionary funding for both veterans and the military—for example, when he said to “make sure that our veterans and our service members are taken care of.” This would require deeper cuts to everything else, meaning the cuts would need to come from the remaining portion of the discretionary budget, otherwise referred to as nondefense discretionary (NDD) funding, excluding the U.S. Department of Veterans Affairs (VA) medical care.**
Based on the speaker’s statements, his plan would lead to an immediate cut of 31 percent to NDD funding, excluding VA medical care, leaving those programs $208 billion below their current service levels.*** To get a sense of a cut that large, $208 billion would be enough to fund all of the programs in the expandable list below—and therefore, cuts of that magnitude would be the equivalent of eliminating the entire program.
What does $208 billion in federal spending pay for?
- The Centers for Disease Control and Prevention
- The National Institutes of Health
- The Environmental Protection Agency
- The National Oceanic and Atmospheric Administration
- The U.S. Geological Survey
- The U.S. Fish and Wildlife Service
- The Smithsonian
- The U.S. Census Bureau
- The U.S. Department of Labor
- The National Labor Relations Board
- The National Science Foundation
- NASA
- The Congressional Budget Office
- The Library of Congress
- The Corporation for National and Community Service
- The U.S. Consumer Product Safety Commission
- The Special Supplemental Nutrition Program for Women, Infants, and Children
- The Section 8 housing program
- The Head Start program
By 2033, a decade from now, funding levels for affected programs would be cut 58 percent below their 2023 levels, on average, after adjusting for inflation and population growth—and if the cut to any program is less than 58 percent, other programs would have to receive a cut that is larger than 58 percent to compensate.**** That would be a cumulative reduction of nearly $3.5 trillion in funding over the decade. Despite the rhetoric that the proposed caps would simply slow the growth in spending, they would slash the purchasing power of affected programs significantly below current services, leaving anti-poverty, research and investment, and other broad programs inoperable. In fact, the cuts are so severe that they would lead to these programs’ face-value, or nominal, funding, on average, decreasing each year; even before adjusting for inflation and population growth, these programs would see their funding cut. In short, budget caps are budget cuts.
This analysis focuses on what would happen if nondefense and VA medical care were protected because Speaker McCarthy has made clear that he intends to ensure the burden of these cuts do not fall on defense or VA medical care. However, even if Speaker McCarthy did not protect the military or VA medical care, the cuts to the budget would still be dramatic and untenable: If no program were protected, the entire discretionary budget would still be 28 percent below its current purchasing power by 2033—including for the VA medical care
What programs would be affected?
The extensive list of programs that would be affected by the McCarthy proposal covers much of the government that Americans rely on and interact with on a daily basis. While it does not include so-called mandatory programs, such as Medicare, Medicaid, Social Security, or Supplemental Nutrition Assistance Program (SNAP), it does comprise much of the remainder of the federal budget, including:
- Programs that ensure the public has clear air, water, and food, as well as funds for treating and preventing substance abuse and for the national weather service
- Critical assistance for low-income families and children such as Section 8 housing, the Special Supplemental Nutrition Assistance Program for Women, Infants, and Children (WIC), the Child Care and Development Block Grant, and Head Start
- Future investments and research in areas such as cancer, clean energy, and space and earth sciences
- Most of the agency budgets, such as the workforce for the U.S. Consumer Product Safety Commission, the Centers for Disease Control and Prevention, the Environmental Protection Agency, the Department of Labor, the Treasury Department, and the Department of State
- The costs of administering so-called federal mandatory programs, such as Medicare, Medicaid, Social Security, and SNAP, which ensures that Americans receive the retirement, health care, and food assistance on which they rely
Conclusion
Make no mistake, the budget caps proposed by Speaker McCarthy are nothing more than deep and devastating budget cuts that would hinder the nation’s ability to make the investments needed to promote economic growth, support workers and families, and protect the environment. Congress should reject this proposal and, instead, fulfill its obligations by raising, suspending, or eliminating the debt limit.
The author would like to thank Jean Ross and Alan Cohen for helpful substantive suggestions and Kyle Ross for research support.
* Author’s note: Inflation and population growth are projected to average roughly 3 1/4 percent per year in the coming decade. If total growth is capped at 1 percent, this means that the purchasing power of programmatic funding would fall slightly less than 2 1/4 percent, leaving programs that much more behind in their ability to continue at their current pace. It could mean covering 2 1/4 percent fewer people, providing 2 1/4 percent less inflation-adjusted funding to recipients, or completing 2 1/4 percent fewer projects per person. Regardless, services would be diminished. And, under each year of budget caps, programs would that much further behind, with cumulative cuts growing significantly over time.
** Author’s note: Taking care of the military and veterans also means that their funding levels, at the very least, match their current services. This further increases the amount that NDD, excluding VA medical care, falls behind each year—due to total discretionary funding being capped at 1 percent annual growth.
*** Author’s note: The White House and House Appropriations Committee Democratic staff have each stated that the Speaker McCarthy’s proposal would lead to a 22 percent reduction in the first year. For the White House, that is a reduction to all of NDD, including VA medical care. For the House Appropriations Committee, that is a reduction to NDD excluding VA medical care. The White House assumed defense would keep pace with inflation. The House Appropriations Committee Democratic staff assumed defense would be frozen at 2023 levels and VA medical care would match the need outlined in the president’s budget. In each case, figures differ from the figures in this analysis because they calculate the year-over-year difference. That is, they look at the change relative to the previous year without adjusting for inflation or population growth, whereas the figures in this analysis take into account inflation and population growth in assessing the depth of the cuts proposed.
**** Author’s note: The calculations used here assume that defense will grow only with the CBO’s inflation assumptions. However, in the past six years, base defense has averaged 5.2 percent annual growth. If defense were instead assumed to grow at that rate, the cuts to NDD excluding VA medical care would grow to 94 percent by 2033.
Methodology
The author calculated the figures in this report using data from the Congressional Budget Office’s (CBO) February 2023 baseline, the CBO’s original scoring of the omnibus appropriations bills for fiscal year 2022 and fiscal year 2023; the president’s fiscal year 2024 budget; the Social Security Administration’s 2023 trustees report, and the bill text of the Limit, Save, Grow Act of 2023.
To calculate the cuts under the House Republican proposal, the author constructed a current services baseline for base NDD programs, excluding VA medical care, by first taking the CBO’s original scoring of fiscal year 2023 base funding, thereby generating a 2023 starting point consistent with the figures discussed by House Republicans. The author then increased this starting point with both inflation and population each year to create a current services baseline. The inflation rate matches the inflation assumed in the CBO’s base NDD, excluding VA medical care funding, in its February 2023 baseline report. The population growth rate matches the population growth rate used by the Social Security Administration’s trustees report, adjusting the administration’s January 1 population estimates to reflect the average for each fiscal year. The author then constructed a funding stream for NDD, excluding VA medical care, under the budget caps proposed by Speaker McCarthy. This began by starting with the figures in Speaker McCarthy’s bill text, which set the total base discretionary funding for fiscal year 2024 equal to the level in fiscal year 2022 and grows from there by 1 percent each year. From there, the author subtracted base defense discretionary funding in the CBO’s February 2023 baseline, as well as the funding for the discretionary portion of VA medical care in the president’s fiscal year 2024 budget. The author compared these two funding streams to analyze the cuts.