UPDATE: The House on July 25 passed (284-149) a measure to raise tight spending caps for Fiscal Years 2020 and 2021 and raise the debt ceiling through July 31, 2021. The Senate is expected to pass the measure next week, and the President is expected to sign the bill (H.R. 3877).

House Speaker Nancy Pelosi (D-CA) and Treasury Secretary Steven Mnuchin reached the deal earlier this week, which would raise tight spending caps put in place by the 2011 Budget Control Act. The agreed-upon top-line spending levels will include about $324 billion in additional spending over the current caps over the two fiscal years, including an increase of $56.5 billion over the next two years above the 2019 level for non-defense discretionary programs (those programs subject to annual appropriations). That is a smaller increase for these appropriations than the House has proposed for FY2020, but it’s more money for these programs than had a deal not been reached. The bill also raises defense funding relative to its 2019 level, by $10 billion less than the non-defense increase. According to the Center on Budget and Policy Priorities, overall non-defense appropriations would still be near a historic low when measured as a percentage of the economy (with data back to 1976).

The deal will also include roughly $77 billion in offsets to partially pay for the additional spending; these offsets are similar to those used in the last two-year spending deal, which included extending automatic cuts to mandatory programs (those not subject to the annual appropriations process), currently set to expire in 2027. The White House originally pushed for $150 billion in offsets.

CHN sent a letter before the House vote urging representatives to support the bill, saying that while there are reservations about the deal, “it allows for important if modest progress in addressing unmet needs and makes it far less likely that the appropriations process will be stymied, leading to the destructive recurrence of a government shutdown.”

Without a deal to change current budget law, domestic programs subject to appropriations would have faced cuts of about 10 percent overall in the fiscal year that begins October 1. Because certain program areas must increase, such as the constitutionally required 2020 Census and previously enacted increases in veterans’ health services, other programs will lose even more.

Reaching a deal became more of a time-sensitive matter after the Treasury Department called on Congress last week to increase the debt limit before the August recess to ensure the government would continue to be able to borrow to pay its bills. Economists and business leaders overwhelmingly agree that failure to raise the debt ceiling would do catastrophic damage to the U.S. and to economies and markets worldwide. House Speaker Nancy Pelosi (D-CA) and other top Democrats said they would not pass a debt ceiling increase without a spending caps deal.

In June, more than 250 national organizations joined CHN in urging Congress to lift budget caps and set domestic and international spending for FY 2020 at levels no less than the House totals. The House agreed on a FY 2020 cap for appropriations of $631 billion for programs other than defense, and placed additional funds for programs including the 2020 Census outside the budget cap.

With a top-line spending limits in place, appropriators can return to the business of passing detailed spending bills for FY20. The House of Representatives has passed 10 of the 12 required FY20 spending bills, while the Senate has not yet moved any bills. For more information, see the July 1 Human Needs Report. 

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