With little time to spare to avert an economic crisis, Congress passed and President Biden signed into law a bill to suspend the nation’s debt ceiling, enabling continued borrowing so the federal government can continue to meet all its obligations. The Fiscal Responsibility Act (H.R. 3746) passed the House (314-117) on May 31 and the Senate (63-36) on June 1. President Biden signed it into law on June 3. While Democrats wanted to pass a bill that just raised the debt ceiling, Republicans insisted that the bill also set caps on discretionary (annually appropriated) spending for Fiscal Years 2024 and 2025.  

The debt ceiling and budget agreement included the Fiscal Responsibility Act and additional “side deals” that were not in the bill but were negotiated by the White House and House Republicans led by Speaker Kevin McCarthy (R-CA). These side deals allow for more spending than is shown in the legislative text. The legislation suspends the debt limit until January 1, 2025, allowing the Treasury Department to continue borrowing money until then. It also sets statutory caps on defense and nondefense appropriations for Fiscal Years 2024 and 2025. 

According to the Center on Budget and Policy Priorities, the debt ceiling deal – including the additional side agreements – provides the following totals for discretionary funding in Fiscal Year 2024:  

• $886.3 billion for defense programs, which is $28 billion or 3.3 percent above the 2023 level and equal to the President’s request; 
• $121 billion for veterans’ medical care, $2.3 billion or 1.9 percent above the 2023 level and equal to the President’s request; and
• $651.6 billion for nondefense programs other than veterans’ medical care, $1 billion below the 2023 level and $67 billion or 9.3 percent below the President’s request.
• Together, the agreed-upon 2024 levels for all nondefense programs — including veterans’ medical care — total $772.7 billion, or $1.3 billion below FY23 levels (the cap amount for all nondefense discretionary programs reported in the legislation – not including emergency spending and other spending in the “side deals” outside the caps – is $703.7 billion for FY24). 

The caps included in the legislation would technically cut overall base discretionary spending to $1.59 trillion in FY24, from $1.602 trillion in FY23, not including the additional agreements. The deal limits all discretionary spending to 1 percent growth in 2025, which is effectively a budget cut, because that is projected to be less than the anticipated 3-4 percent rate of inflation. Because inflation and other factors increase the cost of public services, even flat funding results in a cut in the services government can provide. The bill would also automatically cut discretionary spending by 1 percent if Congress does not pass all 12 required appropriations bills for FY 2024 by Jan. 1, 2024, although implementing those cuts would be delayed until April 2024.

While advocates believe the agreement was an improvement over the debt limit bill the House passed earlier this spring, many provisions remained that will harm human needs programs and people with low incomes. Specifically, the debt limit deal: 

• Raises the age from 49 to 54 for time limits linked to so-called work requirements in the Supplemental Nutrition Assistance Program (SNAP) among adults not raising children who need help putting food on the table. Almost 750,000 older adults will be at risk of losing SNAP benefits due to this expansion. The bill also includes language that would modify the purpose of SNAP to include a provision that the program “assist low-income adults in obtaining employment and increasing their earnings.” On the positive side, the bill creates exemptions from the time limit for veterans, the unhoused, and young people aging out of foster care. For more information, see this analysis from Feeding America.
• Claws back $21.4 billion in funding over two years for IRS enforcement and operations support allocated through the Inflation Reduction Act, undermining the IRS’ capacity to collect taxes already owed from those with high incomes. For more information, see this piece from the Institute on Taxation and Economic Policy.
• Worsens burdensome requirements in the Temporary Assistance for Needy Families (TANF) program by increasing the effective work rates some states must meet. On the positive side, it adds a pilot program for five states to test new outcome-based performance metrics. For more information on TANF provisions, see this piece from the Center on Budget and Policy Priorities.
• Ends the suspension of student loan repayments.
• Rescinds nearly $28 billion in unspent money allocated to pandemic relief programs.
• Does not add new work requirements for Medicaid. (These were initially proposed by House Republicans and were strongly opposed by advocates, congressional Democrats, and the Biden Administration.)  

By limiting spending in FY24 and FY25, the deal could result in cuts to other critical human needs programs such as affordable housing, child care, mental health services, education aid, and others. And, House Republicans have indicated they are treating the caps included in the deal as a “ceiling” and not a floor, restricting spending for human needs even further (more below). This will only exacerbate shortages caused by more than a decade of reduced funding for human needs programs, and lower spending levels proposed by some House appropriations bills will cut critical programs even further (see related article in this Human Needs Report for more information). Read more statements and analyses of the debt ceiling agreement from CHN along with our members and allies in CHN’s FY24 Budget Resource Library. 

Subscribe: