01.05.24

CBO Report Shows Devastating Impact of Republicans Walking Away from Debt Limit Agreement

This afternoon, CBO released a letter that showed just how devastating sequestration cuts to nondefense discretionary (NDD) programs would be under the Fiscal Responsibility Act (FRA) if funding remained at the amount specified in the current continuing resolution (CR) and Republicans are allowed to walk away from the bipartisan spending deal. 

Because the analysis is based only on the statutory caps, it excludes the additional $69 billion in NDD resources (the “side deal”) that the debt limit deal also included.  If negotiators limit themselves to only the portion of the agreement that is in law, as many House Republicans are demanding, nondefense programs will be cut 9 percent from current levels and defense programs will be leaving a 3 percent increase on the table.

CBO’s report should serve as a wake-up call that Congress must reject these harmful cuts.

Walking Away from the FRA Agreement Results in Large Nondefense Cuts

CBO found that complying with the FRA’s spending caps would result in 9 percent cuts from current levels to nearly all nondefense programs—like the Social Security Administration, Customs and Border Protection, National Parks, and the TSA—and would leave defense unchanged. If Congress were to operate under a short-term CR, which uses a different set of spending caps, nondefense programs would be cut 5 percent and defense programs would be cut 1 percent.

However, CBO’s letter leaves out that the NDD cap included in Sec. 101 of the FRA—$704 billion—does not represent the full NDD level that was included in the bipartisan, bicameral FRA deal.  The House and Senate agreed to an additional $69 billion in NDD spending—emergency funding and funding offset with specific rescissions—as part of the full FRA agreement.  Because the side deal was not in the legislative text, it was necessarily excluded from CBO’s work.

To end up with a 9 percent spending cut, Congress would have to comply with only the part of the FRA agreement written in the law and not the essential side deal.  Therefore, this analysis represents a scenario in which Republicans walk away from their previous agreement.

Higher CR Spending is Not the Cause of Sequestration

CBO’s estimate of the current CR is $34 billion higher than its December 2022 estimate of FY23 enacted levels for technical reasons. This upward revision means that the NDD cut that CBO shows is deeper than if current funding had remained at 2023 levels. However, even without this upward revision, the same dynamic would exist:  a massive sequestration cut to NDD, while defense spending is spared.  

The Debt Limit Agreement Continues to Have Bipartisan Support in the Senate

The Senate Appropriations Committee has reported all 12 FY24 appropriations bills with overwhelming bipartisan support.  Those appropriations bills adhere to the FRA agreement (including both the Sec. 101 caps and the side deal resources for NDD). And, as permitted under both the FRA and the side deal, the Committee’s bills also include an additional $13.7 billion in base emergency funding ($8 billion for defense and $5.7 billion for NDD) as negotiated and agreed to on a bipartisan basis.   

The Senate passed the first three of those bills (the fall minibus), including MilCon-VA, Transportation-HUD, and Ag-FDA with a vote of 82-15.