House Republicans want to cut federal spending — and they just passed a bill that would do that.
But they don’t want to cut defense spending.
They don’t want to cut veterans’ health care spending.
They don’t want to cut Medicare or Social Security.
Their bill, which would raise the country’s borrowing limit for a year in exchange for a decade of spending reductions, does not include many specifics. It achieves most of its savings with spending caps for discretionary spending — the part of the budget allocated annually by Congress that is not automatic like Social Security payments — but it doesn’t say what discretionary programs should be cut and which ones should be spared.
Budget Cuts in the G.O.P. Plan
The bill’s caps on discretionary spending would result in larger and larger cuts each year, beginning with a 13 percent reduction in 2024.
Projected
Discretionary spending
$2.0 trillion
Proposed cuts
$1.5
$1.0
$0.5
2015
2023
2033
Discretionary spending
Projected
$2.0 trillion
Proposed cuts
$1.5
$1.0
$0.5
2015
2023
2033
Source: Committee for a Responsible Federal Budget Note: Figure shows base discretionary budget authority, which does not include emergency spending. The New York Times
If the entire discretionary budget were subject to cuts, the reductions would be “aggressive” but “achievable,” said Marc Goldwein, a senior policy director for the Committee for a Responsible Federal Budget, which backs deficit reduction.
But if favored programs are protected, the cuts everywhere else will get much deeper and harder to implement. “It goes from being an achievable goal to one that would be very difficult to achieve,” he said.
The White House has been attacking Republicans for proposing cuts to veterans’ care. Republicans in House leadership have responded that no cuts are intended. House Speaker Kevin McCarthy has promised he will protect the military from reductions, though the bill as written does not exclude them. And Kay Granger, the chairwoman of the House Appropriations Committee, has said border security remains a top priority.
The bill is Mr. McCarthy’s first big move in negotiations over the debt ceiling, which he has argued should be tied to reductions in federal spending to lower future debt, though there is no legal reason it must be. If Congress doesn’t raise the limit on how much the country can borrow to pay its existing bills by June 1, the Treasury Department may be forced to default on its bonds, an underpinning of the global economy. President Biden wants Congress to raise the debt limit without any conditions, saying he’s willing to talk about the budget, but not under a threat of default.
Mr. McCarthy is scheduled to meet with Mr. Biden on Tuesday at the White House.
How Deep Spending Cuts Could Be
The funding caps in the House Republican bill would cut discretionary spending by an average of 18 percent over the next decade. But if three major programs are left untouched, the remaining areas would have to be cut by half.
Source: Analysis of Congressional Budget Office data by Bobby Kogan, Center for American Progress Note: Figure shows base discretionary budget authority totals for 2024-2033. The New York Times
The charts above show how exempting big categories of spending would make the budget caps more draconian. Universal discretionary caps would cut spending by an average of 18 percent over a decade, compared with what’s expected if current levels grew according to inflation. But with defense, veterans’ care and homeland security exempted, the caps would result in cutting the rest of the discretionary budget by more than half.
Defense is the largest category of discretionary spending in the budget. Veterans’ health care is the second largest.
The programs that would be subject to such deeper cuts include nutrition assistance for poor mothers and infants, air traffic control, the State Department, cancer research and Social Security Administration employees. Those are initiatives that many Republican lawmakers and voters value.
The charts spread the remaining cuts out evenly across the rest of the government, to show one simple way they could be applied. But the actual decisions about how to apply reductions would fall to lawmakers on the appropriations committees, who could parcel out the cuts in any way they can agree on.
“It’s easy to write budget caps,” said Bobby Kogan, the senior director of federal budget policy at the left-leaning Center for American Progress and a former Senate and White House budget staffer, who analyzed the bill and provided data for some of our charts. “It’s hard to actually legislate what to cut to live within those budget caps.”
Steve Womack of Arkansas, a Republican who chairs the House Appropriations Subcommittee on Financial Services, told Congressional Quarterly last month that he was worried too many exclusions would make spending bills challenging to write and pass.
When Congress faced a similar challenge a decade ago — legislative budget caps with no specific instructions — it passed annual legislation to raise the caps and spend more than was allowed.
“I think the budget caps made a real difference,” said Roy Blunt, a former Republican senator who was on the Appropriations Committee during the period. He said the caps forced legislators to identify priorities, even though they weren’t followed. “They always gave us a starting point,” he said.
The budget caps aren’t the only changes in the current House bill that would reduce federal spending. There are also policy changes to Medicaid and the nutrition program sometimes called food stamps that would require users to document their work hours every month or lose their benefits. The bill would cancel some green energy tax credits that Congress passed last year. It would block Biden administration policies to forgive student debt. It would reduce spending on tax enforcement at the I.R.S., a change that budget analysts say would actually increase the deficit by lowering tax collections.
What Else Is in the G.O.P. Plan?
The Congressional Budget office estimates the bill would save a total of $4.8 trillion over 10 years, including interest.
| Savings | |
|---|---|
| Discretionary spending Institute caps on spending appropriated by Congress | $3.2 trillion |
| Energy tax credits Repeal credits in Inflation Reduction Act | $540 billion |
| Student loans Prevent Biden administration plans to cancel debt | $460 billion |
| Medicaid, SNAP (food stamps) and TANF Expand work requirements | $120 billion |
| Covid relief funds Rescind unused money | $30 billion |
| Other Reforms to energy regulations | $3 billion |
| Costs | |
|---|---|
| I.R.S. tax enforcement Budget cuts would reduce tax collections, reducing the savings in the rest of the bill | –$120 billion |
Sources: Committee for a Responsible Federal Budget; Congressional Budget Office Note: TANF refers to the Temporary Assistance for Needy Families program. The New York Times
Nearly everything on that list is a nonstarter with Democrats in the Senate and the Biden White House. The energy policies were a cornerstone of the Inflation Reduction Act, a major and hard-won piece of legislation. The work requirement would undermine their goal of expanding health insurance coverage to include more Americans who qualify for federal programs.
Even some Republicans who voted for the bill last week expressed discomfort endorsing cuts to the energy credits, which are helping to fund projects in their congressional districts. An analysis released by the nonpartisan Tax Policy Center on Wednesday found that repealing the energy credits would result in modest tax hikes, particularly for high-income households.
The fight among Republicans about what to protect from the budget caps is a smaller version of the broader challenge that Republicans have faced in their efforts to lower the federal deficit. To earn his speakership, Mr. McCarthy promised lawmakers that he would propose a plan to balance the federal budget in 10 years, a goal that would require much bigger changes than those contained in the current bill. But that plan began to look implausible as Mr. McCarthy took many of the biggest government programs off the table.
If Congress is unwilling to touch Medicare, Social Security or military spending — and is unwilling to raise any taxes — balancing the budget requires enormous cuts to the rest of the government.
This package, with its more modest budgetary ambitions, appears to be a recognition of that difficult math. But with all the promised exclusions, it still would seem to require hefty cuts from popular government functions. In letters to Rosa DeLauro, the leading Democrat on the House Appropriations Committee, agency heads described the changes they would need to make in 2024 to absorb a 22 percent cut, one that assumes Republicans would protect military spending but apply the budget caps to veterans.
• The Federal Aviation Administration would need to close 125 air traffic control towers.
• Cuts to the Women, Infants and Children nutrition program would eliminate food assistance for 1.2 million poor Americans with young children.
• Pell grants would fall by $1,000, and be eliminated altogether for 80,000 students.
• Two million families would lose access to medical care at community health centers.
• The F.B.I. would need to reduce its staff by 11,000 employees.
• Claims processing at the Social Security Administration would slow by months.
• Reductions to the Head Start program would mean slots for 200,000 fewer children.
• NASA would need to halt the Artemis program sending more astronauts to the moon.
If veterans’ care and homeland security are also insulated from cuts, those programs would need to be reduced by far more than 22 percent.
How the Plan Would Affect the Debt
The bill would slow the growth of the federal debt as a share of the economy over the next 10 years.
120%
of G.D.P.
Current trajectory
100%
House Republican plan
80%
60%
2015
2023
2033
120%
of G.D.P.
Current
trajectory
100%
House
Republican
plan
80%
60%
2015
2023
2033
Sources: Committee for a Responsible Federal Budget; Congressional Budget Office The New York Times
Taken together, the package would reduce federal deficits over the decade, coming close to stabilizing the ratio between overall federal debt and the size of the economy, a long-term goal embraced by many economists.
But most of the bill’s savings come from the caps, and that means that Congress would need to actually carry them out to achieve that outcome. Given Mr. McCarthy’s many promises to his colleagues, that seems hard to imagine, even if he could somehow persuade the Democratic Senate and White House to adopt the bill.
FAQs
What Would the G.O.P. Plan Actually Do to the Budget? ›
The bill would cancel some green energy tax credits that Congress passed last year. It would block Biden administration policies to forgive student debt. It would reduce spending on tax enforcement at the I.R.S., a change that budget analysts say would actually increase the deficit by lowering tax collections.
What happens if Congress doesn't pass a budget? ›If Congress does not pass all appropriations measures by the start of the fiscal year (October 1), it has to enact a continuing resolution to keep the government running. The Senate Committee on the Budget was established in 1974 by the Congressional Budget Act (Congress.gov).
What is the GOP deficit plan? ›On Wednesday the speaker unveiled a plan that he said would trim more than $4 trillion from deficits over the next decade, largely by freezing discretionary spending at 2022 levels and increasing them by just 1% a year thereafter.
What does the US government spend the most money on? ›More than half of FY 2019 discretionary spending went for national defense, and most of the rest went for domestic programs, including transportation, education and training, veterans' benefits, income security, and health care (figure 4).
What role does the president play in developing the federal budget? ›The president submits the budget proposal to Congress early the next year. Proposed funding is divided among 12 subcommittees, which hold hearings. Each is responsible for funding for different government functions such as defense spending or energy and water.
What happens if the US defaults on its debt? ›U.S. debt, long viewed as ultra-safe
A default could shatter the $24 trillion market for Treasury debt, cause financial markets to freeze up and ignite an international crisis.
Between 1975, when the current budget process took effect, and 1998 Congress never failed to pass a budget. Since then, Congress has failed to pass a budget in 7 of the last 15 fiscal years.
What is the GOP goal? ›Republicans believe in liberty, economic prosperity, preserving American values and traditions, and restoring the American dream for every citizen of this great nation. As a party, we support policies that seek to achieve those goals.
Who pays for the government budget deficit? ›To pay for a deficit, the federal government borrows money by selling Treasury bonds, bills, and other securities. The national debt is the accumulation of this borrowing along with associated interest owed to the investors who purchased these securities.
Who pays for the national deficit? ›To finance federal budget deficits, the U.S. government issues government bonds, known as Treasuries.
When was the last time the United States was debt free? ›
However, President Andrew Jackson shrank that debt to zero in 1835. It was the only time in U.S. history when the country was free of debt.
How much of my taxes go to welfare? ›Roughly 14 percent of the budget provides assistance to families and individuals in need.
How much money has the US government borrowed from Social Security? ›The Government Has Borrowed $1.7 Trillion From The Social Security Trust Fund. The government has borrowed the total value of the Trust Fund to pay for other government spending.
What is the budget for Social Security in 2023? ›Each year federal agencies receive funding from Congress, known as budgetary resources . In FY 2023, the Social Security Administration (SSA) had $795.28 Billion distributed among its 1 sub-components. Agencies spend available budgetary resources by making financial promises called obligations .
Is Social Security considered mandatory spending? ›Entitlement programs such as Social Security and Medicare make up the bulk of mandatory spending.
What is the largest source of federal revenue? ›Individual income taxes are the largest single source of federal revenues, constituting over one-half of all receipts. As a percentage of GDP, individual income taxes have ranged from 6 to 10 percent over the past 50 years, averaging 8 percent of GDP. Total tax liabilities among individuals vary considerably by income.
Does the US owe most of its debt to itself? ›Many people believe that much of the U.S. national debt is owed to foreign countries like China and Japan, but the truth is that most of it is owed to Social Security and pension funds right here in the U.S.
Does the US ever pay back debt? ›Payment of US national debt
On January 8, 1835, president Andrew Jackson paid off the entire national debt, the only time in U.S. history that has been accomplished.
Potential repercussions of reaching the ceiling include a downgrade by credit rating agencies, increased borrowing costs for businesses and homeowners alike, and a dropoff in consumer confidence that could shock the United States' financial market and tip its economy—and the world's—into immediate recession.
How many times has the government shut down due to budget? ›Since the enactment of the US government's current budget and appropriations process in 1976, there have been a total of 22 funding gaps in the federal budget, ten of which have led to federal employees being furloughed.
Can Congress pass a budget without the president? ›
A budget resolution is a kind of concurrent resolution; it is not a law, and therefore does not require the President's signature. There is no obligation for either or both houses of Congress to pass a budget resolution.
What is the fate of most bills in Congress? ›Most bills are never passed out of their committees and must be re-introduced in the next Congress for consideration. For instance, in the 112th Congress, Second Session, 5,395 measures were introduced, and 148 public bills were enacted into law. Bills “die” in committee for various reasons.
What are the three goals for Democrats? ›fairness, justice, and equality for all by standing up for all middle-class Americans and those struggling to get there. Senate Democrats are working every day to enact policies to level the playing field, fight back against the special interests, and unrig the system holding too many Americans back.
What do liberals believe in? ›believing in equality and individual liberty. supporting private property and individual rights. supporting the idea of limited constitutional government. recognising the importance of related values such as pluralism, toleration, autonomy, bodily integrity, and consent.
What is the difference between a liberal and a conservative? ›Conservatives believe in the importance of stability, and promote law and order to protect private property. Liberals believe in universal access to health care; they believe personal health should be in no way dependent upon one's financial resources, and support government intervention to sever that link.
Who does the US owe the most money to? ›Which countries hold the most US debt? Over the past 20 years, Japan and China have owned more US Treasuries than any other foreign nation. Between 2000 and 2022, Japan grew from owning $534 billion to just over $1 trillion, while China's ownership grew from $101 billion to $855 billion.
When was the last time the US had a budget surplus? ›In 2022, the U.S. government had a budget deficit of 1.36 trillion U.S. dollars. This is compared to 2000, when the government had a budget surplus of 0.24 trillion U.S. dollars.
Is any country not in debt? ›The best example can be taken from Hong Kong (it is a one of the debt free countries), whose economy has the least debt to GDP ratio. It is an almost debt free country. It has a well-regulated financial system and large foreign reserves.
Why is US national debt so high? ›Nearly every year, the government spends more than it collects in taxes and other revenue, resulting in a deficit. (The debt ceiling, set by Congress, caps how much the U.S. can borrow to pay for its remaining bills.) The national debt, now at a historic high, is the buildup of its deficits over time.
Where does the US debt come from? ›The national debt is the sum of a nation's annual budget deficits, offset by any surpluses. A deficit occurs when the government spends more than it raises in revenue. To finance its budget deficit, the government borrows money by selling debt obligations to investors.
How much money does France owe the United States? ›
| French obligations received by U. S. treasury under Liberty Loan acts | $2,997,477,800.00 |
|---|---|
| Bonds received by Secretary of War in payment for surplus war supplies | 407,341,145.01 |
| (interest on war-surplus bonds has been regularly paid) | |
| TOTAL DEBT | $4,137,224,354.57 |
Fewer than one quarter of American households live debt-free. Learning ways to tackle debt can help you get a handle on your finances.
How long will it take to pay off the US national debt? ›To pay back one million dollars, at a rate of one dollar per second, would take you 11.5 days. To pay back one billion dollars, at a rate of one dollar per second, would take you 32 years. To pay back one trillion dollars, at a rate of one dollar per second, would take you 31,688 years.
What is the most the US has been in debt? ›Total US federal government debt breached $30 trillion mark for the first time in history in February 2022. As of February 2023, total federal debt was $31.5 trillion; $24.6 trillion held by the public and $6.9 trillion in intragovernmental debt.
What states receive the most federal aid vs taxes paid? ›- California ($43.61 billion)
- Texas ($26.90 billion)
- Florida ($23.77 billion)
- New York ($22.06 billion)
- Virginia ($17.68 billion)
- Pennsylvania ($15.58 billion)
- Illinois ($13.18 billion)
- Ohio ($12.57 billion)
SSI is a program that helps American adults cover basic expenses such as food and shelter. Unlike Social Security SSI is a need-based federal aid program, which does not require a worker to pay into it. The average monthly SSI payment stood at 617 dollars in 2021.
Where do most of our taxes go? ›The three biggest categories of expenditures are: Major health programs, such as Medicare and Medicaid. Social security. Defense and security.
Has Congress stolen from Social Security? ›Every single dollar in excess revenue collected by Social Security is accounted for by these bonds and certificates of indebtedness. Nothing has been stolen, and not a cent is missing. What's more, Social Security's investment holdings (link opens new window) update each month.
What did Ronald Reagan do to Social Security? ›In 1981, Reagan ordered the Social Security Administration (SSA) to tighten up enforcement of the Disability Amendments Act of 1980 created by then President Jimmy Carter https://www.ssa.gov/policy/docs/ssb/v44n4/v44n4p14.pdf , which resulted in more than a million disability beneficiaries having their benefits stopped ...
Which president started Social Security? ›After a Conference which lasted throughout July, the bill was finally passed and sent to President Roosevelt for his signature. The Social Security Act was signed into law by President Roosevelt on August 14, 1935.
What happens if there is no budget? ›
Without a budget, all of your financial goals are purely theoretical. A budget is the first step to putting aside money toward the important things you need to save for. Without those guidelines, you might not discover where you're spending money and may even be saving it in ways that aren't optimal.
What happens when a budget is not followed? ›So, what are the consequences of not budgeting? In short, the most common consequences of not budgeting include a lack of savings, less financial security, out of control spending, a higher likelihood of going into debt, and more financial stress.
What does Congress do when they fail to pass a budget on time quizlet? ›When Congress fails to pass a budget on time, it will usually issue a continuing resolution to fund affected departments and programs. vice president of the United States.
What happens if Congress fails to pass a budget before the fiscal year starts quizlet? ›If the fiscal year begins without a budget and Congress fails to pass continuing resolution, then: the federal government shuts down. The sum of past federal budget deficits increases the: national debt.
What are 5 consequences of not having a budget? ›A person may face bankruptcy. A person may have what they own, house, car, furniture, repossessed. A person may experience mental health issues, worrying about not having enough money or not being able to afford basic needs. A person may experience relationship issues as they struggle with their finances.
Can an organization survive without a budget? ›A budget allows a business to plan out expenses, reach business goals and anticipate operational changes. Without a budget, a business may experience overspending and underperformance, which could ultimately lead to the company's closure.
Do you really need a budget? ›A budget is a plan that shows you how you can spend your money every month. Making a budget can help you make sure you do not run out of money each month. A budget also will help you save money for your goals or for emergencies.
What percent of Americans don't have a budget? ›Almost 30% of Americans don't budget because they simply don't think they need this tool.
What are the three 3 common budgeting mistakes to avoid? ›- Not writing your budget down. ...
- Not tracking your spending. ...
- Setting unrealistic budgeting goals. ...
- Forgetting to track one-time expenses. ...
- Not planning for emergency expenses. ...
- Forgetting to plan for fun expenses.
Keep Track, Save Money
Only 32% of U.S. households prepare a monthly budget.
What keeps most bills from becoming laws? ›
The bill is sent to the President for review. A bill becomes law if signed by the President or if not signed within 10 days and Congress is in session. If Congress adjourns before the 10 days and the President has not signed the bill then it does not become law ("Pocket Veto.")
What happens to most bills that go through Congress? ›If released by the committee, the bill is put on a calendar to be voted on, debated or amended. If the bill passes by simple majority (218 of 435), the bill moves to the Senate. In the Senate, the bill is assigned to another committee and, if released, debated and voted on.
What is the process for Congress passing a budget? ›- Adoption of the Budget Resolution. ...
- Passage of Appropriation Bills. ...
- Consideration of Reconciliation Legislation. ...
- Consideration of Authorization Legislation.
A government budget surplus is the opposite of a deficit. If the government brings in more revenue through taxes than they spend in their budget, then there is a budget surplus. Surpluses often result in additional spending or lower tax rates.
Why do politicians have a difficult time balancing the budget? ›Why do politicians have a difficult time balancing the budget? It is difficult to pay for everything. Not taking away from popular programs such as Social Security while funding the necessary ones that might not be popular such as Defense. What is the difference between income taxes and social insurance taxes?