The U.S. debt limit looms in early summer, with current estimates suggesting that Treasury may run out of borrowing authority under the $31.4 trillion debt limit sometime in June or July. Earlier this year, House Republicans committed to pairing any increase in the debt limit with spending reforms—a key demand before electing a new House Speaker. By targeting discretionary spending, members expect to make an immediate down payment toward more responsible fiscal policy and assert their policy priorities.
The agreement House Republicans struck with Speaker Kevin McCarthy (R‑CA) highlights a likely direction for debt limit negotiations this summer. The following priorities are especially relevant to understanding GOP strategy:
- Cap fiscal 2024 discretionary spending at enacted fiscal 2022 levels or lower.
- Reject any negotiations with the Senate unless that chamber’s 12 spending bills are passed, the bills comply with the House budget resolution, and they reduce non‐defense discretionary spending.
- Not agree to a debt limit increase without a budget agreement or “commensurate fiscal reforms.”
There are several methods by which House Republicans could return discretionary spending for fiscal year (FY) FY2024 to FY 2022 levels. Reaching this goal requires $131 billion in base spending reductions. If factoring in additional spending for federal disaster accounts, or so‐called adjustments, Congress would need to reduce overall spending by $133 billion. The below table lists base discretionary spending levels for FY23 and FY22, compared to pre‐pandemic levels in FY19.
Following is a series of tables that show outcomes of some different possible scenarios for discretionary spending levels if the GOP plans are adopted and enforced.
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