- April 21, 2023
- Posted by: LSN Partners
- Categories: Federal, Global Projects, Government Affairs
By: LSN Partners on April 21, 2023
House Speaker Kevin McCarthy released a debt limit plan last week, which would lower federal spending to fiscal year (FY) 2022 levels, rescind unspent COVID money, and formally block President Joe Biden’s student loan forgiveness plan.
In a floor speech shortly before the bill text was released, Speaker McCarthy said his proposal would “responsibly raise the debt limit into next year and provide more than $4.5 trillion in savings to the American taxpayer.”
The bill would provide two options for lifting the debt limit: Increasing the current $31.4 trillion statutory borrowing limit by $1.5 trillion or suspending it through March 31, 2024. The measure specifies that the debt limit be reinstated at the threshold reached first. Additionally, the bill would cap topline FY2024 discretionary spending at $1.47 trillion, the FY2022 level, or a $131 billion cut below the comparable level appropriated for the current fiscal year.
Furthermore, there are no separate caps for defense and nondefense programs. Still, it’s commonly understood among Republicans that there will be cuts among domestic and foreign aid accounts, while defense and veterans programs might see increases.
The measure would also cap spending for the remainder of the decade, allowing for 1 percent annual growth. As a result, spending would not return to current levels for a decade.
After a push from conservatives, the bill would repeal IRS enforcement funding and clean energy tax credits from Democrats’ 2022 Inflation Reduction Act – which Republican leadership initially wanted to leave out.
Repealing the climate credits is estimated to save several hundred billion dollars. However, McCarthy cited an analysis from Goldman Sachs Group Inc. that said the cost of the credits could be as much as $1.2 trillion.
McCarthy said clawing back the enforcement funding would save taxpayers $70 billion. Still, the Congressional Budget Office has estimated that on the net, it would cost $114 billion over ten years because anticipated tax receipts lost would be higher than the cost of the enforcement funding.
Other spending cuts in the bill would come from rescinding roughly $70 billion in unspent pandemic aid and canceling President Joe Biden’s student loan forgiveness plan, which will likely save approximately $400 billion over ten years.
Before his speech, Speaker McCarthy told reporters that he plans to bring the bill to the floor next week and was confident it would pass. While some on the Republican side wanted a much bolder plan, others believe these cuts go too far. Senate Republicans support McCarthy’s efforts but have stopped expressing support for this initiative.
The House Republicans’ debt ceiling bill is not expected to receive any Democratic votes in the House and cannot pass the United States Senate in its current form. As a result, negotiations between House Republicans, Senate Democrats, and the White House will continue until they reach a compromise.
We expect most of Congress’ attention to be on the debt ceiling in the coming weeks, and the LSN team will keep you updated on the negotiations.