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Backgrounder: Here Are The Social Programs At Risk In The Debt Ceiling Negotiations

Summary

House Republicans have lured President Biden into negotiating over the debt ceiling. Here are the devastating spending cuts they want in exchange for not destroying the economy.

House Republicans recently passed a sweeping slate of massive cuts to many of the most effective public benefits and social safety net programs, including critical programs to prevent homelessness and hunger.

President Biden will never sign this bill. But he may be forced to enact some components of it now that he has been drawn into negotiations over the nation’s debt limit – and its full faith and credit. The bill’s wishlist for spending cuts provides economic justice organizations a clear and specific sense of which vital social programs are now in danger.

In April, H.R. 2811, the Limit, Save, Grow Act of 2023, was introduced by House Committee on the Budget Chair Jodey Arrington (R-TX) and later presented on the House floor by Speaker of the House Kevin McCarthy (R-CA). This bill proposes to increase the federal debt limit while decreasing federal spending. Additionally, it takes aim at many progressive priorities by repealing energy tax credits, lessening energy project requirements, expanding work requirements for various programs and repealing the Department of Education’s regulations related to the cancellation of federal student loan debt.

This legislation proposes to make substantial cuts to non-military discretionary domestic spending. It would cut federal domestic spending for fiscal year (FY) 2024 to FY2022 levels, weakening federal investments in programs vital to our capacity to produce affordable housing. The proposal limits future spending increases to just 1% annually for ten years and rescinds unspent COVID-19 relief funds. The bill proposes to suspend the debt limit until March 31, 2024, or until the debt increases by $1.5 trillion, whichever occurs first. Overall, H.R. 2811 proposes to cut discretionary programs by $3.2 trillion over the next decade, well below the Congressional Budget Office’s (CBO) recent baseline projection. 

The budget shortfalls this proposal would trigger if enacted would impact critical programs which provide support for housing, college aid, transit and other significant programs where progressives are actively advocating for funding increases. The scale of the cuts is eye-popping: Even if spread evenly across all discretionary programs – including Pentagon programs – the cuts proposed in H.R. 2811 would begin at 13% in 2024, and gradually rise to 24% by 2033.

Even these alarming figures actually understate the slash-and-burn ethos of the bill. H.R. 2811 specifically shelters a select list of programs from deeper cuts, including all defense spending and all benefits programs for military veterans. Holding those noble categories harmless would more than double the cuts required across every other public service: Appropriations would be cut by 33% in 2024, rising gradually to 59% by 2033, per a recent report by CBPP

Such cuts would not only delete more than half of the government’s spending to help people live more secure lives – they would also have a disproportionate impact on both people of color and low- and moderate-income communities. House Appropriations Ranking Member Rosa DeLauro’s (D-CT-03) recent analysis of H.R. 2811 found protecting defense while cutting other programs by the same percentage would cut families off from their housing vouchers, make living conditions in public housing less safe, drive an unprecedented loss of affordable housing capacity, increase homelessness, exacerbate housing conditions in Indian Country and severely impede efforts to combat housing discrimination – outcomes NCRC opposes and has actively advocated against. 

The harm doesn’t stop at a proposed 59% across-the-board cut to programs. The bill also contains provisions to reverse executive actions and Department of Education regulations which the administration has cited to cancel federal student loan debt. Specifically, it repeals Sec. 3513 of the Coronavirus Aid, Relief, and Economic Security (CARES) Act, which provided temporary relief for federal student loan borrowers. This section offered several benefits to borrowers, including suspending all loan payments held by the Department of Education until September 30, 2020, without accruing interest. Additionally, any payment suspension was to be reported to consumer reporting agencies as a regular payment made by the borrower. All involuntary collections associated with the loan were to be put on hold. Repealing this section will simply add to the burden on working families that are already struggling with rising costs of living and stagnant wages.

Still other components of the House majority’s wishlist bill would have substantial implications for climate and environmental funding. Many of the Inflation Reduction Act’s (IRA) climate, environmental and energy funding provisions would be rescinded by H.R. 2811, including sections which control pollutants that harm our environment, sicken our neighborhoods and shorten our lifespans. Additionally, the bill rescinds funding for the Neighborhood Access and Equity Grant Program, a $3 billion program that provides grants to help reconnect neighborhoods divided by infrastructure. The grant program would support equitable transportation planning and mitigate the negative impacts of transportation facilities or construction projects on disadvantaged or underserved communities.

In addition, H.R. 2811 makes modifications or repeals tax credits for renewable and clean energy, alternative fuels and electric vehicles. Congress introduced these tax credits to address climate change, prioritizing climate risk management for low-income communities and individuals of color, as they bear the disproportionate burden of the impacts of climate change. Failing to protect these vulnerable communities would only worsen inequality and further widen the racial wealth gap.

H.R. 2811 would also impose work requirements for Medicaid and intensify the already-demanding work requirements for Supplemental Nutrition Assistance Program (SNAP) and Temporary Assistance to Needy Families (TANF). The CBO has estimated these changes would cut Medicaid, SNAP and TANF benefits by $120 billion over the next decade, which means that $12 billion per year will not find its way into the hands of those who need it. According to the CBO, this proposal would result in reductions for Medicaid by $109 billion, $11 billion for SNAP and $6 million for TANF. Research has regularly shown that work requirements fail to achieve their intended objectives. For example, according to a report from the Urban Institute, implementing work requirements and work-related time limits for specific SNAP participants do not result in significant improvements in earnings or employment. Instead, they primarily generate administrative challenges for state program administrators and bureaucratic headaches for people struggling to make ends meet. 

Compared to President Biden’s FY24 Budget Proposal, the Republican proposal results in massive cuts to housing programs utilized by low- and moderate-income Americans and in particular racial and ethnic minorities. The proposed Biden-Harris budget, while not perfect, is broadly in line with NCRC’s policy proposals. By increasing funding for vital housing programs, investing in climate and environmental infrastructure and easing both financial and logistical burdens on working-class people, the White House budget recognizes the need NCRC has highlighted for these critical investments in our most vulnerable populations.

The Limit, Save, Grow Act of 2023 faces unanimous opposition from Democrats and lukewarm interest from some Republicans in the Senate as well as a veto threat from President Biden and so its chances of becoming law are unlikely. Democrats have emphasized that Congress should raise the debt ceiling with no conditions attached in order to honor the decisions of past Congresses. 

Decades of successive Congresses understood that the artificial legislative cap on national debt was a useful political football, but not something to actually trifle with. Members understood that the nation’s full faith and credit – and the global use of the US Dollar as the world’s reserve currency – could not be jeopardized without creating huge and long-lasting economic pain for hundreds of millions of people. And so the majority would pass a debt ceiling hike, the minority would run attack ads about it, and a few elections later those roles would be reversed. 

What never used to happen was for the clock to run down to within weeks or days of a catastrophic default on US national debt payments – which is exactly what the Treasury Department warns will happen on or about June 1 if no resolution has been found by that time.

H.R. 2811 passed in the House on a narrow 217-215 vote just two months before that deadline for avoiding a catastrophic default on the nation’s debt. They succeeded in pressuring President Biden into opening negotiations over the previously unthinkable prospect of a superpower stiffing its creditors. It now remains to be seen which of the devastating and retrograde policy provisions from H.R. 2811 the president may end up agreeing to in order to cut a deal that avoids the economic catastrophe a default would unleash.

Joseph Reed is NCRC’s Senior Policy Advocate.

Photo by Steve Knutson on Unsplash

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