Approving Spending Levels, Dealing with the Debt Limit Prove To Be Complicated
It’s pesky budget time again after lawmakers punted the job before Christmas to March. Republicans now control the House and the Senate but that doesn’t mean passing a budget bill with only Republican votes will be any easier than before under divided control.
To avoid a holiday government shutdown, lawmakers turned a budget bill into a Christmas tree that continued spending levels, provided $100 billion for disaster relief, renewed expiring health care programs, restricted U.S. investments in China and extended the farm bill setting agriculture and food policy for a year.
They gave themselves until March to approve the budget. Now there are new complications. President Trump wants spending cuts and an extension of his 2017 tax cuts. Newly in control Senate Republicans want spending cuts now and tax cuts later. House Republicans, still in control but with a fragile majority, favor “one big, beautiful bill” with spending and tax cuts.
What Republicans do agree on is using budget reconciliation as the legislative vehicle because it’s not subject to filibusters in the Senate. Extending tax cuts may not be germane to budget reconciliation legislation.
House Speaker Mike Johnson wanted to move first but has been thwarted by continuing disagreements in his Republican caucus where conservative members want deeper spending cuts than moderate members will support.
In the lurch, Senate Budget Committee Chair Lindsey Graham, R-South Carolina, has moved ahead with a budget reconciliation approach that includes $300 billion in new spending, half for border security and half for defense. To offset the increase, Graham proposes that Senate committees be tasked with identifying $300 billion in spending reductions or new revenue.
Candidates for spending cuts include rolling back Biden regulations and student loan forgiveness. Onshore and offshore energy leases could be included that generate revenue and reflect President Trump’s domestic agenda.
The bill, which Graham wants his committee to mark up this week, would instruct committees to find savings that match increased spending, “then we’ll take it to the floor,” possibly as early as two weeks later, when the House is scheduled to be in recess.
The chaos caused by Trump’s executive orders and Elon Musk’s hacksaw on certain federal agencies and federal employees hasn’t made the budget easier to pass, but have provided little incentive for congressional Democrats to bail out their Republican colleagues and Trump.
Then There Is the Debt Limit
As she departed office, Treasury Secretary Janet Yellen sent Johnson a letter about the debt limit that opened with:
“I write to keep you apprised of actions the Treasury Department is taking in regard to the debt limit. In my letter of December 27, 2024, I noted the Fiscal Responsibility Act of 2023 suspended the statutory debt limit through January 1, 2025 and established a new limit effective January 2, and I informed you that Treasury expected to reach the new limit between January 14 and January 23. This letter serves to notify you, pursuant to 5 U.S.C. § 8348(l)(2), of the extraordinary measures that Treasury will begin using on January 21.”
Yellen closed with: “The debt limit does not authorize new spending, but it creates a risk that the federal government might not be able to finance its existing legal obligations that Congresses and Presidents of both parties have made in the past.”
Republicans appear divided on the debt limit, too. Trump wants to eliminate it altogether or at least pushed beyond the 2026 election. Conservative Republicans want to use the debt limit as a hammer to bring down federal spending, some arguing by as much as $2 trillion.
Trump has fumed on social media about the GOP political mistake of not dealing with the debt limit under “Biden’s watch”. Now Republicans may be forced to negotiate a deal with Democrats to secure the necessary votes to raise or modify the debt limit.
As reset by last year’s legislation, the debt limit is now $36.1 trillion. The last time the United States achieved a budget surplus was Fiscal Year 2001 when the national debt stood at $5.8 trillion.
The Congressional Research Service predicts federal health and retirement benefits pose long-term budgetary challenges that will expand the gap between federal outlays and revenues. Higher interest rates also are raising the cost of national debt. The U.S. government is expected to pay an additional $1.1 trillion in interest over the coming decade, according to the Congressional Budget Office.
Defaulting on national debt payments has been viewed as disastrous for the nation’s credit rating. Raising the debt ceiling enables the Treasury Department to fund commitments the government has already incurred through laws and budgets approved by Congress and the President.
“Between 1992 and 2012, the debt ceiling was raised 15 times. Beginning in 2013, policymakers began suspending the ceiling (with a reset at the end of the period) rather than raising it directly. Since 2013, policymakers have suspended and reinstated the debt ceiling seven additional times, allowing the debt ceiling to rise from $16.7 trillion in 2013 to $31.4 trillion in 2023, according to the Peterson Foundation, which advises on fiscal issues.
