Until voters demand better, expect politicians to continue to throw together spending deals that don’t do much to begin with and then ignore those deals when convenient. The political penalty for cutting a popular program — and just about every program is popular to someone — is still far greater than the political benefit from being responsible.
Last summer, Joe Biden and Kevin McCarthy made a deal to suspend the debt limit and impose controls on future spending. As we said at the time, the deal was modest. The best that could be said for it was that it prevented a default. The discretionary-spending controls were so slight that they wouldn’t have any major impact on the long-term trajectory of the national debt.
Speaker Mike Johnson worked with Democrats to pass a “laddered” continuing resolution at the end of the year. Four of the twelve appropriations bills expire on January 19; the remainder expire on February 2. The CR was a tiny victory for fiscal conservatives in that it at least avoided the Christmastime rush to spend while few are paying close attention, but overall did not include any major spending cuts or signal any effort toward serious fiscal responsibility.
With the first expiration date from the laddered CR approaching, Congress and the White House have made a deal — to ignore the spending caps from the debt-ceiling deal.
Biden and McCarthy’s deal was called the “Fiscal Responsibility Act.” It was fiscally responsible in the first place only in the sense that other alternatives were less responsible. If Congress followed it, it was projected to save a total of $1 trillion over the next ten years, which sounds like a lot until you consider that the national debt grew by $2 trillion last year alone.
But Congress isn’t even going to follow it. The cap for nondefense discretionary spending was supposed to be $704 billion this year. There’s a side deal that will take nondefense discretionary spending to $773 billion, which is the number Democrats are claiming.
Making matters worse, this deal doesn’t include the two spending items that have been the focus of Congress’s attention the past few months: border security and aid for Ukraine and Israel. Bills on those subjects could pass at a later date, potentially adding over $100 billion more in spending this year.
And of course this deal is only for discretionary spending, which is projected to be roughly balanced anyway in the long run. The driver of the national debt is mandatory spending: Social Security, health-care programs, and interest payments. Mandatory spending remains on autopilot as the national debt steams past $34 trillion, and both parties promise not to touch it.
Republicans are celebrating clawing back $20 billion in IRS funding and $6.1 billion in unspent Covid-relief funds. We celebrate with them for what it’s worth, though we wish each of those numbers were higher. It’s just hard to get too excited about such small dollar amounts relative to the size of the budget.
Keeping discretionary spending roughly equal to last year’s is a perfect demonstration of Washington’s unseriousness on fiscal policy. Last year, the deficit was $2 trillion. It was a year of low unemployment, no major new domestic programs, no U.S. forces involved in major wars, and tax revenue comfortably above the historical average as a share of the economy.
Coming up $2 trillion short in those conditions is an embarrassing failure of leadership, starting with the president and his administration and running all the way through both chambers of Congress. It’s part of the reason why the bond market is sounding the alarm about deficits. There does not seem to be much potential for anything close to a balanced budget for the foreseeable future.