Federal Update – Speaker McCarthy Releases Debt Limit Plan
April 20, 2023
On April 19, House Speaker Kevin McCarthy (R-CA) released a legislative framework – entitled the Limit, Save, Grow Act of 2023 – to raise the nation’s debt limit for one year, while scaling back federal spending. Specifically, the proposal would suspend the nation’s borrowing limit, currently $31.4 trillion, through March 31, 2024 or until it increases by another $1.5 trillion – whichever comes first. The plan also would freeze discretionary spending at fiscal year 2022 levels (a reduction of approximately $130 billion) and limit the growth of spending over the next decade to one percent annually. In addition to these reforms, the measure would rescind unobligated COVID-19 relief funding while also rolling back programs that were approved as part of the Inflation Reduction Act, including a number of clean energy tax credits and funding for increased tax enforcement.
The Limit, Save, Grow Act would create new work requirements for certain individuals receiving Supplemental Nutrition Assistance Program (SNAP) or Medicaid benefits. For SNAP, the bill would extend work requirements for adults without children until they reach age 56, replacing the current work rules in effect through age 49. The measure would also make it more difficult for states and counties to obtain waivers of work requirements in areas of high unemployment. For Medicaid, Republicans proposed a rule requiring that certain recipients between the ages of 19 to 56 meet certain income or work thresholds. Requirements include, for example, participating 80 hours per month in employment or community service. The provision does contain some exemptions from the requirements, including those who are pregnant or caring for young children or a person with a disability, or those participating in a substance use treatment program or enrolled in an educational program.
As part of his opening bid, Speaker McCarthy is also urging his Democratic counterparts to consider including energy permitting reforms in any debt limit package. Despite bipartisan interest in reforming federal permitting rules, the two parties remain far apart in defining their priorities as part of that effort. Senators from both parties, meanwhile, have expressed skepticism towards linking permitting to the debt ceiling, not wanting to insert an unrelated policy matter into a high-stakes political battle.
As expected, the Biden administration and congressional Democrats have come out in strong opposition to the House GOP framework, referring to the proposal as a nonstarter. Instead, they are calling on Republicans to increase the debt ceiling with no strings attached, though Speaker McCarthy has made clear that Republicans would not raise the limit without meeting certain conditions.
Despite the Democratic opposition, GOP leaders could bring the package to the floor as early as next week. However, passage may prove complicated, as it’s unclear whether the measure has enough Republican support to advance. With narrow control of the lower chamber, Speaker McCarthy can only afford to lose a handful of votes in order to pass the legislation. Even if it does advance, the measure has little chance of being considered in the Democrat-controlled Senate, though it could put additional political pressure on President Biden to negotiate a compromise.
It should be noted that the U.S. nearly broached its current borrowing authority in January, but the Treasury Department has employed a series of so-called “extraordinary measures” since that time to prevent the nation from defaulting on its debt obligations. Those measures are set to run out in early summer, perhaps as early as June. With a growing urgency to make progress toward a resolution, the approaching deadline has motivated lawmakers to craft potential fallback options. While some are calling for a short-term extension that might buy Congress more time, others have offered proposals to avoid a potential default.
For one, Congressman Tom McClintock (R-CA) recently introduced legislation (H.R. 187) – the Default Prevention Act – that would allow the Treasury Department to exceed the nation’s borrowing authority in order to pay principal and interest to all U.S. debtholders, as well as foreign countries. Republican leaders have also added exceptions to the plan that would allow the federal government to borrow beyond the limit to prioritize Medicare and Social Security benefits.
Senate Poised to Approve Fire Grants and Safety Act; Chamber Rejects ARPA Amendment
At press time, the U.S. Senate was expected to approve the Fire Grants and Safety Act (S. 870), a bipartisan bill that would reauthorize through fiscal year 2030 the U.S. Fire Administration, as well as two programs that benefit local fire departments, namely the Assistance for Firefighters Grants (AFG) program and the Staffing for Adequate Fire and Emergency Response (SAFER) program. Under the legislation, the authorization level for both programs, which is currently set at $750 million apiece, would remain unchanged. However, consistent with current law, the authorization for AFG and SAFER grants would continue to be adjusted every year for inflation.
During consideration of S. 870, the Senate voted on an amendment that would require the U.S. Department of the Treasury to identify and transfer unobligated funds from the American Rescue Plan Act’s (ARPA) State and Local Fiscal Recovery Fund to the USFA. The amendment, which was sponsored by Senator Rick Scott (R-FL), was rejected on a 47-49 vote.
Looking ahead, S. 870 is expected to be considered by the full House in the coming weeks.