On Thursday, January 19th, 2023, Secretary of the Treasury Janet Yellen announced that the United States had officially reached its debt limit and that the Treasury Department is deploying “extraordinary measures” — in this case, suspending investments in government retirement funds — to avoid defaulting.
In a letter to Congressional leaders, Secretary Yellen urged Congress to raise the debt limit, noting that the measures being taken are estimated to last until June 5th of this year, though the exact timing is difficult to predict. Without lifting the ceiling the government would default on paying its bills including various checks to individuals and payments to states. In 2011 the government was so close to the deadline the government’s bond rating was lowered.
Speaker of the House Kevin McCarthy has indicated that he will negotiate raising the debt ceiling only if there are significant reforms to federal spending, though he has backed away from plans to make cuts to Medicaid and Social Security. The Washington Post has reported that there is a “debt prioritization” plan under consideration by House Republicans, which would instruct the Treasury Department to prioritize 1) debt service payments, 2) Social Security, Medicare and veterans benefits and 3) military funding absent a bipartisan agreement to raise the borrowing cap. Democrats and economists, even conservative ones, have already raised opposition to this plan.
This showdown over the debt ceiling is likely to drag on throughout the winter and into the spring, as there is currently no agreement among leadership on how to proceed in addressing the problem.
The outlook on Appropriations is not much cheerier. For the first time, the Appropriations Four Corners, leaders of the House and Senate Committees, are all women: Senators Patty Murray (D-WA) and Susan Collins (R-ME) in the Senate, and Representatives Kay Granger (R-TX) and Rosa DeLauro (D-CT) in the House. This historic moment is dampened somewhat by the difficult task ahead of these leaders: Speaker of the House Kevin McCarthy (R-CA) has announced that House Republicans will slash federal spending by at least $130 billion without cutting defense, bringing FY2024 spending back down to the FY2022 level. This proposal is a nonstarter for Senate Democrats and the White House. Some House Republicans have also noted that cuts this drastic are not feasible.
House Appropriations Committee Ranking Member DeLauro has sent letters to all cabinet secretaries seeking information about the impact on their programs if appropriations levels were cut back to FY22 funding. She has asked for responses by February 3rd.
In addition to steep cuts in nondefense spending, the new House Rules package states the intention to pass all twelve spending bills individually, rather than as a big omnibus, and allows an amendment free-for-all on each bill, two procedural changes that will certainly slow down the process of passing a comprehensive spending plan this year.