This article is published in the June 2023 issue.

The Debt Limit Deal and How it Could Impact Research Funding

By Brian Mosley, Senior Policy Analyst

Over the Memorial Day Weekend, President Biden and House Speaker McCarthy (R-CA) agreed to a deal to suspend the nation’s debt limit and make changes to control federal spending. Congress worked quickly over the following week and, through much partisan grumbling and political showmanship, passed the legislation into law.

The deal that was struck has impacts on the Federal budget. Both the White House and House Republicans released breakdowns of what was agreed to. As with past budget deals, it keeps the defense vs nondefense pots of federal spending. Non-defense spending will be kept “roughly flat” for Fiscal Year 2024 (ie: the year that starts on Oct 1 and is currently being worked on by Congress) and will increase by 1 percent for FY2025. Defense spending will increase by 3.3 percent for FY2024 and 1 percent for FY2025. There are no caps set after FY2025, only, “non-enforceable appropriations targets,” according to the White House document.

As a bit of an aside: there is also an unusual section of the legislation which imposes a 1 percent cut on current Federal funding in the event a continuing resolution is passed by Congress. Given that Congress has consistently not been able to pass the federal budget on time, we are likely to see this happen come October 1st.

Perhaps of most significance for a “debt limit deal,” it also suspends the nation’s debt limit until January 1st, 2025, bypassing next year’s Presidential election.

Finally, the deal also has several provisions unrelated to the nation’s debt limit or the overall Federal budget. These include such things as work requirements for people on food assistance programs, fast-track approval of a West Virginia natural gas pipeline, protecting veterans’ healthcare spending, cuts to the IRS’ budget, and rescinding unspent COVID related spending, among other provisions.

How does this impact research funding: while the deal doesn’t explicitly cut scientific research, it makes a difficult budget situation worse. With nondefense spending, which includes most of the federal research funding portfolio, kept flat for this coming fiscal year, it will make fully funding the Chips & Science Act more unlikely. Science had a particularly good write-up on the impacts, with reactions from people within the science policy community.

With the deal passed, it is now the law of the land…or is it? Senate Majority Leader Schumer (D-NY) read a joint statement, agreed to with Senate Minority Leader Mitch McConnell (R-KY), on the floor of the Senate, and entered into the Congressional Record:

We share the concern of many of our colleagues about the potential impact of sequestration and we will work in a bipartisan, collaborative way to avoid this outcome.

Now that we have agreed on budget caps, we have asked Appropriations Committee Chair Senator Murray and Vice Chair Senator Collins to set the subcommittee caps and get the regular order process started.

To accomplish our shared goal of preventing sequestration, expeditious floor consideration will require cooperation from Senators from both parties. The Leaders look forward to bills being reported out of committee with strong bipartisan support. The Leaders will seek and facilitate floor consideration of these bills with the cooperation of Senators of both parties.

Senator Schumer also said that this legislation,

“does nothing to limit the Senate’s ability to appropriate emergency/supplemental funds to ensure our military capabilities are sufficient to…respond to ongoing and growing national security threats, including Russia’s ongoing war of aggression against Ukraine, our ongoing competition with China…or any other emerging security crisis; nor does this…limit the Senate’s ability to appropriate emergency/supplemental funds to respond to various national issues, such as disaster relief, or combating the fentanyl crisis, or other issues of national importance.”

The joint statement and Senator Schumer’s remarks were essential to get defense hawks to back the final debt limit legislation. But what do these statements do in relation to what was just passed into law?

Put simply, Congress can pass a new law that suspends previously enacted legislation. In this case, the Senate could pass supplemental funding bills that suspends or goes around these agreed-to caps. But such legislation would then have to move to the House of Representatives, controlled by Speaker McCarthy and the Republican House Caucus, for consideration. In all likelihood, the House would not agree to such a move, calling it a violation of the debt limit deal, and the legislation would be dead. Of course, the House could also agree to such a move and pass it into law, suspending the deal that was just agreed on. Again, there is no law Congress can pass that it can’t suspend, as long as both chambers agree (and the President will sign into law).

This doesn’t mean these caps aren’t in place, or that they can be ignored out-of-hand. What it means is that going around the caps will require another agreement between the President, House Republicans, and the Senate. It’s an exit clause, of sorts, but not an easy one to use. We’ve been through this before with past budget-debt-limit deals, where funding caps were suspended or raised. The unfortunate reality means that the research community will have to cope with two years of budget caps again. On the brighter side, if past is prologue, there likely will be another grand budget deal negotiated at the end of the year (such an outcome is not guaranteed though). Please keep checking the CRA Policy Blog for updates and to track the Fiscal Year 2024 budget process.