The Debt Limit Deal and How it Could Impact Research Funding

Over the weekend, President Biden and House Speaker McCarthy (R-CA) agreed to a deal over the nation’s debt limit and federal spending. That deal, and its accompanying legislation, is quickly approaching its fate, with a vote late Wednesday in the House of Representatives. That is the make-or-break point; if the legislation can’t pass the closely divided House, it will not make it through the even more closely divided Senate. But what is in this legislation?

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 the 2025 calendar year, 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.

But will the deal be passed into law? It’s hard to tell at this point. There is a lot of grumbling on both sides: Progressive Democrats feel it cuts too much from social programs; Freedom Caucus Republicans feel it doesn’t cut spending enough; defense hawks feel defense spending is too constrained; and environmentalists are unhappy with this fast-track approval for natural gas pipeline. One way of looking at it is this is natural grumbling to a compromise where everyone got something, but not everything. Or it could be the beginning of the legislation’s demise and the nation defaulting on its debt; with Congress so closely divided, it’s hard to say at the moment. The House will be voting on it today and all eyes in Washington are watching the proceedings closely. We’ll update should events change.

UPDATE 6/2/23: The Senate passed the debt limit deal last night, sending it to President Biden’s desk for signing into law. During floor consideration in the Senate, Senate Majority Leader Schumer (D-NY) and Senate Minority Leader McConnell (R-KY) issued a joint statement and had it included in 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.

Schumer, in additional remarks, went further, saying that this legislation (edited for brevity): “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.”

News reports are categorizing the joint statement and Senator Schumer’s remarks as essential to get defense hawks to back the deal. 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 go 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 surprise everyone and agree to such a move, 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 or suspending 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 is that the research community will have to cope with two years of budget caps again. On the brighter side, if past is prologue, there will likely be another grand budget deal negotiated at the end of the year (though such an outcome is not guaranteed). We’ll keep following the federal budget and will report on any new developments, so please keep checking back for updates.

The Debt Limit Deal and How it Could Impact Research Funding