Foundation

Don't Forget: Beyond Shutdown Threat, Debt Ceiling Looms

by Michael Tasselmyer / /

The 2015 Fiscal Year ends on September 30, and unless Congress can agree on a deal to fund federal functions beyond that, we’ll have a repeat of the 2013 government shutdown on our hands. Beyond the immediate budget controversy regarding federal funding of Planned Parenthood, the President and many Members of Congress are seeking a way to bust through spending caps they agreed to just a few years ago.

The situation has its roots in 2011, when the President signed the Budget Control Act (BCA). That law directed a special committee to agree on $1.5 trillion worth of deficit reduction measures by a certain deadline; because they couldn’t do so, caps on discretionary spending went into effect. The Murray-Ryan budget deals of 2013 effectively and temporarily increased those spending caps through 2015, but the original caps will go back into place on October 1 barring Congressional action.

Complicating the situation is the ongoing political battle regarding Planned Parenthood, which receives about $500 million from the federal government. Some Republican lawmakers have threatened to oppose any deal that doesn’t strip away that funding. What’s more, the 2016 election campaign is already underway and several Senators tasked with reaching a deal are also running for President.

It’s possible that in order to reach a short-term “stopgap” deal (which would likely last through the end of the calendar year in order to buy more time for negotiations), Congress will consider doing away with or relaxing the BCA’s spending caps. The biggest obstacle preventing a long-term deal still seems to be figuring out how to “pay for” future spending increases.

However, that approach ignores the reality that even under the current “restrained” spending environment in the wake of BCA caps, current debt levels are not sustainable and must be addressed. This Fiscal Year, the government will spend $426 billion more than it collects in taxes and other revenues. The Congressional Budget Office has repeatedly warned that even though deficits have been steadily decreasing, failing to reduce the debt itself would have a widespread negative impact on the economy as interest payments and entitlement spending continue to rise. As NTUF showed recently, the BCA spending caps have played a key role in reducing spending below what Washington would have otherwise preferred.

Our political leaders seem to be forgetting that the government bumped into the statutory debt ceiling earlier this year. The national debt has been stuck at $18.113 trillion for the past 193 days since the ceiling was re-established on March 15.  While the Treasury has been unable to issue any new debt, it has been implementing “extraordinary accounting measures” in order to finance daily obligations. Before the end of the year, Congress will have to address this challenge and will probably do so by increasing the debt ceiling yet again.

Rather than debating which offsets are more or less appropriate to “pay for” a breach of the BCA caps Congress should focus on finding cuts that can, if nothing else, continue shrinking the deficit and work on addressing the government’s unsustainable long-term spending trajectory.


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