House Conservatives Propose Spending Cuts

Topline

The right-wing House Freedom Caucus wants to slash President Joe Biden’s student loan bailout program, rescind all Covid-19 funding and cap future federal spending over the next 10 years at fiscal year 2022 levels in exchange for agreeing to raise the debt ceiling—setting the stage for a stalemate with the White House, which has said it will not negotiate on the borrowing limit.

Rep. Scott Perry, R-Pa., center, and members of the House Freedom Caucus unveil their demands for … [+] spending cuts in exchange for raising the debt limit, at the Capitol in Washington, Friday, March 10, 2023. (AP Photo/J. Scott Applewhite)

Key Facts

The coalition of 40-some conservative lawmakers unveiled the demands on Friday in a one-page summary, titled “Shrink Washington, Grow America,” that establishes a baseline for negotiations with the White House and the rest of the House GOP conference over raising the debt ceiling.

The caucus wants to roll back all federal spending to fiscal year 2022 levels, allowing for 1% annual growth over the next 10 years—cuts it claims will amount to $131 billion in fiscal year 2024 and $3 trillion over the next decade.

The plan calls for cuts to Biden’s student loan forgiveness program, which is expected to cost the federal government $400 billion over the next 30 years, though it does not offer specifics on what portions of that program or others should be reduced.

In addition to reducing Biden’s student loan program and rescinding all unused Covid-19 funding, the caucus wants to establish stricter work requirements for welfare recipients and make cuts to the $369 billion for climate change initiatives included in the Inflation Reduction Act passed in August.

The plan also targets the $80 billion in funding for the Internal Revenue Service over the next 10 years included in the Inflation Reduction Act—money that has become a focal point for Republicans who claim it will be used to hire new agents to unfairly harangue average Americans for possible tax violations (in reality, about $46 billion will go to enforcement, with the goal of targeting wealthy and corporate tax dodgers, while the rest will be used to fund operations support, taxpayer services and modernize the agency’s systems, according to a report from the Congressional Budget Office).

The House Freedom Caucus said the plan will reduce spending to a level that eliminates the need to raise the debt ceiling and allow Congress to instead “address the many abuses and disasters caused by the Biden Administration, such as the chaos on the southern border, COVID vaccine mandates” and new regulations on pistol stabilizing braces.

What To Watch For

The Biden Administration faces a tough battle with right-wing Republicans who have outsize leverage in the House under the GOP’s slim 222-213 majority, meaning their refusal to support any GOP-led legislation could lead to its failure. The Freedom Caucus plan released Friday sets a baseline for negotiations that formalizes conservatives’ promises to demand spending cuts in exchange for their votes on raising the debt ceiling—indicating they are prepared for a long battle with the White House.

Chief Critic

Biden fired back at the plan on Friday by highlighting the mathematical fallacies of the GOP’s pledge to balance the budget over the next decade. “You know what the essence of the enactment of [this] legislation is? Cut all spending other than defense by 25%,” he said, a figure that mirrors an analysis by the nonpartisan, nonprofit Committee for a Responsible Federal Budget that found that in order for the government to spend less than it collects in revenue by 2034 without raising taxes, as Republicans have demanded, one-quarter of all federal spending would need to be cut.

Key Background

The federal government must raise its $31.4 trillion borrowing limit by late summer or risk defaulting on its debts and legal obligations, an unprecedented scenario that would halt federal aid to individuals and businesses and could trigger a stock market crash and recession. The U.S. already hit its debt limit on January 18, prompting the Treasury Department to take “extraordinary measures” to stave off a crisis, which are essentially accounting maneuvers that involve moving money from one agency to another and suspending investments in federal employee retiree funds (that will later be made whole). Yellen reiterated her plea for Congress to raise the debt ceiling on Friday, urging lawmakers “to come together to address the debt limit without conditions and without waiting until the last minute,” she said during a House Ways and Means committee hearing. Yellen’s stance aligns with the White House’s repeated statements that it will not negotiate on raising the debt ceiling.

Tangent

The Freedom Caucus plan comes a day after Biden unveiled his $6.8 trillion fiscal year 2024 budget proposal that also includes a $3 trillion deficit reduction over the next 10 years, largely through $5 trillion in new tax revenue collected from corporations and the wealthy. Republican House leaders billed the proposal as “reckless” and “unserious.” The Biden Administration hit back at the Republican criticism by highlighting the absence of a formal GOP spending plan and the difficult negotiations House Speaker Kevin McCarthy (R-Calif.) faces as he begins to iron out the details of a counter-offer that will be presented to the White House in the coming months. The budget, which is separate from the debt ceiling negotiations, will need to be passed by the end of the current federal fiscal year on September 30 in order to avoid a government shutdown.