Running down the details of the debt ceiling agreement
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The Auto-CR Dilemma

Today's X-Date: If the debt ceiling deal passes, the military budget
goes up and IRS funding gets slashed. But if Congress doesn't pass the
subsequent spending bills, that reverses.

 

 

J. Scott Applewhite/AP Photo

By David Dayen

**** Since my initial rundown of the debt ceiling
deal was published
<[link removed]>,
we got the actual text of the agreement
<[link removed]>.
Let's go through a few particulars that are new:

TANF changes are really a five-state pilot. Most states are not going to
be affected. There is a "small checks" scheme where states get families
eligible for TANF using their own expenditures. That faces a crackdown,
but not until 2025.

SNAP work requirements have a phase-in. It's a very odd phase-in.
Able-bodied, childless adults must work to avoid time limits on
nutrition assistance. The cutoff moves from 49 years old to 50 within 90
days of passage (approximately September 1), and then to 52 at the
beginning of fiscal year 2024 (October 1). One month for a phase-in?
That won't cause trouble! The full change to 54 kicks in on October 1
of 2024, and then sunsets October 1, 2030.

Permitting really is a nothingburger. The BUILDER Act
<[link removed]>, which mostly writes
down things the White House has already implemented, like a single
agency lead, better coordination, and a handful of page limits and
timelines for environmental reviews (though they can be extended), is
the main thing in here. A provision on interregional transmission lines
is not only a study, it's an extended study that can take a year and a
half to write and another year to finalize after public comment. It's
very clear that the monopoly utilities lobbied that provision into dust.
There is an addition of energy storage projects to the FAST Act, an old
infrastructure streamlining bill from 2008.

They added Joe Manchin's Mountain Valley Pipeline approval. The
Pipeline Payoff (a new term I've coined, how do you like it?) is in
the deal, confirming outstanding approvals and stripping jurisdiction
from all courts except the D.C. Circuit, which is thought to be
friendly. Some have taken this to mean that progressives were wrong to
oppose last year's permitting bill, since Manchin got what he wanted
anyway without any trade-offs. This neglects that it was Mitch McConnell
who torpedoed permitting because he thought he could get something
better in the next Congress. He was right. Plus, the Pipeline Payoff is
going to drain Manchin's support for a permitting deal that gives
something to both sides. See Dave Roberts on this
<[link removed]>.

AI environmental reviews? There's a study commissioned on the
potential of "online and digital technologies to address delays in
reviews." This is mainly about online portals as repositories of
information and better tools to track progress, but it explicitly says
the study is not limited to that. I immediately thought about AI. One
way to accelerate the review process is to have ChatGPT write it, I
guess. That will probably go as well as AI legal briefs
<[link removed]>.
This bears watching.

**Read all of our debt ceiling coverage here**
<[link removed]>

Click to Support The American Prospect <[link removed]>

I'm no longer worried about administrative PAYGO. This was the
provision that codified an executive order that forces federal agencies
to offset any mandatory spending created by their regulations by cutting
other regulations. If it had teeth, it would be very bad, essentially
baking in deregulation. But the agency can exempt rules from this
requirement, the Office of Management and Budget can waive it entirely,
there's

**no judicial review** for any OMB finding, and it sunsets at the end of
2024. This may slow down a couple of rules, but I don't expect it to
do much.

The unobligated COVID aid rescissions come to $29 billion. That's the
approximation given by negotiators. In addition ...

There's potentially $21.4 billion in cuts to IRS funds coming.
Officially in the bill, the cut is $1.4 billion. But according to
numerous <[link removed]>
reports <[link removed]>,
budget appropriators plan to steal $10 billion from the $80 billion in
IRS funding in the Inflation Reduction Act in fiscal year 2024, plus
another $10 billion in FY2025, and use that to fill in gaps in
nondefense discretionary spending. (It's possible those losses get
replenished later
<[link removed]>.) The COVID
rescissions also backfill that nondefense discretionary budget in
FY2024. That brings us to ...

The automatic continuing resolution creates an interesting dilemma. As I
explained over the weekend
<[link removed]>,
the deal only creates topline numbers, baselines for future budget
appropriations that have yet to be written. If those bills aren't
passed by January 1, 2024, an automatic continuing resolution snaps in
at the level of fiscal year 2023, reduced by 1 percent. (This "penny
plan" is the brainchild of libertarian Rep. Thomas Massie
<[link removed]> (R-KY),
who sits on the House Rules Committee and presumably will advance the
bill through the committee for that reason.)

But that auto-CR treats defense, veterans, and nondefense spending far
differently. Specifically, it's much harsher on the defense and
veterans side. Those buckets of spending were increased significantly in
the debt ceiling deal. So if they go all the way back to FY2023 levels,
it's a much deeper cut from where they would have been. Adjusted for
inflation, the cut to defense is nearly 10 percent.

Let me show my work. Skip this if you don't like math; my sources
include the CBO baselines
<[link removed]>
and the bill text
<[link removed]>.
Per Bloomberg's Erik Wasson
<[link removed]>, FY2023
discretionary spending was $1.602 trillion; the new baseline in the deal
for FY2024 is $1.590 trillion. If the spending bills don't get done,
the auto-CR trigger for FY2024 is $1.602 trillion minus 1 percent, which
comes to $1.585 trillion. So, a $12 billion cut if the spending bills
pass, a $17 billion cut if they don't.

But under the spending bills passing scenario, defense spending

**increases** by $28 billion, while nondefense is cut by $40 billion.
The $29 billion in COVID rescissions and $10 billion from IRS funding
(in the first year) mostly fills that nondefense gap.

If the spending bills don't pass, you get a nominal

**cut** to defense of $9.12 billion, and a cut to nondefense of $7.88
billion. However, the IRS fund transfer, which is not in the deal and is
just presumed as part of the appropriation, would not happen under this
scenario. (I don't know what happens to the COVID aid in this
scenario; I guess it would just go to deficit reduction.)

[link removed]

OK, you can come back now. The upshot is this: If Congress doesn't
pass the spending bills, the military loses about $37 billion from what
they'd otherwise get, a 4 percent nominal cut and adjusted for
inflation almost a 10 percent real cut.

**And**, the IRS would keep almost all of its funding boost. The
trade-off is that nondefense discretionary would lose around $7 billion
more, a little less than 1 percent, in this scenario. Plus, veterans
funding would lose a significant amount, probably around 5 to 7 percent.

For additional context, nondefense spending got a major boost
<[link removed]>
in FY2023, which became the new baseline
<[link removed]>. An
inflation-adjusted cut from that is certainly not good, but we're
getting one either way; the difference is less than 1 percent. In the
no-spending-bills-pass scenario, you trade a slightly larger cut-off a
high baseline-for serious cuts to defense and preservation of the
ability to go after rich tax cheats in future years. Isn't that
something requiring serious consideration?

It's not like a major newsmagazine didn't just release a blockbuster
report
<[link removed]>
on how badly the Pentagon is getting ripped off. Just curtailing routine
price-gouging would easily cover this cut, which we should be doing
anyway. And even more important, the auto-CR would retain the
relationship between defense and nondefense spending that has been
severed by this deal. In the future, it'll be fine to increase
military spending without increasing non-military spending concurrently,
unless this deal collapses.

The whole thing depends on Congress not being able to pass its 12
appropriations bills. Doesn't that seem like a good bet? Congress is
famously not good at such things. The House canceled a bunch of votes on
the easiest spending bills last week because they couldn't find
consensus
<[link removed]>.
The point of this auto-CR is to concentrate minds and get them moving to
pass the bills. But if you're a Democrat who talks about how we have a
bloated military budget, and that rich people get away with murder from
an imbalanced tax system, isn't this your big chance? And all you have
to do is just not vote for spending bills! Every Democrat who does this
makes it that much harder to get those bills passed, and that much
closer to kicking in the auto-CR.

If you asked me point-blank, I'd say that Congress will somehow get
those bills done. The military has contractors in practically every
congressional district
<[link removed]>,
making military pork barrel spending a jobs program for almost all
politicians. And the fact that veterans programs would be clobbered too
makes this a heavy lift. But to be clear, all that's needed here to
trigger the auto-CR is congressional incompetence. That's not exactly
out of the realm of possibility.

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