Two “Must-Dos” Face Congress: Debt Ceiling, Funding Government
Congress has two “must-do” issues this year – addressing the debt ceiling and the federal appropriations process. Here is a quick guide to both issues and a final take on what could happen.
What is the debt ceiling?
The debt ceiling applies to the level of borrowing the U.S. can use to pay its debts and obligations. There are two types of debt. The first type is debt held by the public. This is mostly in the form of securities issued by the Treasury and held by investors such as individuals, the Federal Reserve, mutual funds, and financial institutions. This currently accounts for the majority of debt ($24+ trillion). The second is intragovernmental debt (debt held by the government) and accounts for roughly $6.87 trillion of existing debt. As of January 2023, it costs the government $261 billion to maintain its debt. That is 14% of total federal spending.
The current ceiling is set at $31.381 trillion. Treasury Secretary Yellen advised the Congress in January that the U.S. was approaching the debt ceiling and the agency would begin taking “extraordinary measures” to keep within the limit. These extraordinary measures will likely be exhausted by late summer.
| A Deeper Dive See our related content at CLAconnect.com for more insights plus health care related topics Congress may take up. |
Congress must either raise the debt ceiling or suspend the debt ceiling. According to the Congressional Research Service, over the past 40 years, Congress has done so either by enacting “stand-alone legislation (often referred to as a ‘clean’ debt limit bill) about 40% of the time, while debt limit legislation has been enacted as part of a larger legislative package about 60% of the time.” The most recent time Congress acted was December 16, 2021 (Public Law 117-73), setting the limit at $31.381 trillion.
Failure for Congress to act by the time extraordinary measures are exhausted would result in delayed payments and, ultimately, default. To date, the U.S. has never defaulted on its debt, though it was within days of doing so in 2011. While markets were a bit jittery in the final days and U.S. creditworthiness was downgraded, things quickly turned around. However, the White House Council of Economic Advisors also previously said that the impact of a default is “unknown,” but could be “widespread” and even “catastrophic” to the U.S. and global economy.
What is the federal appropriations process?
The federal appropriations process relates to funding discretionary government spending, which requires an annual Congressional vote. Congress must fund the federal government by either passing 12 appropriations bills or passing a Continuing Resolutions (CR). Mandatory spending (also called direct spending), on the other hand, does not require an annual vote because funding is authorized by existing laws. Mandatory spending accounts for roughly two-thirds of federal government spending and generally includes entitlement programs like Medicare and Social Security.
The federal budget process begins with the President’s presentation of a budget to Congress. This document is aspirational and non-binding on Congress. Congress then begins the budget process by determining how much it will spend (i.e.: topline numbers agreed to via budget resolution). Specific committees in each chamber with jurisdiction over certain funding and programs then determine how this spending will be allocated. The full House and full Senate must ultimately agree to the same appropriations bill(s) before enacted by the President.
The government is funded under the Consolidated Appropriations Act of 2023 (CAA, 2023) through the current federal fiscal year, September 30, 2023. Congress must pass a CR or appropriations bills by October 1, 2023. Failure to pass any bill would result in a full government shutdown. Failure to pass some of these bills would result in a partial government shutdown. There have been multiple shutdowns over the years. The economic impact depends on the length of a shutdown and the agencies impacted.
Final Take?
- Congress has a busy year ahead of it, and the clock is already ticking.
- There is a new Republican majority in the U.S. House of Representatives which means there will be a new, untested (and potentially rowdy) dynamic during both negotiations.
- The House has all new committee chairs controlling the budget/appropriations process. There are new members on committees, importantly the Rules Committee. Plus, there are changes to House procedural rules that will impact the process in the House (harder to increase spending or taxes).
- The U.S. Senate still has a slim Democrat majority and along with unique Senate rules, it will serve as a reality-check on what can actually get passed. The President can serve as a backstop.
- At a minimum, health care changes will be floated during negotiations if only due to their magnitude of funding. See graph for FY 2022 actual dollars spent (as opposed to obligated) for “health” is $914 billion (15% of federal spending) and $755 billion (12% for Medicare) for a total of $1.669 trillion.
- Throughout the process, Medicare benefits will not be cut, but there could be some interest in other Medicare and Medicaid changes, like program integrity provisions (i.e.: waste, fraud and abuse).
- Gear up for a bumpy 2023.
How we can help
We will be watching and advising our clients as these issues move forward. Reach out if we can assist you.
Jennifer Boese is the Director of Health Care Policy at CLA. She is a highly successful public policy, legislative, advocacy and political affairs leader, including working in both the state and federal government as well as the private sector. She brings over 20 years of government relations and public policy knowledge with her to CLA. Well over half of her career has been spent dedicated to health care policy and the health care industry, affording her a deep understanding of the health care market and environment, health care organizations and health care stakeholders. Her role at CLA is to provide thought leadership, policy analysis and strategic insights to health care providers across the continuum related to the industry's ongoing transformation towards value. A key focus of that work is on market innovations and emerging payment models. Her goal is to help CLA clients navigate and thrive in an increasingly dynamic health care environment.
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