Update 679 — The GOP’s Fiscal Ransom Note:
“Big Spending Cuts or Else… We Will Default”
The joke among Democrats in Washington on House GOP plans for the debt limit: The GOP is willing to hold the American economy hostage, threatening, or indifferent to, default. It just hasn’t finished agreeing on a ransom note. The ransom notes floated thus far have ranged from vague structural spending reform, to voting to end Social Security every five years, to scaling federal spending down to FY ‘22 levels. That last one is specific but not totally unimaginable — is the GOP serious, though?
According to House Democratic Leader Hakeem Jeffries, the GOP-proposed policy is extreme and its implications extremely serious. Today, we take a look at these GOP demands to roll back federal spending to the mid-pandemic levels of FY 2022 and show our audience what the consequences would be – for critical programs, people, and the American economy at large.
Good weekends all,
Since they took the majority, House Republicans have been calling on Congress not only to cut the existing federal spending but also to constrain the growth of government spending in coming years. While no firm plans have emerged yet, Republicans reportedly pledged to cut appropriations to FY22 levels as part of a deal to make Kevin McCarthy speaker.
In January, House Appropriations Ranking Member Rosa DeLauro sent letters to the heads of federal agencies asking for information on the effects of cutting their respective budgets to FY22 levels. Earlier this week, she released their responses, which painted a grim picture for the American people. Agencies outlined threats to public safety, national security, and the basic ability of the agencies to operate. Agencies also highlighted that cuts of that size would diminish their ability to serve vulnerable populations and hamper economic activity. DeLauro also asked each agency to outline the consequences of a 22 percent cut to their programs – roughly the average cut that would be needed to return to FY22 levels without cutting defense or veterans’ medical care. Under this scenario, the results were even starker.
Reductions in Services
Due to annual inflation and population growth, agencies need regular increases just to maintain their current operating capacity. If forced to revert to FY22 levels, many agencies would need to immediately institute a hiring freeze and/or cut staff, including staff hired specifically for the sake of public safety, like air traffic controllers, and food and rail inspectors.
If its budget were cut by 22 percent, the Department of Commerce would need to eliminate over 5,000 positions. Cutting the Department of Transportation’s budget to FY22 levels, would not only force the Federal Aviation Administration to halt all system modernization efforts but also impact the hiring of 1,800 air traffic controllers and almost 500 safety inspectors. The Social Security Administration, which is still working to recover from its lowest staffing levels in over 25 years, would need to close field offices, shorten hours, furlough staff for four weeks, and lay off approximately 6,000 employees. This would lead to longer wait times to reach a representative, as well as longer processing times for things like new retirement and disability claims and new Social Security cards.
Cutting appropriations by 22 percent would have devastating implications for workers and families that rely on government services, including:
- Housing Services – The Department of Housing and Urban Development would be forced to make significant cuts to existing programs, many of which require increases just to maintain their current level of service. 640,000 fewer families would receive assistance through the Housing Choice Voucher program. Public Housing operations would be put in jeopardy, leading to reduced maintenance and potentially unsafe conditions in public housing. Funding for approximately 286,000 families would be eliminated in the Project-Based Rental Assistance program. 95,000 fewer unhoused people and domestic violence survivors would receive assistance under the Continuum of Care Program.
- Educational Services – Title I Grants would be cut by roughly $4 billion, the equivalent of removing over 60,000 teachers and related service providers from classrooms, impacting roughly 25 million students. IDEA Grants to states would be cut by over $3 billion, impacting 7.5 million children with disabilities. The maximum Pell Grant benefit would be cut by roughly $1,000.
- Access to Child Care – 101,000 childcare slots would be eliminated, as well as over 200,000 slots for Head Start.
- Nutrition Services – Over a million older adults would no longer receive meals through HHS’s Administration for Community Living. The Special Supplemental Nutrition Program for Women, Infants, and Children (WIC) program would be able to offer services to roughly 1.5 million fewer participants than current FY24 projections.
- Heating Benefits – Cuts to LIHEAP funding would reduce the average annual heating benefit to $413 – less than half the amount needed to heat the average home with natural gas – or cut off benefits for over a million households.
This list is by no means exhaustive, but it is indicative of how untenable the demands for massive decreases to nondefense appropriations are. Not only would agencies across the board have to cut down on their existing staff and scale back basic operations, but many of the government programs serving our most vulnerable populations would no longer be able to maintain their current level of service.
Diminished Economic Activity
Many of the cuts agencies would have to make would impair the United States’ economic competitiveness and job growth. For example, the Department of the Treasury’s ability to monitor risks to the banking system – like those they’ve dealt with over the last two weeks– and respond swiftly and appropriately to them would be significantly impaired. At the Department of Commerce, the International Trade Administration would have fewer resources available to promote trade and investment. Reduced access to child care and related services would also exacerbate labor supply challenges by forcing parents and caregivers to stay home rather than go to school or work.
Additional consequences of a 22 percent cut to the agencies’ budgets include:
- Workforce Training – A 22 percent cut to the Department of Labor would keep 750,000 job seekers from accessing services and job training through the Enforcement and Training Administration. 100,000 fewer workers would be employed through registered apprenticeships.
- Investments in Infrastructure and Technology – Agencies would not have to cut back on the grants that they can offer to fund the construction of new public works and develop new technologies. For example, reduced funding for the Department of Transportation would reduce funding for projects that are already either underway or nearing construction under the FTA’s Capital Investments Grant account. Cuts to the Environmental Protection Agency’s funding would slow the development and implementation of clean energy technologies.
- Reduced Services to Businesses – Businesses would face longer processing times for labor certification decisions, forcing them to wait up to two additional months for decisions on their ability to hire H-2B workers. Processing times for labor certification decisions under the PERM immigrant program would increase by 73 percent to an average of approximately 325 days. The Economic Development Administration’s grant funding would also be reduced, as would that of the Minority Business Development Agency.
House Republicans have tried to sell a balanced budget as the key to reining in inflation and boosting the economy. However, such deep cuts would in reality make it harder not only for low-income families to get by, but also for businesses to grow and workers to find good jobs, while also not achieving their goal of a balanced budget.
If the GOP succeeds in extracting deep budget cuts for FY24, the consequences will be serious and long-lasting. The 2011 Budget Control Act, which was enacted the last time that House Republicans instituted harsh caps on non-defense discretionary funding in exchange for raising the debt limit, had disastrous consequences. Decade-long caps on discretionary funding left a number of agencies like the IRS and the Social Security Administration understaffed with outdated systems and lacking the ability to adequately serve the public, and they led to deep cuts to programs that help vulnerable populations. Although the caps ended following FY21, the consequences of the 2011 deal are still being felt today.
According to a recent report by the Center on Budget and Policy Priorities, on a real per-capita basis, non-defense discretionary programs excluding VA health still lag 2010 levels by 10 percent. Repeating the mistakes of the 2010s would only exacerbate the existing problem. Doing so on the scale that Republicans are proposing would raise the cost of living for hundreds of thousands of families, endanger public safety and generally make the government less effective at serving the American people. Otherwise, the only alternative Republicans offer is default.