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Following are the portions of a CBO summary on key provisions of the recently enacted debt ceiling law, including its provisions for restricting discretionary spending by agencies other than the DoD and VA.
Description of the Bill
H.R. 3746 would impose caps on discretionary funding, make other changes affecting spending and revenues, and raise the debt ceiling. Specifically, the bill would:
• Establish statutory caps on discretionary funding for fiscal years 2024 and 2025 that would be enforced by sequestration;
• Set limits on most discretionary funding for each year from 2026 through 2029 that would be enforced using the Congress’s procedures for considering budgetary legislation;
• Rescind certain funds provided to the Internal Revenue Service (IRS) and related agencies under Public Law 117-169 (an act to provide reconciliation pursuant to title II of S. Con. Res. 14; referred to here as the 2022 reconciliation act);
• Modify work requirements for the Supplemental Nutrition Assistance Program (SNAP) and Temporary Assistance for Needy Families (TANF);
• Rescind unobligated balances from specific accounts provided by six laws enacted between 2020 and 2022;
• Appropriate $22 billion for the Nonrecurring Expenses Fund of the Department of Commerce;
• Appropriate $45 billion to the Toxic Exposures Fund for veterans’ health care and associated expenses;
• Amend provisions of current law that regulate permitting of certain proposed energy-related projects;
• Terminate the current suspension of payments, interest accrual, and collections on defaulted loans in the student loan program 60 days after June 30, 2023;
• Require the executive branch to follow administrative pay-as-you-go procedures before finalizing certain administrative actions; and
• Temporarily suspend the debt limit.
CBO’s estimates of the budgetary effects of those provisions are detailed below. For the purposes of this letter, CBO has assumed that the bill will be enacted in June 2023.
Caps on Discretionary Funding
Title I of division A would impose limits on most discretionary funding (that is, budget authority provided in appropriation legislation). Current law specifies a number of adjustments or exceptions to the caps for certain types of funding and that funding would not be constrained by the imposed limits. Under the bill, certain other funding would not be subject to the caps. For funding that is constrained by those limits, referred to hereafter as base funding, separate caps would be established for defense and nondefense funding.
Under section 101(a), the caps on base discretionary funding for 2024 would total $1.590 trillion ($886 billion for defense and $704 billion for nondefense funding.
The caps on base discretionary funding in 2025 would equal $1.606 trillion ($895 billion for defense and $711 billion for nondefense).
Some funding would be limited either according to a formula or to specified amounts, funding designated as an emergency requirement or for overseas contingency operations would not be constrained, and certain other funding would not be subject to the caps. With those adjustments, and base funding constrained by amounts specified in section 101(a), CBO projects that total discretionary funding under the bill would amount to $1.795 trillion in 2024 and $1.818 trillion in 2025.
A breach of those limits would be addressed by the Administration using sequestration procedures. Under those procedures, automatic spending cuts, generally of a uniform percentage, would occur through the withdrawal of funding for some government programs to reach the amount needed to reduce funding by the amount of the breach.
CBO has compared its estimates of spending under the caps with amounts in its May 2023 baseline projections. As specified in the Balanced Budget and Emergency Deficit Control Act of 1985, CBO’s baseline projections for discretionary appropriations are assumed to grow each year with inflation from the amounts provided for the most recent year, whereas CBO’s projections under the bill reflect the assumption that funding would be constrained by the caps with authorized adjustments through 2025 and keep pace with inflation thereafter. Thus, relative to the baseline, under the caps established in section 101(a), budget authority would be $1.458 trillion lower and outlays would be $1.332 trillion lower over the 2024–2033 period.
The projected reductions in outlays are smaller than the projected reductions in budget authority partly because outlays generally lag behind budget authority (and thus some savings from the caps would occur beyond the 10-year budget window) and partly because some budget authority never results in outlays.
Section 101(f) of title I also sets limits on most discretionary funding for each year from 2026 through 2029. Those limits would be enforced using the Congress’s procedures for considering budgetary legislation.6 If future appropriations were provided at the amounts of the caps as specified, budget authority would be $632 billion lower and outlays would be $553 billion lower over the 2026–2033 period than the amounts CBO would project based on the caps specified in section 101(a) for 2024 and 2025.
Section 102 would establish temporary caps on funding if a continuing resolution is in place on January 1 of 2024 or 2025. Caps on defense funding would be lower and caps on nondefense funding would be higher relative to the caps in section 101(a). Once full-year appropriations were enacted, the caps would revert to the limits that were in place on December 31 of that fiscal year (that is, the caps established in section 101(a), with adjustments). If a continuing resolution were still in place on April 30 of either 2024 or 2025, a final sequestration order would be issued according to the cap amounts in section 102.
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