Returning discretionary spending to the fiscal year 2022 level, as many congressional Republicans want to do, using legislation to increase the federal debt limit as a vehicle, can be done in several ways, according to an analysis by Romina Boccia, director of budget and entitlement policy at the Cato Institute.
Discretionary spending excludes mandatory spending on entitlements, such as Social Security and Medicare, which are long-term drivers of federal budget deficits and the national debt. It also does not include payments on the debt, which is now more than $31 trillion.
The federal government is one-third of the way through FY 2023, which began October 1, 2022. House Republicans have agreed to return the discretionary part of the federal budget to FY 2022 levels in FY 2024.
In other words, spending would be cut from the FY 2023 level, says Boccia.
“Reaching this goal requires $131 billion in base spending reductions,” states Boccia in a policy analysis published by the Cato Institute. “If factoring in additional spending for federal disaster accounts, or so‐called adjustments, Congress would need to reduce overall spending by $133 billion.”
As discretionary appropriations are split between defense and non-defense spending, a simple way to achieve the spending reduction goal would be to return both categories to their FY 2022 levels, according to Boccia.
“Compared to FY19 pre‐pandemic spending levels, total discretionary spending would still be higher by $28 billion or 2 percent, after adjusting for inflation through 2022,” wrote Boccia.
Because some Republicans, perhaps a majority, want to increase defense spending, the GOP is split. One alternative is to just cut non-defense discretionary spending to its FY 2019 level, before all the “emergency” spending during the COVID-19 pandemic.
“Returning non‐defense discretionary spending to FY2019 levels in FY2024 would free up $16 billion in additional spending for defense, while still returning overall discretionary spending to FY2022 levels,” wrote Boccia. “Non‐defense discretionary spending would be reduced by $147 billion (20 percent), compared to FY23.”
Other alternatives Broccia discusses, such as picking and choosing which federal programs and departments should go, are more difficult. And reforming mandatory spending on entitlements, which Boccia and other economists recommend, is very unlikely in the 118th Congress, given the priorities of President Joe Biden and the Democratic majority in the U.S. Senate.
Indeed, it would be an achievement just to cut $133 billion in discretionary spending, and a number of such “baby steps” will be necessary to gain the confidence of American taxpayers, voters, and retirees that it possible to put the government on the path to fiscal stability—and to convince them the debt limit debate is not just another opportunity for Congress to make them pay more (taxes) for less (spending).
Source: Romina Boccia, “The GOP Wants to Return Discretionary Spending to FY2022 Levels: A Brief Analysis,” Cato at Liberty, Cato Institute, January 25, 2023.