Houses raises debt ceiling with promise to spend less

From his porch in Sioux City, Iowa, Caesar Jiron has kept a nervous eye on the U.S. debt. He’s not a financial expert or a policy analyst, but he understands the burden of debt: He’s unemployed. What scares him about the country’s position is the sheer scale of what it borrowed without a plan to pay it back.

“It’s trillions of dollars! Who’s going to pay for it? It is impossible. Right now [it’s] $31 trillion. It is impossible for America to come out of that debt,” Jiron said.

For now, the number is about to get bigger, but not without an attempt to bring down the United States’ borrowing needs just a little bit. The U.S. House of Representatives passed the Fiscal Responsibility Act of 2023 on Wednesday night—a piece of legislation that raises the debt ceiling and trims government overspending.

The agreement does less to address the country’s expenses than many House Republicans had hoped. But with less than a week before the U.S. Treasury’s predicted default date, the vote marks a victory for House Speaker Kevin McCarthy and the White House.

“For the first time in quite some time we would spend less than we did the year before,” McCarthy said moments after the vote. “This is the biggest cut and savings this Congress has ever voted for.”

Strictly by the numbers, he’s not wrong. But the savings come from reducing projected spending—not from reducing the total sum of dollars being spent now.

In terms of savings, the bill accomplishes two broad objectives. First, it caps the amount of money the government can spend on nonmilitary, nonmandatory expenditures in the next two years. Second, it draws a red line through some spending that had already been approved either through government programs or by budgetary appropriations. The deal makes minor increases to work requirements for welfare recipients. It also shears down the $80 billion appropriated for the IRS last year to $59 billion.

According to the Congressional Budget Office, changes like those would cut the deficit by $69.5 billion between 2023 and 2024. If kept in place, the savings would reduce spending by $1.3 trillion by 2023 when compared to projected spending over the same period.

Despite the cuts, fiscal conservatives on and off Capitol Hill have voiced concern about the core of the agreement: the debt ceiling itself.

“It’s not increasing the debt limit, it’s suspending it,” said Richard Stern, the director for the Heritage Foundation’s Grover M. Hermann Center for the Federal Budget. “From when the bill gets signed into law to Jan. 1, 2025, there will just be no debt ceiling whatsoever. And so for that whole period of time, whatever we end up spending, the debt ceiling will accommodate it.”

Yes, Stern noted, the spending cap should keep some expenses down in that time. But in a sense, Congress has left the door wide open and made a promise not to walk through it. That doesn’t give him a lot of confidence.

Stern pointed out that cutting government spending isn’t politically easy.

“When the government takes money and does something with it, there’s something you can point to … if you’re trying to convince people that there’s profit in cutting spending, you have to convince people to have faith in that process,” Stern said.

Supporters of the debt ceiling hike say that without it, the country would have defaulted on its debt, leading to economic disaster for the United States and global markets. In the weeks leading up to the vote, Treasury Secretary Janet Yellen repeatedly warned Congress that the consequences for failing to raise the debt limit could wreak havoc.

“Tonight, the House took a critical step forward to prevent a first-ever default and protect our country’s hard-earned and historic economic recovery. This budget agreement is a bipartisan compromise. Neither side got everything it wanted. That’s the responsibility of governing,” the White House said in a statement after the vote.

Back in Sioux City, Jiron understands that the country has to pay its obligations. But that does little to make him feel better about the outstanding balance.

“That is not their money! They want to put another two, three trillion dollars into the economy. … They don’t care that they’re playing with the future of American families,” Jiron said.

At the moment, the debt ceiling remains in place. The bill now heads to the Senate, where it must receive bipartisan support to pass.

Moments before the final vote on the Fiscal Responsibility Act, I asked Democratic House Minority Leader Hakeem Jeffries of New York if he had a message for the Senate as it prepares to entertain the bill.

“My expectation is that if we get through the House with a strong bipartisan vote, that it will clear the Senate and we will avoid catastrophic default,” Jeffries said.