President Joe Biden and Speaker Kevin McCarthy, R-Calif., announced a debt limit deal Saturday, with a vote expected Wednesday in the House of Representatives.

Heritage Foundation experts scrutinized the text of the 99-page bill, including provisions related to spending, pro-growth policies, student loan cancellation, and work requirements for welfare. The following is their latest analysis of the Fiscal Responsibility Act.

Spending

Early in the year, The Heritage Foundation called for total base discretionary spending to return to fiscal 2022 levels—a cut from current levels of around $130 billion. Whereas the House Republicans’ Limit, Save, Grow Act hit that mark, the Fiscal Responsibility Act would only cut discretionary spending by $12 billion in fiscal 2024—only 9% of what Limit, Save, Grow offered.

Under the hood, the bill would cut non-Veterans Affairs, non-defense discretionary spending by $40 billion and get those accounts down, roughly, to fiscal 2022 levels. However, it would spare VA funding and increase defense funding by $28 billion, leaving the total cut at only $12 billion.

Additionally, the bill would rescind only $28 billion in COVID money and $1.4 billion in IRS funds, far short of the roughly $50 billion in COVID and $70 billion in IRS money rescinded under Limit, Save, Grow. Worse, $22 billion of the $28 billion is made available to Democrats to spend through a single fund at the Department of Commerce.

While CBO claims the two-year caps included in the deal would reduce discretionary spending against the 10-year CBO baseline by $1.3 trillion, almost all of this would be cuts to assumed growth and not cuts to current spending levels. A large portion of further savings that proponents claim rely on assumptions that the waivable parameters of the bill will remain in place after year two, which we do not believe is likely. CBO even acknowledged that these would only be enforceable if Congress doesn’t waive the rules—which is why they were excluded from CBO’s formal score.

Of note, the enforceable limits in the bill, including those triggered if the annual appropriations bills are not enacted, do not provide funding levels. These are merely caps on funding levels. This does not remove pressure to pass a funding bill to avoid a government shutdown and these limits could be amended in a funding bill. So, while the debt ceiling suspension in the bill is a firm blank check to Biden, the discretionary alterations are a promise, and not set in stone.

On the other hand, the debt ceiling suspension in this bill to a date certain—not a specific dollar amount—would likely lead to at least $3.5 trillion in new federal debt. This total could be vastly higher. As such, the bill would increase the debt ceiling by much more than it would yield in terms of federal spending cuts and increased economic output.

Pro-Growth Policies

The Heritage Foundation called for pro-growth policies and the bill delivers a few.

The Builder Act permitting and National Environmental Policy Act reforms are very good. However, these pale in comparison to the pro-growth polices in Limit, Save, Grow, and the loss of the REINS Act, failure to incorporate all of H.R. 1, and the failure to repeal the so-called Inflation Reduction Act’s distortionary green tax subsidies are important departures from Limit, Save, Grow.

Furthermore, some of the features of the bill that claim to be pro-growth fail to meet the mark upon further inspection. More on that below.

Student Loan Cancellation

The Fiscal Responsibility Act puts an end to the Biden administration’s unlawful series of pauses of student loan repayment.

Since 2020, borrowers of federal student loans have had to pay zero on their loans, no interest has accrued, and the U.S. Department of Education has counted these zero-dollar “payments” toward the number of monthly payments required for other debt cancellation programs. By the end of August 2023, no more extensions of this scheme will be allowed.

This provision of the bill is only a short-term win, however. The provision seems to codify the legality of the pause, despite the possibility that the legal authority for the pause (the HEROES Act) does not extend indiscriminately to the entire nation. Codifying the current pause suggests that if the president declares a new “emergency,” then the Department of Education is allowed to start a whole new series of pauses.

Much worse than what’s in the bill is what’s not. The deal has complete silence on the Department of Education’s loan cancellation and income-based repayment schemes, each of which will cost taxpayers hundreds of billions of dollars and go further to socialize higher education.

Once again, this is a disappointing departure from Limit, Save, Grow, which fully overturned the student loan bailout.

—Adam Kissel

Welfare Reform and Work Requirements

A primary feature of the Fiscal Responsibility Act are changes to two of America’s biggest welfare programs, Temporary Assistance for Needy Families (TANF) and Supplemental Nutrition Assistance Program (SNAP).

Republican negotiators made the goal of strengthening work requirements in welfare a priority in discussions with the Biden administration, but the Temporary Assistance for Needy Families provisions are harmful and counterproductive. They actually weaken the existing work requirements, overturn the design of the original reform bill, and move the entire TANF program in a liberal direction. 

The Supplemental Nutrition Assistance Program provisions in the Fiscal Responsibility Act are somewhat better than those in the House-passed Limit, Save, Grow Act, but the removal of work requirements for able-bodied adults in Medicaid that were included in the original House Republican bill is a missed opportunity and disappointing.

—Robert Rector and Jamie Hall

Conclusion

In all, it would seem that Limit, Save, Grow has turned into very limited savings and growth.

At a time when American families are suffering from an inflation and interest rate crisis, with real wages falling, we must do better. Our nation is staring down the barrel of an unprecedented fiscal crisis and under the weight of a largely unchecked woke and weaponized federal bureaucracy.

Conservatives around the country have rallied together to give our elected representatives this chance to save our nation. Congressional conservatives should stand by them and demand a bill worthy of their efforts.

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