A Mixed Bag in the Year-End Fiscal Legislation

David Super

     Congressional negotiators just made public their year-end fiscal legislation.  The bill, which likely will pass on Friday, addresses the fiscal year that began October 1 and, in some instances, future years.  House Republicans early on made clear their disinterest in this project so negotiations involved the four forces whose approval legislation requires:  the House majority, the Senate majority, the Senate minority, and the President.  On some key matters, negotiators were unable to agree, leaving difficult issues unsettled indefinitely.  On a surprising number of matters, however, they found compromises.

     The core of the package was appropriations for federal fiscal year 2023.  Had negotiators failed, the result would be a year-long continuing resolution (CR) freezing programs at current levels without adjustment for inflation.  With full-year CRs highly likely in each of the next two years – and possibly longer if divided government continues beyond 2024 – getting discretionary programs necessary funding adjustments was rightly a top priority for Democrats.  (The largest domestic programs – including Social Security, Medicare, and Medicaid – receive funding under permanent legislation, some of which includes inflation adjustments.  But the much more numerous programs that depend on annual appropriations –

from the EPA and the National Park Service to the TSA, air traffic control and the administration of federal benefit programs – could seriously erode under a nominal-dollar freeze, reducing key services and conveying an impression of governmental incompetence.) 

     In the end, eleven of the twelve annual appropriations bills were rolled into omnibus legislation to receive funding increases.  The Pentagon will receive the largest increases, but domestic and international discretionary programs also will benefit.  Final cost estimates should become available late today or tomorrow. 

     The one exception was the appropriations bill for the Department of Homeland Security.  Negotiators could not reach agreement on immigration-related riders Republicans sought.  As a result, Homeland Security and related functions will be subject to a full-year continuing resolution at frozen funding levels.  New funding for DHS could have supported both positive and troubling activities.

     Several other pieces of legislation will be attached to the omnibus appropriations bill.  Some of these, such as reform of the Electoral Count Act, will no doubt be addressed by experts in those fields.  I will confine myself to matters focusing on low- and moderate-income people. 

     Funding for public benefit programs in the territories has been chronically inadequate throughout this country’s history, a remarkable example of lingering de jure discrimination against a population 98% composed of people of color.  (I am about to submit a law journal article on how to understand this disparity.)  The omnibus does not remotely repair this deficit, but it does provide substantial new money for Medicaid in Puerto Rico over the next five years while providing permanent increases for the other territories.  Some aggressive moves by the Biden Administration to bolster Puerto Rico’s funding unilaterally appear to have provided needed leverage.

     Republicans long have complained that the Biden Administration has continued the pandemic-driven temporary expansions of Medicaid and nutrition assistance programs too long.  Although an end to these measures was expected during 2023, Republicans wanted to legislate this end badly enough that they agreed to permanent, structural improvements to programs in both areas in exchange for a date-certain end to the temporary measures.  The estimated savings from an early end to the temporary expansions also provided fiscal offsets making the permanent improvements possible.  Over the medium- and long-term, these improvements will bring much more aid to low- and moderate-income people than the benefits lost by accelerating the end of the pandemic measures. 

     Among the improvements are permanent “continuous eligibility” for children in Medicaid.  This will prevent children from losing eligibility due to often-temporary increases in their family income over the course of a year.  The legislation also will make permanent a version of the highly successful pandemic program providing children food during summers when school meal programs are closed.  The existing Summer Food Service Program for Children serves only about one in seven eligible children due to difficulties securing sponsors. 

     Missing from the legislation is any improvement in the Child Tax Credit, which significantly reduced child poverty during the last half of 2021 under a temporary expansion in the American Rescue Plan Act.  Although Democrats dramatically reduced what they were seeking, Republicans refused even to negotiate on a tax package.  As a result, various tax breaks that business interests had sought – and that children’s advocates insisted should only move in tandem with a partial restoration of the Child Tax Credit expansions – also were not included.  If children’s advocates can maintain the link between corporate tax breaks and the expanded Child Tax Credit, business interests may pressure the new House majority into making the concessions that Senate Republicans rejected this time. 

     Unfortunately, negotiators did agree on largely regressive retirement savings changes that will funnel more money to the affluent while doing little for low- and middle-income people who can face serious struggles during retirement.  Democrats have trouble resisting even badly-designed retirement proposals.

     Overall, this is a surprisingly good package, even if it falls far short of what many progressives had hoped to achieve.  This is the most that could be expected with a rapidly expiring House Democratic majority and just 47 Democrats in the Senate (along with two Independents who are fairly reliable and one who is decidedly less so). 

     The next two years look to be unusually unproductive legislatively, with House Republicans likely too divided, too partisan, and too dependent on their most extreme Members to make deals even on highly favorable terms.  Senate Republicans knew that and drove a hard bargain.  Still, the improvements are real and will be lasting.  This deal was more than worth doing. 

     The next two years likely will be consumed with responding to extremist House Republicans’ attempts to weaponize threats of a government shutdown (blocking appropriations for 2024 and 2025) or a federal government default (blocking increases in the debt limit).  If President Biden proves as weak a negotiator as President Obama was, this could result in serious, lasting harm to government’s ability to meet basic human needs.  On the other hand, if he stands his ground in insisting that these measures are basic obligations of whomever is in power, we could see a lasting move away from brinksmanship and crude extortion in the federal government. 

     Although theoretically Democrats could have tried to raise the debt limit through budget reconciliation during this lame-duck session, that was never a realistic prospect.  Any attempt to do so would certainly have ended all negotiations with Senate Republicans over the important gains in the omnibus appropriations bill.  It also might have failed if Sen. Sinema had defected.  And ultimately, it should be unnecessary. 

     House Republicans have had no qualms about increasing the deficit and raising the debt limit when Republicans were in the White House.  Democrats resisted foolish advice to hold the debt limit hostage even when the cause of rising debt was the egregious Trump tax cuts.  This ought to provide more than enough leverage for the President to cast blame on House Republicans for any partial government shutdowns and for him again to mobilize business leaders to warn Republicans off flirting with default over the debt limit. 

     @DavidASuper1