The recent proposal around the 2024 fiscal year appropriations announced by Leader Schumer and Speaker Johnson is being framed as largely in line with the Fiscal Responsibility Act negotiated over the summer.
The new spending deal includes a bipartisan spending deal that was agreed upon by House Speaker Mike Johnson and Senate Majority Leader Chuck Schumer.
However, the proposal contains several key differences from the FRA – differences that will likely lead to more significant cuts to non-defense programs than would have happened had the FRA been maintained.
“Allowing House Republicans to treat the IRS as a piggy bank by accelerating the unnecessary IRS cuts in the debt ceiling deal only creates a funding hole in 2025 that could require more cuts to the IRS and critical programs,” said Igor Volsky, Executive Director of Groundwork Action. “Simply put: lawmakers must not support a deal that further empowers wealthy tax cheats to avoid paying their legal share, deprives our government of revenue, and undermines our economic growth.”
Groundwork Action shared the following explainer, which is meant to help clarify the differences between the deals and what that means for FY2024 and FY2025.
The Schumer/Johnson Proposal Largely Ratifies the True Non-defense Spending Levels for FY24 That Were Agreed to as Part of the Fiscal Responsibility Act.
The Fiscal Responsibility Act included caps on defense and non-defense discretionary spending. For the defense caps, what you see is what you get, and the true level of funding for defense largely matches the capped level.
However, for non-defense (NDD), the deal included a range of adjustments that would, in effect, raise the true level of NDD spending to about $70 billion above the capped level, roughly matching FY23 true funding levels. These adjustments were a mixture of painless accounting mechanisms as well as some spending offsets (e.g., COVID rescissions and IRS rescissions).
The Schumer/Johnson proposal would reach the same true funding levels as the original deal for FY24. However, the mix of adjustments is different – and that will impact FY2025.
For FY2024, the Schumer/Johnson Proposal Includes More Real Cuts to Non-ndd Funding Than the Fiscal Responsibility Act.
Although the Schumer/Johnson proposal reaches the same level of true NDD funding for FY24 as the original deal, it does so in a different way.
In the original deal: Of the $70B in adjustments, the original deal included about $21B in real cuts to non-NDD funding as offsets to create room under the caps. That included $11B in rescissions from COVID relief legislation, as well as $10B in rescissions from the IRA-provided funding to the IRS. The other $50B in adjustments were largely accounting mechanisms that did not have material effects on any other spending, but simply created more room for NDD funding.
In the Schumer/Johnson proposal: This deal achieves the $70B in adjustments with roughly $40B in real cuts to non-NDD funding. This includes an additional $10B in IRS cuts this year, as well as another $7.5B in COVID rescissions ($6.1B of which are entirely new, with the rest being pulled forward from applying as offsets in FY25). As a result, Schumer/Johnson’s adjustments for FY24 are roughly $30 billion in “painless” accounting mechanisms, with $40B in offsets that do affect other spending.
As a Result, the Schumer/Johnson Proposal Will Likely Lead To Damaging Cuts to Non-defense Appropriations for Fy 2025.
The Fiscal Responsibility Act sets enforceable caps for both FY2024 and FY2025. If honored, the Schumer/Johnson proposal will allow Congress to enact appropriations at the FRA levels for FY2024 without risk of sequestration, while still maintaining the true NDD funding levels envisioned by the deal.
FY2025 will be much more challenging. The caps in FY2025 go up by only one percent, which means that in order to reach the same true funding levels as FY2024, Congress will again need to agree on roughly $70 billion in adjustments.
Whereas the original deal identified where those adjustments would come from, the Schumer/Johnson proposal leaves a roughly $30 billion hole. That’s because it both pulls some of those planned FY2025 adjustments forward to FY2024 (most especially the planned IRS rescission of $10 billion), but also because contains about $20 billion less in accounting mechanisms that could be carried forward into FY2025.
As a result, in Order to Simply Flat Fund Ndd Next Year, Congress Will Likely Have to Find an Additional $30B in Non-Ndd Cuts, Reintroduce the Larger Accounting Mechanisms That House Republicans Have Now Rejected, or Else Adjust the Caps.
The Schumer/Johnson proposal leaves both the IRS and other non-defense programs, like housing, education, and nutrition assistance, incredibly vulnerable to additional cuts in FY2025. Speaker Johnson and Republicans are already saying “they negotiated an additional $10 billion clawback, for a $30 billion cut” to the IRS.
In essence, moving up cuts from FY2024 into FY2025 will result in even more cuts coming next year.