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CCFB News» July 2023

Manifolds, Manolos, and Manure

The debt limit is a legislative limit on the amount of debt that the U.S. Treasury can incur to cover the expenses previously spent by Congress. Article I Section 8 of the Constitution authorizes Congress to borrow and spend money. 

 

Again. Congress has the power to spend money. Not the Treasury. They have the authority to act on the spending previously approved by Congress. So, in reality, the debt limit has nothing to do with controlling spending. The only people with the authority to control spending are the people who establish and approve the budget and programs. Cue Congress.   

 

Up until the late ‘70s, debt ceiling debates were snooze fests.  Congress raised the limit usually without drama and the public never heard a peep. In 1979, Congress passed “The Gephardt Rule” named for then-Representative Richard Gephardt. The rule automatically lifted the debt ceiling to coincide with the spending amount previously approved by Congress. 

 

After 15 uneventful increases, the rule was repealed in 2011 thus beginning the debt ceiling drama that we are now unfortunately accustomed to. The first debt ceiling battle out of the gate resulted in the very first U.S. credit downgrade.

 

Let’s talk recent history. Unless you’ve been fortunate enough to live in a full media blackout, you’re aware that the latest debt ceiling debate bothered the markets and the U.S.’s standing with foreign markets. Succinctly, the Biden Administration wanted a clean debt ceiling bill.  Republicans wanted spending cuts. Remember the debt ceiling has nothing to do with spending.  In this case, like many times before, the debt ceiling was just the political football of the moment being lobbed around.

 

The result was the Fiscal Responsibility Act of 2023 which suspended the debt limit until January 1, 2025 while also capping discretionary spending during fiscal years 2024 and 2025. Further, a portion of the $80 billion in additional funding for the Internal Revenue Service was also rescinded.

 

Also notable, the Act broadened work requirements for adults ages 50-54 who are Supplement Nutrition Assistance Program (SNAP) recipients with no children in the house. Proponents of the restrictions argue that the work requirements are necessary to grow the workforce and provide additional resources for residents in need. Opponents of the changes are concerned that the deal contains the largest restrictions on SNAP to date since President Biden voted for welfare reform when he was a senator in 1996 during the Clinton Administration.

 

The Congressional Budget Office added their own flare to the conversation by arguing that the broadened work requirements would actually increase SNAP enrollment benefits and spending.

 

For Congressional process hardliners, the addition of SNAP in the Act creates another hurdle given that SNAP is traditionally handled during Farm Bill negotiations. The next Farm Bill is scheduled to be worked on this summer.

 

As much as I love the political process and the idiosyncrasies of government, its time to get down to the business of governing and start acting like adults.

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