House Passes Debt Ceiling, Spending Cuts Legislation with Uncertain Future
On Wednesday, April 26, the House passed the Limit, Save, Grow Act of 2023, legislation intending to increase the federal debt limit and decrease spending. It would also repeal several energy tax credits, modify the permitting process, expand work requirements for the Supplemental Nutrition Assistance Program (SNAP), and nullify regulations for federal student loan debt cancellation.
The Congressional Budget Office estimated the bill would cut the deficit by about $4.8 trillion from fiscal 2023 through 2033. That would include a $3.2 trillion reduction in discretionary spending, a net $700 billion reduction in mandatory spending, and a net $400 billion increase in revenue.
The team at Constitution Partners dove into the specifics:
Debt Ceiling: The measure would increase the debt ceiling by $1.5 trillion or until March 31, 2024, whichever comes first, allowing the government to continue financing its operations. The debt limit places a cap, currently set at $31.4 trillion by a 2021 law.
Spending Caps: The measure would cap FY24 discretionary spending at fiscal 2022 levels — $1.47 trillion. It would also limit future increases to such spending to 1% annually for 10 years, reaching $1.61 trillion in fiscal 2033.
Clean Energy Tax Repeals: The measure would repeal new tax incentives established by the Inflation Reduction Act, including credits for:
Previously owned plug-in electric and fuel cell vehicles and commercial clean vehicles
Domestic production of clean fuels based on their carbon emissions
Sale or use of a qualified mixture of sustainable aviation fuel
Sale of domestically produced electricity with zero emissions
Investment in qualifying zero-emissions electricity generation facilities or energy storage technology
Production of zero-emission nuclear power
Production of clean hydrogen based on lifecycle emission rates
Domestic production and sale of qualifying solar and wind components
It would also repeal the enhanced investment tax credit for solar and wind facilities that serve low-income communities and additional allocations of the advanced energy manufacturing tax credit.
Oil and Gas Leasing: The Interior Department would have to reinstate quarterly onshore lease sales on federal lands. At least four oil and gas lease sales would be required each fiscal year in states with land available for oil and gas leasing. The measure would reduce royalty rates for oil and gas leases, and reduce fees associated with land leases.
Energy and Infrastructure Funds: The Limit, Save, Grow Act would rescind unobligated balances under the Inflation Reduction Act related to energy, environment, and infrastructure initiatives. This would include:
$5 billion for energy infrastructure reinvestment financing
$5 billion for climate pollution reduction grants
$1.89 billion for a neighborhood access and equity grant program and $1.26 billion for Federal Highway Administration grants in economically disadvantaged areas
$1 billion for adopting latest energy building codes and zero energy codes
$200 million for National Park Service deferred maintenance projects
Production and Investment Credits: Under the Limit, Save, Grow Act, production and investment tax credits related to renewable energy would only apply to certain facilities, including wind facilities, that began construction before 2022, instead of 2025. The measure also would increase the base rate for the credit by 1.5 cents, from 0.3 cents.
Supplemental Nutrition Assistance Program (SNAP): The measure would increase the age limit from 50 to 56 for work requirements for adults without children under SNAP.
IRS Funding: The package would rescind most of the $80 billion in funding provided to the IRS under the Inflation Reduction Act. However, it would preserve funding for taxpayer services and business systems modernization. The IRS released a plan for spending those funds earlier this month.
Coronavirus Relief: The measure would rescind unobligated Covid-19 relief funds provided under 2020 pandemic laws and the American Rescue Plan.
Student Loans: Regulations would be canceled that cover extensions of federal student loan payment suspensions, including waivers of interest on such loans, that were first provided under the 2020 Covid-19 aid package.
Regulatory Process Changes: Major rules with an annual economic cost of $100 million or more would have to be approved by Congress before taking effect.
What's Next?
The House approval of the Limit, Save, Grow Act follows a months-long standoff between Republicans and Democrats over how to address the looming deadline — expected as soon as this summer — to raise or suspend the debt limit or risk a default. Republicans have insisted on pairing any increase with spending cuts, which Democrats oppose.
After the bill’s approval in the House, Speaker Kevin McCarthy (R-CA), Majority Leader Steve Scalise (R-LA), Majority Whip Tom Emmer (R-MN), Conference Chairwoman Elise Stefanik (R-NY), and Budget Committee Chairman Jodey Arrington (R-TX) issued a joint statement saying, “House Republicans just delivered a plan that will address the country’s debt crisis. Our conference came together to pass the only plan in Washington that will tackle the debt ceiling, stop excessive federal spending and inflation, and put our country back on track for sustained economic growth. Today’s vote also sends a clear message to President Biden – continuing to ignore the problem is not an option. The President must come to the table to negotiate.”
The White House issued a veto threat on April 25, calling the measure “a reckless attempt to extract extreme concessions as a condition for the United States simply paying the bills it has already incurred.” Nonetheless, the bill’s passage on a 217-215 vote hands Speaker McCarthy a small and much-needed symbolic victory, underscoring his ability to bring together his razor-thin, often rambunctious majority.
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