Set-Aside Alert news analysis:

Debt default averted: Bipartisan bill cuts fed’l spending by 1%

      Congress narrowly avoided causing a devastating default in the nation’s ability to borrow funds by approving a deal with President Joe Biden to suspend the debt ceiling until Jan. 1, 2025, shortly after the 2024 election.

      In exchange for allowing a raise to the debt ceiling, federal spending will be capped at approximately current levels in fiscal 2024 and will be cut by 1% in fiscal 2025. Those caps likely would cause agency budgets to fall behind inflation. The bill also made several policy and program changes.

      The House and Senate voted to approve a bill to carry out the deal, and the president signed it, just days before the June 5 deadline when the nation’s credit limit would have had a catastrophic breach.

      For federal contractors, the avoidance of default brings relief that feared delays and disruptions in payments also have been avoided and the current appropriations may be spent roughly on schedule through the end of the fiscal year on Sept. 30. The traditional “busy season” for federal spending starts on July 1, as it does each year.

      At the same time, there is concern that the debt ceiling bill’s caps on spending in the coming year would have to be included very quickly in fiscal 2024 appropriations bills already under discussion. That rushed timing is raising anxiety.

      The debt ceiling bill puts defense spending in fiscal 2024 at $886 billion, which is a 3% increase from current levels.

      Also in fiscal year 2024, non-defense discretionary spending would be flat and roughly the same as the fiscal 2023 appropriations with various adjustments. In fiscal year 2025, those budget caps would rise by 1%.

      Other provisions include:

• Rescinding $28 billion in unobligated Covid relief funds;
• Reducing the Internal Revenue Service’s budget by $1.4 billion and also withdrawing about $20 billion provided to the IRS by the Inflation Reduction Act. That money was meant to help restore the agency after years of reductions. The IRS said the additional funds were for supporting operations, modernizing customer service technology and providing assistance to taxpayers;
• Restarting student loan payments that had been suspended by the Biden Administration;
• Implementing work requirements for Supplemental Nutrition Assistance Program and Temporary Assistance for Needy Families benefits on people up to 55 years old (the current threshold is 50), with carve-outs for veterans and homeless people; and
• Reducing the authorities of the National Environmental Policy Act to allow for streamlined permitting for energy projects.

More Information:
Debt ceiling bill text: https://tinyurl.com/52vt8mfu

Debt default averted: Bipartisan bill cuts fed’l spending by 1%

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