Policy Overview
As customary, Congress failed to pass full-year funding bills for federal agencies when the fiscal year 2023 started. As an alternative, Congress relied on standing measures to support agencies (CliftonLarsonAllen, 2023). Considering that the House will get a new majority in 2023, there was some uncertainty that Congress could achieve a compromise on discretionary spending amounts. In time for Christmas, a compromise was made to pass all 12 appropriations packages.
Usually, $1.7 trillion in expenditures is squeezed into a 4,000-plus page comprehensive bill in the last days of the year, with little time for examination, and those extraneous policy measures ride along. In aggregate, the FY2023 Consolidated Appropriations Act offers, albeit with less discretionary spending for non-defense programs than the current legislative majority would have approved, while significantly increasing military spending. The omnibus package also provides $38.2 billion in additional financing for disaster relief and $47.3 billion for assistance to Ukraine’s military (CliftonLarsonAllen, 2023). The measure also covers election laws and improvements to retirement policy. The approximately $138 billion in expenditure cutbacks, set to take effect at the beginning of next year, are likely the most budget-significant aspect of the omnibus legislation.
Historical Background
The two concerns Congress must tackle are the debt limit and government financing. It should be stressed that the debt ceiling is the amount the US government can borrow to fulfill its legally established obligations, such as Social Security and Medicare benefits, military pay, interest on the government’s deficit, tax refunds, and other payouts. Since 1960, Congress has raised the debt limit 78 times under both Republican and Democratic administrations. Public Law 117-73, enacted on December 16, 2021, established the cap at $31.381 trillion (CliftonLarsonAllen, 2023).
Treasury Secretary Janet Yellen has informed Congress that the United States was nearing the debt ceiling and that “exceptional measures” would be used to stay under the limit. These tools will likely be exhausted by the summer, at which point Congress must act to prevent a default. The second concern is the federal budget process, as mentioned above. CAA increased government financing until September 30, 2023, the end of the federal fiscal year (Gray, 2022). In March, Biden will unveil his budget, but Congress is unlikely to approve it. Instead, the next months will be devoted to committee hearings and talks on what may really pass a divided House. Their discussions must be concluded by October 1, 2023, or a governmental shutdown will occur.
Socio-Economic Analysis
First, the measure includes the Electoral Count Reform Act, which will modernize the Electoral Count Act of 1887, which regulates presidential elections. The legislation clarifies certain aspects of the process and reduces uncertainties about the authorities’ duties. The CAA also includes the SECURE 2.0 Act, which builds on the First SECURE Act and a long line of retirement programs (Gray, 2022).
The legislation modifies the tax structure and qualifying requirements for retirement benefits. It would increase automatic enrollment in retirement plans and help employers create retirement programs for their workers. It would increase the Saver’s Credit and provide a credit for matching donations made by employers to individuals making payments on student loans. The measure will raise the age at which older employees must begin accepting mandated distributions from their current plans.
The CAA builds on prior legislative practice by deferring a significant expenditure reduction for 2 years. The legislative Pay-As-You-Go scoreboard has a credit line of $742 billion, mainly owing to the American Rescue Plan Act (Gray, 2022). Everything else being equal, this might necessitate the president to impose a $742 billion sequester early in the following year. The real savings might be closer to $138 billion, but even that would look like too much debt reduction for congressional tastes. Therefore, Congress has postponed this expenditure reduction until 2025, when the theoretical reduction will be almost $1.5 trillion.
The Federal Reserve significantly raised the target range for the federal funds rate in 2022 to better combat rising inflation. According to forecasts, inflation will gradually decrease in 2023 as pressures from factors that, beginning in the middle of 2020, have led demand to expand faster than supply will begin to ease. In 2023, no growth in economic output is expected, and the unemployment rate continues to climb due to the tightening of monetary policy (CliftonLarsonAllen, 2023). Following that point, inflation gradually returns to the Federal Reserve’s long-run target of 2 percent, and production expands more rapidly as interest rates continue to decline.
Compared to its projections from May 2022, a substantially slower increase of real GDP for 2023, higher growth over 2024–2026, and comparable expansion rates for the balance are anticipated. Inflation is expected to be higher in 2023 for two reasons. Recent statistics reveal that inflation has been more sustained across many industries, and supply shortages have been more pronounced. Both trends contrast what the analytics anticipated, and the CAA will not likely address the issues. The Committee for Budget and Policy currently anticipates that both short- and long-term interest rates will be higher, on average, over the next five years, primarily due to greater projected inflation.
Nevertheless, it should be emphasized that if none of the 12 appropriations bills or a continuing resolution (CR) to fund the government is passed, the entire government would shut down. A partial government shutdown would follow from the approval of some of the 12 bills, but not all (CliftonLarsonAllen, 2023). The duration of the closure and the affected agencies will determine the magnitude of the economic damage.
Throughout its history, the federal government has experienced several different shutdowns. The most recent partial government shutdown lasted five weeks, beginning on December 22, 2018, and ending on January 25, 2019 (Congressional Budget Office, 2023). According to estimates provided by the Congressional Budget Office, the partial government shutdown caused a delay of approximately $18 billion in expenditures by the federal government (reimbursement, purchases of goods and services, and the suspended federal services), which resulted in a reduction of $8 billion, or 0.2%, in the forecasted point of real GDP (Congressional Budget Office, 2023). Federal workers and private-sector enterprises that relied on government contracts for products and services were the most affected. Consequently, although the closure may not have had a significant effect on the economy as a whole, it did have a significant impact on various individuals and enterprises.
Throughout the history of the United States, there has never been a breach of the debt limit, which would have far-reaching and possibly highly detrimental effects on the economy. The US government will be unable to issue any further debt if it reaches the debt ceiling; instead, it will be forced to rely solely on the cash it already has (Gray, 2022). The fact that the federal government has a deficit of more than a trillion dollars indicates that more money will be required than will be available, which may soon spiral into an economic crisis. Experts have different ideas about what such effects might be like.
Political Analysis
The discretionary expenditure levels for fiscal year 2023 were not constrained by the statutory spending restrictions mandated by the Budget Control Act of 2011. This is the second year in a row that this has occurred (Gray, 2022). As a result, the White House, congressional leadership, and senior appropriators worked together over many months to negotiate the topline expenditure levels.
The omnibus spending bill for fiscal year 2023 includes numerous critical initiatives important to counties, as highlighted in this report. These include, but are not limited to, providing full funding for the Payments instead of Taxes program and making significant investments in the RECOMPETE pilot program and innovation hubs authorized by the bipartisan CHIPS and Science Act. However, these are not the only provisions included. These initiatives and others supported by the law, including an increase of $550 million in funding to suppress wildland fires (Gray, 2022), would allow counties to offer essential services and prepare for economic development and sustainability in 2023.
In addition to regular algorithmic funding and extensions, the omnibus budget resolution for FY 2023 includes nearly $10 billion in earmarks, indicating 4,000 projects. This marked the first time in nearly a decade that earmarks were involved in an omnibus spending bill. However, the legislation included increased transparency and guardrails (Gray, 2022). Consequently, the federal government will directly fund thousands of county programs and essential infrastructure projects to better serve local communities.
The required legislation will be enacted. It is not anticipated that there will be a grab bag of ideas on the table, but a few extra policies may garner sufficient support from both parties or form part of a bargained package. This is primarily the result of the thin majorities that govern Congress and of the new rules established by the majority party in the United States House of Representatives (the Republicans). For instance, the House will now work under a system called CUTGO, which stands for Cut-As-You-Go. This system stipulates that compulsory expenditure reductions of equal or higher value must offset any additional obligatory expenditure. As an alternative, tax increases cannot be used as an offset.
It remains to be seen how high-stakes negotiations, such as those concerning the debt ceiling and government funding, will be handled in light of the recent election of a Republican majority in the House of Representatives, the election of a new speaker, the adoption of new house rules, the slender majority held by Democrats in the Senate, and the parliamentary process. The outcome can be straightforward legislation that is easy to understand and implement (with no ancillary problems), or the process can become much more difficult. Throughout the back-and-forth of discussions, we do not anticipate any highly politicized topics being brought to the table. Still, a Democratic or Republican agenda may be advanced if it is linked to a concern of the other political group.
Last but not least, it is believed that federal state bodies will play an outsized role this year due to the increased difficulty of passing legislation through Congress. Stakeholders in the healthcare industry and the president are likely to look to relevant agencies for help advancing their respective agendas, so that policy changes can be achieved through the rulemaking process.
Evaluation
It should be admitted that the Act contains provisions that may be considered positive and primarily related to the healthcare dimension. First, there is the extension of telehealth for two years. Second, a portion of the Medicare reimbursement reduction for CY 2023 is prevented. Third, financial aid and loan forgiveness are expanded for psychological health professionals.
Fourth, $153 million was allocated to the Behavioral Health Workforce Education and Training (BHWET) initiative, a boost of $30 million. Fifth, there is the fact that $20 million, an increase of $10 million, will assist municipalities in establishing portable mental health crisis intervention teams. Sixth, a $10 million investment will be provided as grants to the states to help them implement equity (National Association of Social Workers, 2023; Park et al., 2023).
However, it should also be recognized that another sad instance of a long-standing tradition in Congress has occurred. There is not much time left until the financing for the federal government runs out, and it seems probable that Congress will pass a funding bill worth $1.7 trillion into law with minimal examination. There is no formal estimated cost available for the lawmakers or the community to get an unbiased view of the budget consequences of the new possible law, and there is precisely zero chance that the public has had the time to critically examine the bill and the pertaining report language in its entirety. There is also no formal cost approximation obtainable for the public to get an impartial perception of the budget impacts of the new legislative perspective. While there are some significant policy advancements, the CAA generally exemplifies the worst impulses in the current Congress and should not be supported, excluding, maybe, the healthcare sphere.
References
CliftonLarsonAllen. (2023). What Congress is facing in 2023 and how it affects health policy.
Congressional Budget Office. (2023). The budget and economic outlook: 2023 to 2033.
Gray, G. (2022). Highlights of the FY2023 Consolidated Appropriations Act. American Action Forum.
National Association of Social Workers. (2023). End of year federal spending bill includes support for mental health and other NASW priorities.
Park, E., Dwyer, A., Brooks, T., Clark, M., & Alker, J. (2023). Consolidated Appropriations Act, 2023: Medicaid and CHIP provisions explained. Georgetown University Health Policy Institute.