Congress is on a Christmas spending spree
Romina Boccia and Dominik Lett
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At a time when federal deficits clock in at $2 trillion annually and with interest rates at historic highs, Congress should avoid complicity with President Joe Biden’s supplemental spending gamesmanship. Topping off federal budgets under the guise of emergency spending should not be viewed in isolation. It is part of a time-honored tradition of hoodwinking taxpayers with false claims of urgency.
Senate Majority Leader Chuck Schumer (D-NY) has taken initial procedural steps to vote on a $106 billion foreign aid supplemental package. The proposal is packed with sweeteners, tying together funding for Ukraine, Israel, Indo-Pacific partners, and more.
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To secure enough votes to pass the bill, Schumer will need the support of House Republicans, who are thus far refusing to agree to the supplemental bill without a hard-line border security bill, which many Democrats feel is a nonstarter. Also in the mix is a separate $56 billion domestic emergency funding request for child care, natural disasters, and high-speed internet that Biden has been pushing.
Go back a few months earlier to the May debt limit deal, and legislators sang a different tune. In the Fiscal Responsibility Act, Congress tied raising the debt limit to a two-year promise to keep annual appropriations below a set level. Like in past fiscal deals, appropriators carved out special exemptions for any spending designated as an “emergency.”
No one should be surprised at Washington’s myopic focus on the latest crisis. Before the ink was dry, Biden and members of the Senate were looking for ways to bust the new spending caps. Already, the grand total of proposed emergency spending, $162 billion, can easily wipe out any theoretical savings achieved for 2024 under the original budget deal. That’s before considering the $16 billion in emergency funds Congress snuck into September’s short-term spending extension.
Surprisingly, fiscal responsibility is not playing a more prominent role in debates over emergency spending. By our estimates, Congress has designated nearly $12 trillion for emergency spending over the last three decades. That’s similar in size to what was spent on Medicaid and veterans’ programs combined. Moreover, the rate at which Congress spends through this budget loophole is increasing. One in 10 dollars was designated as emergency spending in the past decade.
History should act as a guide here. In December 2005, Congress passed a $33 billion emergency supplemental bill for hurricane response and pandemic prevention (influenza, not COVID-19). Six months later, Congress passed a separate $95 billion supplemental bill, primarily funding the wars in Iraq and Afghanistan.
Like today, the 109th Congress attempted to handle two overseas conflicts and many domestic problems by funneling money through emergency supplementals in a nonrecession year. The difference is that, at the time, public debt as a share of the economy was relatively low — just 35% of gross domestic product compared to today’s 98% of GDP.
“I urge every single senator to think where we are at this moment in history,” Schumer said on the floor in support of the foreign aid supplemental. “America’s national security is on the line.”
Schumer’s call to action neglects to mention that fiscal security is national security.
Federal emergency spending sprees, such as in World War II, the Great Recession, and the COVID-19 pandemic, were only possible because bond markets were willing to finance more federal debt. Already, bondholders are demanding higher interest rates in response to expectations for greater inflation for longer as the Treasury’s financing needs continue to grow. At this rate, high debt could constrain America’s capacity to respond to and prepare for real future emergencies. Ironically, fiscally irresponsible emergency spending in the name of national security could make the country less safe.
Emergency spending can be warranted, but Congress has a bad habit of passing rushed, excessive emergency packages filled with unrelated parochial priorities. At a bare minimum, Congress needs to use emergency designations responsibly. Any emergency proposal should be limited to respond to necessary, sudden, urgent, unforeseen, and nonpermanent events. Too often, Congress tacks on excess spending out of sheer convenience.
Better, Congress could establish firm fiscal rules to rein in excessive emergency spending. Legislators should offset new emergency spending by reducing spending in lower priority areas, immediately or at least in the out-years. Such a mechanism would commit Congress to forward-looking budgetary planning and reduce the temptation to use emergencies as a pretext for blowing through statutory spending limits.
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Emergency funding deserves extra scrutiny because it faces less oversight and bypasses the typical trade-off considerations involved in good budgeting. It also contributes directly to America’s mounting fiscal challenge. Over the past 30 years, emergency spending has contributed 43% to the publicly held debt, amounting to $11.6 trillion of the $26.8 trillion debt total.
Annual deficits are in the trillions, and interest rates are at historic highs. Now is not the time to throw gasoline on the Yule log. A Christmas emergency spending bonanza would worsen America’s unsustainable budget trajectory and further undermine trust in the U.S. government as a responsible fiscal steward.
Romina Boccia is the director of federal budget and entitlement policy at the Cato Institute. Dominik Lett is a research associate at Cato.