Romina Boccia and Dominik Lett
Congress is barreling toward a March 14 discretionary funding deadline with no agreement in sight. Republicans are aiming to pass yet another stopgap funding patch through the end of FY 2025, again failing to deliver a regular budget. With deficits at $2 trillion, Congress should be reining in discretionary spending, including instituting spending caps and returning to pre-pandemic spending levels. Instead, legislators are likely to extend current funding levels.
This pattern of budget dysfunction is another missed opportunity to downsize federal spending by returning responsibility for most domestic programs to states, localities, and the private sector (such as education) and eliminating distortionary spending (such as corporate welfare).
On March 8, House Republicans released the text of a 99-page stopgap funding measure, called a continuing resolution (CR), that covers the remaining fiscal year. The CR mostly extends FY 2024’s funding levels of $1.6 trillion in budget authority but makes a few adjustments, adding $6 billion for defense while claiming to reduce nondefense discretionary spending by $13 billion.
Major DOGE cuts, like defunding the Department of Education or USAID, are absent. Critically, the CR waives any budget sequestration that would have occurred due to the stopgap measure remaining in place past April 30—another violation of fiscal responsibility as Congress reneges on a deal it made the last time legislators suspended the debt limit.
Summary
Per AP’s Kevin Freking, the CR provides $892.5 billion for defense and $708 billion for nondefense. If you ask Republican aides, the CR represents a small net $7 billion decrease in spending compared to FY 2024, but the devil is in the details. By our assessment, the CR is a mixed bag at best and fails to right-size federal spending by closing down failed government programs and devolving responsibilities back to states and the private sector.
Below, we review the status of the stopgap debate, including notable changes from FY 2024 funding levels and a more responsible path forward. Key highlights include:
Boosted defense spending, including for shipbuilding and service pay.
Mix of nondefense spending increases and cuts, with housing and disaster relief seeing the biggest plus-ups.
Defunding of earmarks, a small win for fiscal restraint.
Defense Gets a Boost
On the defense side, the CR includes a request by the Trump administration to boost spending on shipbuilding and to fund a significant pay increase for service members. In total, defense gets a $6 billion increase over prior-year levels. As Rollcall’s Aidan Quigley notes, that comes on top of $6.6 billion in “emergency” funds appropriated in the December CR.
The CR provides an additional $6 billion for veterans’ health care to cover a projected shortfall. Conveniently, House Republicans don’t count this as part of their topline math since the money is classified as mandatory spending. If they did, the claimed net cuts would basically be erased. The benefit increase also adds insult to injury since it stems from the 2022 Honoring Our PACT Act, a non-offset benefit increase that added $277 billion to deficits over 10 years.
Notably, the administration requested but did not receive (at least, in full) several new spending authorities, including a whopping $32 billion in unjustified transfer authority to shift funds between defense programs, the authority to start new programs not authorized in the previous fiscal year, and the elimination of the “80/20 rule,” which requires no more than 20 percent of defense funds to be spent at the end of the fiscal year.
In the proposed CR text, the administration only received a quarter of its requested transfer authority ($8 billion), and the 80/20 rule was altered to a 60/40 distribution. These changes may appeal to defense hawks who prioritize budget flexibility for military readiness, but they are hardly good fiscal policy and risk encouraging wasteful spending. By weakening the 80/20 rule, for example, the Department of Defense is more likely to engage in end-of-year spending sprees and frivolous purchases. Still, it’s worth pointing out that appropriators did not fully cede to the executive here and held the line on some semblance of responsible defense budgeting.
Nondefense Sees Mix of Cuts and Increases
Outside of defense, the CR provides many of the “anomalies” requested by the administration, including a $4.5 billion increase in housing subsidies, a $2.2 billion plus-up for the Federal Emergency Management Agency’s Disaster Relief Fund (after Trump called for “maybe getting rid of FEMA”), and a series of other spending increases spread across health care, airline security, food stamps, and more.
The administration also requested and received the authority to expand crop insurance payments to non-insured producers. Under current law, non-insured producers generally receive payments covering up to 70 percent of revenue losses. The administration request would bump this up to 90 percent in cases of “de minimis” losses. This expansion of a costly subsidy should be rejected. Small revenue losses are a routine risk of farming that farmers are well aware of—this seems like a pure giveaway to appease legislators from affected states who have been lobbying for more farm aid. Raising the non-insured reimbursement rate weakens risk management incentives and increases moral hazard. Instead of broadening the subsidy, federal crop insurance should be repealed, saving $100 billion over the next decade.
So, where is non-defense getting cut? One of the biggest fiscal wins in the CR is the zeroing out of billions of dollars of nondefense earmarks. Earmarks primarily authorize pork barrel spending, inviting fraud, waste, and abuse. This is a temporary return to form for Republicans, who banned earmarks after the 2010 midterms. Hopefully, they can carry this change forward, reinstating the earmark ban.
In addition to cutting earmarks, the CR features a $20 billion rescission to IRS enforcement and other smaller rescissions to various programs that help offset the spending increases. Thankfully, the CR does not seem to rely on cutting the gimmicky Commerce Nonrecurring Expenses Fund (a fake cut) to offset spending increases, a marked improvement over the administration’s initial request.
More of the Same
By and large, the latest CR is more of the same, a feature of Washington’s budget dysfunction and the never-ending punting of deadlines. Rather than face the tough discussions of reducing and capping discretionary spending at pre-pandemic levels, Congress is eyeing another CR that locks in post-pandemic bloat. Credit to appropriators for cutting earmarks, but addressing this pork barrel spending is a mere drop in the bucket.
Ultimately, kicking the can down the road will only worsen the nation’s fiscal outlook. Breaking this cycle is long overdue, but with yet another CR, Congress remains unwilling to enact fiscal discipline.
