Caps, Caps, and More Caps

When the Fiscal Responsibility Act (FRA) was enacted in June 2023, it suspended the federal debt limit until the beginning of 2025 in exchange for imposing caps on discretionary spending for fiscal years (FYs) 2024 and 2025, enforced by across-the-board sequestration. It did not only impose caps; it mandated that they be revised if any short-term continuing resolution (CR) were in place to fund any portion of the government as of January 1, 2024, or 2025.

When the FRA was announced, it was accompanied by a “side agreement” that was not part of the law itself. The agreement included a host of budgetary maneuvers and other provisions to bring actual non-defense discretionary spending above the caps while still adhering to them on paper.

January 1, 2024, has come and gone, and sure enough, a short-term CR remains in place. This raises questions about the spending caps that will be in play under various scenarios.