Congress sets stage for ‘side deal’ spending fight with White House 

Congress is setting the stage for another partisan government-funding fight, as conservatives look to chip away at a previous “side deal” struck between Speaker Kevin McCarthy (R-Calif.) and the White House aimed at boosting nondefense dollars.  

Democrats have been sharply criticizing a recent announcement by House Appropriations Chair Tom Cole (R-Okla.) previewing cuts the party could seek for fiscal year 2025 funding for nondefense programs, as GOP negotiators prepare to ramp up the annual spending process in the coming weeks.  

As part of the proposed allocations for the coming fiscal year, Republicans say nondefense would stand to be “cut effectively by 6 percent,” while defense funding would see a modest increase of one percent.  

Republicans say the proposed figures – which call for about $895 billion for defense funding and $710.7 billion in nondefense dollars for fiscal 2025 – is in line with the Fiscal Responsibility Act (FRA), passed by Congress last year to set spending ceilings as part of a larger deal to raise the debt limit.  

But Democrats and advocates have accused Republicans of leaving billions of dollars on the table for nondefense programs, while forgoing critical components of the overall bipartisan deal to plus up nondefense funding.

“It is déjà vu all over again,” Rep. Rosa DeLauro (Conn.), the top Democrat on the House Appropriations Committee, said this week. “Where is Yogi Berra when you need him?” 

The FRA sets caps on annual discretionary spending at about $886 billion for defense spending and almost $704 billion for nondefense spending for fiscal year 2024. It also allows a one percent increase to defense and nondefense programs to those caps funding for the following fiscal year.

But Republicans and Democrats have drastically different arguments around what that one percent for nondefense programs should look like. Republicans don’t want to include the “side deals” in calculating the 1 percent increase. Democrats say it must be included.

Democrats said this week that the enacted funding for nondefense programs for fiscal year 2024 actually comes in around $778 billion largely because of the McCarthy-Biden handshake deal.

That jump comes after the White House detailed changes agreed to by GOP leadership last year to redirect funding from areas like the IRS and coronavirus relief with the purpose of reinvesting it into other nondefense programs. Democrats say the handshake agreement was key to locking down support from their side of the aisle at the time. 

Conservatives unsuccessfully pushed to ditch that agreement in full when it came time for both chambers to produce the fiscal year 2024 funding bills. But budget watchers say changes in a funding agreement struck later by Speaker Mike Johnson (R-La.) and Senate Majority Leader Chuck Schumer (D-N.Y.) also raises uncertainty around where the original handshake deal for nondefense dollars stands for the next fiscal year.

In a letter detailing the changes earlier this year, Johnson noted plans to use roughly twice as much clawed-back IRS funds than intended in the original plan to offset nondefense spending for fiscal 2024. Experts say that could put an added squeeze on negotiations when they craft funding for fiscal 2025, as some of those yanked-back funds were also expected to be used to help offset nondefense funding for the coming fiscal year as well.

“Instead of doing $10 billion of IRS in the first year, and $10.23 billion in the second year, they did $20.2 [billion] in the first year,” Bobby Kogan, a senior federal budget policy director at the Center for American Progress and a former Senate Democratic budget aide, said in an interview on Friday.

“And so then it’s like, ‘What are we going to do in the second year? Is there going to be more IRS? If it’s not more IRS then you need to find the money somewhere else,’” he said, noting estimates that the offsets and budget tweaks in the original McCarthy-Biden plan would have allowed for north of $60 billion in additional nondefense funding for fiscal years 2024 and 2025 each.

“How you figure out how to make to $69.69 billion worth of side deal is a giant question,” Kogan said, adding that, even if Cole did “want to abide by the real deal, then you need to figure out what are you going to do under the hood.”

Democrats now say nondefense funding would need to be at least $786 billion for fiscal 2025 to be consistent with the overall debt limit deal calling for a one percent increase.

“Consistent with the bipartisan budget agreement, funding for both nondefense and defense must increase by nothing less than 1 percent over 2024,” DeLauro said in a statement this week, in which she also accused Republicans of leaving “on the table at least $75 billion in investments in American families.” 

However, many conservatives were upset with the amount allocated to nondefense dollars in the government funding packages passed for fiscal 2024 back in March. They say the handshake deal shouldn’t be included in the calculation for 2025.

“The bills written by this committee will adhere to law set by the Fiscal Responsibility Act—with no side deals — and focus resources where they are needed most,” Cole said in his announcement this week.  

The announcement also detailed interim allocations for the appropriation subcommittees that craft the 12 annual funding bills.

While it notes that the figures are “subject to change with evolving information,” as the committee plans to begin markups next week, it also provides a glimpse into where Republicans could be eyeing larger cuts to nondefense programs. 

That includes subcommittees that fund agencies such as the departments of Labor, Health and Human Services, Education, State, financial services and general government, which the notice said would “receive significant cuts of 10-11 percent” under the proposed figures. 

Senate Democrats have already fired a warning shot over the notice, with Senate Appropriations Chair Patty Murray (D-Wash.) saying the upper chamber will “include the full resources that House Republicans and the President agreed to last year.” 

“Bottom line: we cannot shortchange our country’s future—we’ve got to invest in it, and at a minimum, that starts with providing the full funding for domestic programs that was agreed to last year,” she said.  

“But as lawmakers on both sides of the aisle have made clear, the current caps are inadequate to meet this moment, so we've got to find a way to deliver the resources for defense and nondefense we need to strengthen our economy and keep America safe,” she also noted. 

Her comments come as senators on both sides have signaled more dollars are needed for defense spending beyond the one percent increase in the FRA.  

Congress has until late September, when current government funding is set to expire, to pass legislation to keep the lights on or risk a shutdown. Republicans are looking to pass out all 12 bills out of committee by August recess. 

However, Congress is expected to need some kind of stopgap measure, also known as a continuing resolution (CR), by the end of September to prevent a funding lapse. And some conservatives are already pressing for a longer CR that would run beyond the end of the calendar.

If Republicans reclaim the Senate and White House, they’d then have more leverage over 2025 spending.

Rep. Andrew Clyde (R-Ga.), a member of the House Appropriations Committee, told reporters this week that the party “absolutely should not be sending a CR into the lame duck session.” 

“Why would we do a CR when we have the least amount of leverage? We should be doing a CR up to the point where we we have the most amount of leverage,” he said. He’s pushing for a “February-March timeframe.” 

Democrats and even some GOP appropriators are looking to have the bills completed by the end of the year, particularly as Congress stares down a busy 2025 – when some tax cuts put in place under the Trump administration are set to expire and another fight over the debt ceiling awaits.  

“We’ve gotta finish this up. There will be a continuing resolution, but we need to finish these bills by December,” DeLauro said when asked by reporters whether Republicans are setting themselves up for chaos next year.  

“In the long run, they need Democratic votes to get them across the finish line,” DeLauro said.