U.S. Department of the Treasury (Treasury) Secretary Janet Yellen announced on January 19 that the federal government had reached its statutory debt limit and that Treasury would begin implementing “extraordinary measures” to avoid a default. Negotiations about the raising of the debt limit that play out in Congress over the next year are likely to involve questions about federal funding for domestic programs, including housing and homelessness services.
Established by Congress in 1917, the debt limit, also known as the “debt ceiling,” is the legal limit on the maximum amount of debt that can be taken on by the federal government to finance obligations that have already been approved. Since its creation, lawmakers have voted to raise the debt limit more than 100 times to ensure the federal government can continue paying its financial obligations. The process of raising the debt ceiling has historically been uncontroversial but has become politically contentious in recent years.
When the federal government hits the debt ceiling, it cannot issue any new debt but can continue paying its bills in the short-term by using “extraordinary measures” (that is, by shifting federal funds to keep paying its financial obligations). However, these measures are temporary and expected to be exhausted in June 2023, giving members of Congress only a few months to take action to lift the debt ceiling. Failure to do so would result in the federal government defaulting on its financial obligations, a first-ever event that would throw global financial markets into chaos.
Despite the urgent need to raise the debt ceiling, House Speaker Kevin McCarthy (R-CA) has pledged to use debt ceiling negotiations to demand cuts to the federal budget. The same tactic was used in debt ceiling negotiations in 2011 and resulted in the “compromise” enactment of the “Budget Control Act of 2011,” which imposed austere spending caps on discretionary spending for the next decade in exchange for raising the debt ceiling. Most Senate Democrats and the White House are calling for a “clean” raising of the debt ceiling, without any policy strings or funding cuts attached. However, due to the divided Congress, bipartisan support will be needed in both chambers to move any proposal.
The emerging debt ceiling debacle foreshadows difficult negotiations ahead over the fiscal year (FY) 2024 budget, which will need to be finalized by October 1, the beginning of the new fiscal year. Speaker McCarthy is pushing to cap FY2024 spending at FY2022 levels, which would result in an estimated $130 billion in cuts, primarily to non-defense programs that would likely include affordable housing and homelessness resources.
It is unacceptable to balance the federal budget by demanding cuts to programs that help the lowest-income households survive. There is a national shortage of approximately 7 million affordable, available homes for people with the lowest incomes, and only one in four households who qualify for federal housing assistance receives the help it needs. Without adequate federal funding for vital federal affordable housing and homeless assistance programs, households with the lowest incomes will continue to live precariously, only one missed paycheck or unexpected emergency away from housing instability, eviction, and, in the worst cases, homelessness.
NLIHC and our members, partners, and allies will continue working to advance the policies needed to ensure everyone has a safe, affordable, accessible place to call home and to guard against spending cuts and harmful proposals that would increase barriers to receiving housing assistance for people with the lowest incomes.
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