The Senate is ready to raid the figurative emergency rainy day fund again. As we highlighted in a recent Debt Digest, Senate Appropriations Chair Patty Murray (D‑WA) and Vice Chair Susan Collins (R‑ME) have reportedly struck a deal to increase fiscal year (FY) 2025 discretionary spending by $34.5 billion by designating some ordinary spending as emergency funding.
Romina Boccia and Dominik Lett
House Budget Committee Seeks to Reform Emergency Spending as Senate Prepares to Raid Rainy Day Funds
Another CBO Report Warns of Debt Surging, As a Fiscal Crisis Brews
As debt grows and interest costs rise, irresponsible spending by Congress and the White House is taking a larger toll on American workers, reducing economic opportunity and their take-home incomes significantly. It also puts our nation at greater risk of a sudden fiscal crisis.
Emergency Spending and the Erosion of Congressional Fiscal Norms
Irresponsible emergency spending practices have eroded fiscal norms, contributing directly to America’s mounting debt challenge. Over the last three decades, Congress designated 1 in 10 dollars of federal spending for emergencies. Most of this emergency funding was provided through deficit spending with no plan to pay down the accumulated debt with future surpluses.
Will Economic Growth Be Short‐Lived as Fiscal Challenges Abound?
The United States has been experiencing remarkable economic growth, even as debt and deficits soar to unprecedented heights. The economy has benefitted from lower interest rate sensitivity in the market and fiscal and monetary tailwinds. These dual trends are largely temporary, hiding the debt drag beneath the surface.
Including Emergency Spending in Fiscal Projections Distorts the CBO Baseline
Congress recently approved a $95 billion foreign aid package to send aid to Ukraine, Israel, and the Indo‐Pacific region. Including this new “one‐time” emergency spending in fiscal projections distorts the Congressional Budget Office (CBO) baseline.
The High Cost of War: Ukraine Aid Could Top $240 Billion
To date, the US has committed about $114 billion in Ukraine‐related emergency funding, equivalent to the combined 2023 budget for the Department of Homeland Security and NASA. Should Congress decide to pass additional emergency funding, Ukraine aid plus interest could top $240 billion.
The Threat of Fiscal Dominance: Will the US Resort to Money‐Printing to Finance the Rising Debt Challenge?
With Congress currently unwilling to seriously address the entitlement spending problem that’s driving the US toward a fiscal cliff, it’s worth evaluating the possibility of more frequent episodes of fiscal dominance and their consequences.
The Price of Shortsightedness: Emergency Spending’s $2 Trillion Interest Tab
Over the past 30 years, we estimate that emergency spending has generated almost $2 trillion in interest costs. Congress should reject the allure of costly, short‐term budget thinking and offset new emergency spending.
New Emergency Spending Would Cost $28-$41 Billion More Than Incomplete Budget Score Suggests
Legislators and the public tend to underestimate the fiscal costs of emergency spending. Emergency supplemental bills, such as the Ukraine‐Israel foreign aid package, are often billed as one‐time, temporary costs. This framing obscures the tens of billions of dollars in interest costs generated by new deficit spending.
Seven Emergency Spending Reforms Congress Should Consider
Congress designated $12 trillion as emergency spending over the last 30 years, according to our recent policy analysis. That’s equal to 43 percent of public debt. Despite the true size and scope of emergency spending remaining obscured until recently, some legislators have been leading the way on the interlinked issues of emergency spending and emergency powers.