This week, President Biden released his fiscal year (FY) 2024 budget request, which seeks total discretionary spending of $1.695 trillion, split between $886 billion for defense programs and $688 billion for nondefense, reflecting increases of three and seven percent respectively over FY23. Building on themes and policy proposals in last month’s State of the Union address, the President’s budget for FY24 features deficit-reduction goals alongside new programs and significant new investments in existing initiatives. The President’s annual budget request is as much a messaging document as it is a budget proposal, setting overall federal fiscal policy and detailing the Administration’s priorities for federal agencies and programs. With the Administration’s recommendations now in hand, Congress will begin its budget and appropriations process under the specter of the summer’s looming debt-limit fight.

Budget Overview

The President released his topline budget overview and select summaries, but many agency-specific budget proposals will not be available until early next week. Still, the available information shows a comprehensive proposal to increase government revenues and investments in key areas.

Despite proposing a seven percent growth in discretionary federal programs, the budget, relying on a series of revenue increases, seeks to provide over $2 trillion of deficit reduction in the next 10 years without reducing or restricting Social Security or Medicare benefits. The President is once again proposing to raise the corporate tax rate and increase taxes on individuals earning more than $400,000. He also calls for raising the tax on corporate stock buybacks and creating a 20 percent tax on households worth more than $100 million.

On the spending side, the President is proposing an ambitious list of new investments, including expansions of the child tax credit and Affordable Care Act subsidies, guaranteed family and medical leave, universal pre-K, two years of tuition-free community college, and funding for school districts and research programs focused on closing the K-12 achievement gap and addressing learning loss from the pandemic. Of interest to universities, the budget also seeks an $820 (11 percent) increase in the maximum Pell Grant, which would bring it to $8,215. The President is also proposing increases for biomedical research, including a $1 billion increase for the nascent Advanced Research Projects Agency for Health (ARPA-H) and $500 million for the National Cancer Institute to support the Cancer Moonshot initiative; however, the President is seeking only a modest 2 percent increase for NIH overall. The budget includes requests for $21 billion in CHIPS and Science Act-authorized activities, including a $1.5 billion (15 percent) increase for the National Science Foundation (NSF) and specifically $1.2 billion for the agency’s Technology, Innovation, and Partnerships directorate. The proposal also seeks to address climate change by proposing investments of $4.5 billion in clean energy infrastructure, $16.5 billion in total cross-agency climate science and clean-energy innovation, and $24 billion to improve communities’ climate resilience. In a Massachusetts specific proposal, the President’s budget calls for directing $350 million toward replacement of the Cape Cod bridges in FY24 as part an initial investment in a total commitment of $600 million.

Below are more details.

Congressional Budget Outlook

The federal debt limit has dominated discussions of fiscal policy this year, but FY24 funding is a must-pass item on this year’s agenda. Already, Congressional leaders are laying the groundwork for the appropriations process by holding hearings featuring Cabinet and senior Administration officials to discuss their agencies’ spending plans.

That process will involve new faces and new political pressures. In the Senate, new Appropriations Committee Chair and Ranking Member Patty Murray (D-WA) and Susan Collins (R-ME) are pledging to work together to move individual spending bills to the floor. In the House, the seasoned leadership of Appropriations Committee Chair Kay Granger (R-TX) and Ranking Member Rosa DeLauro (D-CT) face new challenges bridging partisan differences, given that many in the Republican majority are seeking to cap FY24 spending at FY22 levels, which would necessitate funding reductions of $130 billion. With defense and veterans’ programs likely exempt from these cuts (and expected to increase), these cuts would be concentrated on the remaining nondefense discretionary agencies and programs, which fund student aid and most scientific research as well as a multitude of other government functions.

In the absence of an overarching budget agreement or framework, the House Appropriations Committee is expected to move ahead with partisan legislation, with a goal of using their slim majority to pass all 12 bills at FY22 levels. These bills are expected to look quite different from any spending bills introduced or considered in the Senate, which will build on the spending increases in FY23. The distance between the two chambers underscores the challenge of resolving differences in topline spending as well as discretionary and nondiscretionary accounts – and suggests that the FY24 process will extend beyond September 30.

Meanwhile Congressional leaders and the White House continue to trade barbs over the debt limit, which the Treasury Department expects to exceed as early as July. So far, there is no concrete plan to raise or suspend the debt limit, with Democrats seeking a clean debt ceiling increase and Republicans insisting on spending cuts to accompany any increase with a goal of balancing the budget within a decade. Although real negotiations have not yet begun and the contours of a potential deal are unclear at this point, there is bipartisan agreement that the US will not default on its debt, which is at least a starting point for future discussions.

Policy Outlook

In addition to the FY24 budget and appropriations process, the Congressional agenda is full on both sides of the Capitol, although progress is expected to be slow given the political realities of 2023. In the House, the Republican majority has an ambitious oversight agenda on issues ranging from COVID origins to Biden Administration policies. In the Senate, the Democratic majority continues to approve judicial and other nominees. Although divided government will make it difficult to enact significant new initiatives, there are a few must-pass or bipartisan policy areas that may see legislative action in this Congress, including the FY24 National Defense Authorization Act, the farm bill, and the reauthorization of the National Quantum Initiative Act. Additionally, with the establishment of the House Select Committee on the Strategic Competition between the U.S. and the Chinese Communist Party, there will continue to be an intense focus on engagement with and investing in China, ranging from supply chains to academic collaboration, espionage, human rights abuses, and TikTok. And despite disagreements over scope, there is also bipartisan interest in reforming the regulation and operations of large tech companies.

In the Administration, federal agencies are focused on the implementation of the bipartisan infrastructure package, the Inflation Reduction Act, and the CHIPS & Science Act, as those combined multi-trillion-dollar laws continue or begin to distribute funding. As Congressional action stalls, the Administration is expected to increase the use of its regulatory and executive authority to carry out its domestic agenda. For example, the Department of Education is expected to release a number of proposed or final rules this spring, including the final Title IX rule covering campuses’ handling of sexual assault, misconduct, and discrimination as well as other rules addressing accountability in higher education.