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As the August recess approaches, members of Congress are under growing pressure to pass an increase in the federal debt limit in order to avoid a government default. One strategy they are considering, according to the AP, is tying the debt limit increase to a bill that would fund the Veteran’s Choice Program – a program that allows military veterans get medical care outside of Veterans Affairs (VA) facilities. Tying these issues together would mean that in order to fund the Choice program, lawmakers would also have to raise the debt ceiling.
The Choice program will run out of funding by mid-August, according to VA Secretary David Shulkin, if Congress does not vote to transfer money from one VA account to another. And if funds dry up, thousands of participating veterans could potentially have their long-term healthcare treatments interrupted. This urgent need for funding could create additional pressure on lawmakers to act on the debt limit.
In this post, we’ll cover what the debt ceiling is and why it’s so controversial; what the Choice program is and why it is running out of funds; and what would happen if the Choice program went unfunded and the debt ceiling un-raised.
What is the debt limit?
The U.S. government spends more money than it brings in through revenue. It covers those leftover expenses – known as the deficit – by borrowing money, and in doing so, creating new debt. But the government can take on debt only up to a limit, or ceiling, set by Congress. Right now, the national debt is around $19.8 trillion.
The government actually hit the debt limit in March of this year. But the Treasury Department is using so-called “extraordinary measures” – emergency cash-saving steps – to pay the government’s bills for now. Those measures, however, will only last until early-to-mid October, according to the Congressional Budget Office. And the Treasury Department’s cash balance could drop to very low levels as early as September.
What happens if Congress doesn’t increase the debt limit?
If Congress fails to increase the debt limit, the government would be forced to stop, limit, or delay payments on a broad range of legal obligations, including Social Security and Medicare benefits, military salaries, interest on the national debt, tax refunds, and other commitments. Defaulting on those legal obligations would, according to the Treasury Department, be bad news for Americans and even global markets.
Much more serious than a “government shutdown” (which has occurred a number of times over the past 30 years when Congress failed to fund government programs and agencies), a government default has never occurred in American history. A default could ultimately lead to a financial crisis, with a stock market crash and a spike in interest rates. This is partially because investors, both foreign and domestic, would begin to doubt the U.S.’s ability to honor its financial commitments.
The Treasury Department states that the ensuing financial crisis from a default “would have catastrophic economic consequences, potentially including the loss of millions of American jobs.” It would also lead to higher borrowing costs, reduced retirement savings, and lower home values across the country.
What is all the controversy about?
Though the impact of failing to raise the debt limit could be severe, lawmakers often have trouble rallying support for an increase, because it can appear to voters and political opponents like a vote for more debt. Republicans are especially resistant to the idea, and many of them want to tie spending cuts or other fiscal restraints to the increase of the debt limit. Many Democrats, on the other hand, want a “clean bill” that doesn’t include any spending cuts or other controversial provisions.
Tying the debt limit to funding for the Veterans Choice program could be a solution. The legislative move, still in the early stages of discussion on Capitol Hill, according to the AP, would let Republicans claim a policy victory while raising the federal borrowing cap.
House Veterans Affairs Committee Chairman Phil Roe (R-Tenn.) said he could see why tying the bills together would make sense for Republicans:
“You know how this place works: You always stick something people love onto something people hate,” Mr. Roe told the AP. “Obviously something that has to be done—that’s what we always do to get the debt ceiling raised.”
What is the Choice program?
The Veterans’ Choice Program was created in 2014 after media reports revealed that thousands of veterans faced long wait times at VA facilities. The program was created as a three-year, temporary solution that would allow veterans (who lived 40 miles from a VA medical center or had waited 30 days for a VA appointment) to receive care from private providers paid for by the VA. In April, President Trump signed legislation allowing the program to continue past its August 7 expiration date and to use what was left of the initial $10 billion that Congress put into the program in 2014.
The program faced a substantial amount of controversy over the past three years. As an emergency measure enacted quickly, it was not always well-coordinated. Many private providers were (or still are) being paid months after seeing a patient, causing some providers to opt to leave the program. Critics also voiced issues about continuity of care, arbitrary eligibility requirements, and the program’s overlap with other VA community care programs.
Lawmakers and Secretary Shulkin are currently working on a complete overhaul of the Choice program that would consolidate the VA’s community care programs and trouble-shoot the above-noted critiques. But the current version of the program was down to $821 million in mid-June and will run out of funds before such legislation could be passed.
RELATED READ: The Veterans’ Choice Program & the future of community care – Read to learn more about the different critiques of the Choice Program and the details of Secretary Shulkin’s proposal for a new and improved community care program.
Why does the Choice program need more funding?
In March, the Choice program faced the opposite problem — with more than $2 billion available – and lawmakers actually voted to transfer funds to another VA account before the program expired. But in June, Secretary Shulkin told Congress that spending had jumped in recent months, with less than $850 million available and thousands of appointments still dependent on the program, according to Military Times. The program’s funds, Secretary Shulkin said, would “dry up by mid-August” if they didn’t vote to transfer money from one VA account to another.
That would mean potentially cancelling some long-term medical plans for veterans, or at least complicating how those appointments are paid for. Mental health practitioners from the VA and the private sector have expressed special concern for veterans receiving mental health care through the program, as interruption of care for struggling veterans can have potentially severe effects, like suicide or returning to homelessness. Military Times reported that Secretary Shulkin and other top VA officials have also warned that any such disruption in care could endanger veterans’ health.
But the community care overhaul proposed by Secretary Shulkin is not ready for a vote, according to Senate VA Committee members. So House leaders have proposed a six-month funding extension to keep the Choice program running while Congress debates the future of the program.
“We will make sure there is stability in the Choice program, and then we will come back and discuss the rest,” Chairman Roe told Military Times. “We’ve learned that when you’re going to tackle some of these big things, you’ve got to build the coalition, you’ve got to bring in the stakeholders.”
That six-month funding patch is the bill Senate leaders may tie to the debt limit increase. Will funding the Choice program be enough to motivate Republicans to vote to raise the debt ceiling? Only time will tell…