Congress Should Extend Caps on Discretionary Spending

The discretionary spending caps put in place under the 2023 Fiscal Responsibility Act (FRA) are scheduled to expire on October 1. As lawmakers work to negotiate Fiscal Year (FY) 2026 appropriations, they should extend those caps. Multi-year discretionary spending caps would not only constrain growth in appropriations and maintain order in the appropriations process, but could also help generate much-needed deficit reduction.

While most of the budget is on autopilot, defense and nondefense discretionary spending – which make up a quarter of the budget – are appropriated annually. Although appropriations levels are supposed to be decided annually in the budget process, this process has, in many ways, broken down, sometimes leaving leadership and appropriators the ability to set whatever spending levels they want. Discretionary spending caps put an overall limit on those levels, often split between defense and nondefense, while allowing the appropriations process to determine how dollars are allocated within that cap.

Discretionary spending caps were in place between 1991 and 2002, between 2012 and 2021, and in 2024 and 2025. Although they have not always successfully limited spending to their intended levels, they have generally proven an effective way to control the growth of appropriations – at least compared to the alternative of not having any caps.

Without caps in place, appropriators often have no limiting principle for deciding on annual appropriations, which can lead to unfettered growth. For example, appropriations grew by roughly 8 percent each year between 2007 and 2010 before the Budget Control Act (BCA) implemented caps on defense and nondefense discretionary spending through a bipartisan agreement that also established a deficit reduction committee. However, once the BCA’s caps expired, appropriations grew significantly between 2021 and 2023. Thanks to the FRA caps, they have been relatively flat since.

Unfortunately, the binding FRA caps expire at the end of this year, leaving non-binding targets – suggesting 1 percent annual nominal growth – between 2026 and 2029. Meanwhile, the recently enacted reconciliation law – the One Big Beautiful Bill Act (OBBBA) – included massive supplemental funding for defense, Homeland Security, and several other areas.

Given this funding and the increasingly unsustainable debt situation, lawmakers should preferably facilitate nominal spending reductions through ten-year discretionary spending caps that cover defense and nondefense spending. At the very least, Congress should codify the existing spending targets into enforceable spending caps.

Lawmakers should do so while avoiding budget gimmicks, like fake emergency supplementals, phantom Changes in Mandatory Programs (CHIMPs), and side deals.

With the national debt on track to exceed record levels and recently made worse by the enactment of OBBBA, Congress should extend the enforcement of the discretionary spending caps in addition to strengthening pay-as-you-go (PAYGO) rules, securing the nation's trust funds, and reducing deficits through other spending and revenue changes.