“Even if McCarthy is able to push his debt limit bill to House approval, the legislation is dead-on-arrival in the Democratic-controlled Senate. Instead, the GOP debt bill is effectively a messaging tool for Republicans in their push for talks with President Joe Biden, who has thus far insisted on a no-strings-attached increase of the debt limit.
The Treasury Department has already been using “extraordinary measures” for months to hold off a default while an unclear “X-date” looms. But there could be more clarity soon: The Congressional Budget office and the Bipartisan Policy Center are planning to release updated projections the second week of May.”
“In one scenario outlined by the CBO, Congress would have to cut 86 percent of all discretionary spending if it wanted to balance the budget by 2033 without touching the military, veterans programs, or entitlements like Social Security and Medicare. In a slightly altered version of that same scenario in which the Trump tax cuts were not allowed to expire as intended in 2025, Congress would have to cut 100 percent of discretionary spending—and the country would still face a $20 billion deficit.”
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“it should be clear that any attempt at bringing the federal budget deficit under control must kill (or at least wound) the Republicans’ sacred cows of military spending, entitlements, and the recent Trump tax cuts. Right now, however, leading Republicans including former President Donald Trump and Speaker of the House Kevin McCarthy (R–Calif.) have vowed to keep Social Security out of any long-term spending deals. Rep. Jim Banks (R–Ind.) has promised to oppose any bill that cuts defense spending.
As for the tax cuts, they’re technically temporary—a gimmick that allowed Republicans to game the CBO’s scoring of the tax cut bill—but keeping the lower individual income tax rates in place past 2025 is a top priority for Republicans.”
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“the CBO’s numbers aren’t partisan and neither is the blame for America’s massive budget deficits. These latest projections only reveal how difficult the choices ahead will be. If Republicans are serious about trying to balance the budget, there can be no more sacred cows.”
“Social Security will be insolvent by 2034. One of the trust funds for Medicare will be insolvent even sooner. When insolvency hits, both programs will be subject to mandatory benefit cuts. The exact size of the cuts will depend on payroll tax collections in that year, but the current estimate is that Social Security will be able to pay only 80 percent of promised benefits in 2034.
As I wrote last month, when Republicans such as former President Donald Trump were making similar vows not to cut Social Security benefits: Promising to do nothing amounts to promising a roughly 20 percent benefit cut in a little more than a decade. There is no getting around that fact.”
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“Standing up for seniors (and everyone else who has been paying into Social Security and Medicare for their entire working lives) requires acknowledging that there is no reality in which the politicians do nothing and the entitlement programs continue functioning normally. The choice is between making changes now or accepting mandatory cuts in about a decade.”
“In addition to Republicans’ pledge to slice $130 billion from the $1.7 trillion government funding package that passed in December, conservatives want to take the process old-school. Rather than passing one massive bill, they’re calling for individual votes on the dozen appropriations bills that set annual budgets for different agencies, a more time-consuming but transparent procedure that recent Congresses have struggled to complete.
They’re also planning to allow an amendment free-for-all, which is all but certain to further drag out or trip things up.
Additionally, House Republicans say they’ll refuse to negotiate with the Senate until the upper chamber passes its own spending bills, which hasn’t happened in years. Typically, Senate appropriators have instead entered into bipartisan talks with their House counterparts, only burning valuable floor time on a package they’re certain would pass both chambers.
And GOP demands expand beyond funding the government. Republicans say they won’t back a debt limit increase unless they get their way on spending cuts or measures to reign in the ever-increasing $31 trillion debt. The timing of that could be tricky, however, as the Treasury Department could hit its credit card limit this summer, while federal cash expires on Sept. 30.
A debt ceiling hike will arguably make for a much bigger battle in Congress, leaving even less time and patience for bipartisan talks on funding the government.”
“the CBO published its report on budget options. The two-volume document highlights options for deficit reduction. One volume details large possible spending reductions while the other lays out small ones—so the options are plenty. They include important reforms of some of the major drivers of future debt: Medicare, Medicaid, and Social Security.
All told, it’s possible to achieve deficit reduction of $7.7 trillion over 10 years. That’s enough to accomplish what some people mistakenly believe to be out of reach: balancing the budget without raising taxes. There are also a few options to simplify the tax code by removing or reducing unfair individual tax deductions and by cutting corporate welfare.
For instance, it’s high time for Congress to end tax deductions for employer-paid health insurance. This tax deduction is one of the biggest of what we wrongly call “tax expenditures.” It’s responsible for many of the gargantuan distortions in the health care market and the resulting enormous rise in health care costs. The CBO report doesn’t eliminate this deduction; instead, it limits the income and payroll tax exclusion to the 50th percentile of premiums (i.e. annual contributions exceeding $8,900 for individual coverage and $21,600 a year for family coverage). The savings from this reform alone would reduce the deficit by roughly $900 billion.
A second good option is to cap the federal contribution to state-administered Medicaid programs. That federal block grant encourages states to expand the program’s benefits and eligibility standards—unreasonably in some cases—since they don’t have to shoulder the full bill. CBO estimates that this reform would save $871 billion.
CBO also projects that Uncle Sam could reduce the budget deficit by $121 billion by raising the federal retirement age. CBO’s option would up this age “from 67 by two months per birth year for workers born between 1962 and 1978. As a result, for all workers born in 1978 or later, the FRA would be 70.” Considering that seniors today live much longer than in the past and can work for many more years, this reform is a low-hanging fruit.
Congress could save another $184 billion by reducing Social Security benefits for high-income earners. I support a move away from an age-based program altogether since seniors are overrepresented in the top income quintile. Social Security should be transformed into a need-based program (akin to welfare). Nevertheless, the CBO’s option would be a step in the right direction.”
“Despite campaigning as a moderate, President Biden has dramatically accelerated federal spending during his time in office. He has now spent more in his first two years than President Trump did during his last two years at the height of the pandemic.
Official estimates from the Congressional Budget Office (CBO) show that, since January 2021, legislation signed by President Biden has set in motion a record $3.37 trillion in new spending, surpassing Trump’s previous record of $3.28 trillion during the 116th Congress.
Like Trump, Biden has overseen significant pandemic-related relief, but he also has ramped up spending on priorities well beyond COVID-19. The American Rescue Plan Act (ARPA), passed in March 2021, cost $1.8 trillion, more than half of the new spending enacted during Biden’s time in office.
But it’s the other expensive legislation Biden has signed that pushed him past Trump. The much-vaunted Infrastructure Investment and Jobs Act spent another $765 billion, though the infrastructure expenditures will occur over the course of the next five years. The Jon Stewart-promoted Promise to Address Comprehensive Toxics (PACT) Act contributed another $278 billion, while the recently passed CHIPS Act “chipped” in $255 billion more. And though congressional Democrats failed to pass Biden’s Build Back Better legislation earlier this year, its eventual successor, the Inflation Reduction Act, is still estimated by the CBO to add another $51 billion to the federal ledger.”
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“the CBO estimated in June that a number of the president’s executive actions total another $532 billion, including interest expenses. The list of actions reviewed by the CBO include $300 billion for an expansion of the Supplemental Nutrition Assistance Program, $34 billion for the extension of various healthcare subsidies, and $85 billion for pauses in student loan repayment.
What’s more, on the topic of student loans, Biden has since taken even greater actions. One estimate puts his most recent pause at another $40 billion, while the cost of fuller loan forgiveness would be more than $400 billion. Taken together, these add more than another $1 trillion in spending to Biden’s legislative impact, and help explain how the administration racked up a whopping $4.8 trillion in new borrowing in just the last two years.”
“The US is currently projected to hit its existing debt ceiling sometime in 2023, according to the Bipartisan Policy Center. While raising the ceiling should be relatively straightforward, it’s become a contentious process — and an opportunity for the minority party to extract policy concessions or score political points. Both parties have used debt ceiling increases to their advantage, but Republicans have done so much more frequently in recent years.
In 2011, for example, Republicans balked on suspending the debt limit and refused to move forward until President Barack Obama agreed to key spending cuts, concessions they ultimately secured. The US got so close to default that year, however, that Standard and Poor’s downgraded the country’s credit rating.
Political experts note that this disagreement marked one of the first times it seemed like lawmakers were actually willing to go over the edge, despite the economic chaos that could ensue. Were the US to actually default, that would likely downgrade the dollar and lead to a recession.
While a default has never happened, Republicans’ behavior in 2011 — and their current rhetoric — suggests that they’re more open to the possibility and taking such fights to that point.
Democrats, including in the White House, are reportedly considering preempting this worst-case scenario by tackling the debt ceiling this winter, according to Axios. The White House has denied that such conversations are happening.
There are also still questions about what a debt ceiling bill could look like. While some lawmakers including Sen. Jeanne Shaheen (D-NH), and a group of prominent House Democrats, have expressed support for doing away with the debt ceiling altogether, others, like Biden and Sen. Bernie Sanders (I-VT), have opposed taking this route. That’s likely because such talks still offer an opportunity to evaluate spending, and because it could be a useful tool for Democrats should the GOP hold the White House and Congress.
In lieu of getting rid of the debt limit altogether, there’s been growing pressure on Democrats to consider increasing it to such a high value that there isn’t likely to be a standoff over the issue in the short term.”