“The bipartisan Problem Solvers Caucus—made up of 31 Republicans and 32 Democrats—has reportedly crafted a debt limit proposal that calls for Congress to return to so-called regular order for the passage of annual budget bills. That means the dozen appropriation bills that make up the federal budget would go through the full congressional process, including committee hearings and individual votes for each, rather than being rolled together in the massive omnibus packages that Congress has relied upon in recent years.
According to a draft proposal from the caucus published Wednesday by Axios, a return to regular order would be one of several changes the lawmakers in the group would demand as part of a debt ceiling deal. They’re also asking for the creation of a new fiscal commission to make recommendations on stabilizing the federal government’s dangerously high levels of debt, and the adoption of budget controls (similar to those that were in place between 2011 and 2018) to limit future spending increases.
If those terms are agreed to, the group’s framework would raise the debt ceiling to a level that won’t be reached until after 2025—in other words, until after the next election.
On their own, those proposals won’t solve America’s serious fiscal challenges. But they would be a series of good first steps toward taking the mess seriously and would avert the potentially catastrophic debt default that looms over everything in Washington right now.”
“If nothing changes, Social Security benefits will be subject to a 23 percent cut in a decade.”
…
“Since any changes to shore up Social Security’s bottom line will likely require huge tax increases or changes to how benefits are paid, policy makers are also running out of time to implement those changes in ways that don’t cause major disruptions to the economy and Americans’ retirement plans.”
…
“The most straightforward solution to Social Security’s problem is to raise the payroll taxes that fund the program to make up for the shortfall on the benefit side of the ledger. But that would only exacerbate the problem by placing a bigger burden on younger, generally poorer workers.
According to the report, Social Security could be kept afloat for the next 75 years by hiking the payroll tax by 4.15 percentage points in 2034 (or implementing a smaller increase sooner). The payroll tax is currently charged at a 16.5 percent rate, with employers and employees each covering half. That works out to a nearly 25 percent tax hike. Alternatively, the report says, benefits could be cut by about 25 percent.”
LC: We could also fund it by higher taxes on the wealthy.
“To pretend that Social Security and Medicare shouldn’t be touched is nothing short of political malpractice. Over the next 30 years, the two programs will run a $116 trillion shortfall. This number accounts for the significant amount of interest payments on the debt the government will ring up in the process. While we might be able to stumble along indefinitely, all that borrowing will slow—perhaps even halt—our economic growth, making funding the programs that much more difficult.”
“The Biden administration has framed its new, tighter “Buy American” regulations as a way to bolster domestic manufacturing and benefit parts of the country that have been left behind by technological innovation.
To many of those same communities, the White House has promised better connectivity and higher internet speeds. The bipartisan infrastructure plan signed by President Joe Biden in 2021 dedicated $42 billion to expanding broadband access, with much of the funding aimed at laying fiber optic lines in parts of the country where they don’t exist.
There’s one small problem with all this: Finding enough fiber optic cables that comply with the Buy American rules.”
…
“Under Biden’s Buy American rules, 55 percent of the component parts of any product used in a federal construction project must be sourced in the United States. That disqualifies any imports of finished cable, but it also wipes out most of the available American-made supply since many of the component parts are sourced overseas.”
…
“Another problem, according to a Bloomberg report earlier this week, is that building a fiber optic network requires more than just fiber optic cable. You also need switches, terminals, routers, and other pieces of tech that are mostly imported or manufactured with imported components. In both cases, the Buy American requirements mean broadband companies can’t use those parts for projects funded with federal funding from the infrastructure bill.
That means less infrastructure gets built, and lots of perfectly good American-made fiber optic cable doesn’t get purchased, simply because less than 55 percent of its components happened to come from somewhere else.”
“The U.S. will default on its $31.4 trillion debt this year if Congress doesn’t raise the nation’s borrowing cap. But when, exactly? That’s harder to answer.
While Congress sets the nation’s annual budget, the Treasury Department actually manages trillions of dollars beyond that, with millions of payments flowing in and out of the government’s accounts each day. And just like an everyday checking account, cash flow varies: Sometimes the government gets a flood of dollars from tax receipts, and other times it needs to pay the bills. Those dips and surges add another wrinkle to a political drama that threatens to tank the global economy.
By this summer or early fall, unless Congress acts before then, the U.S. government will be so cash-strapped it won’t be able to pay interest and principal to the country’s lenders. But before the nation reaches that point of default, it could come alarmingly close several times over the next few months as spending and revenue rise and fall — a fluctuation that could spook Wall Street, escalate pressure on negotiations between congressional leaders and President Joe Biden, and potentially force a short-term fix.”
“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.”
…
“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.”
…
“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.”
“At the end of 2021, not quite a year into Joe Biden’s presidency, something unusual happened: Congress actually allowed a massive government program to expire. That program was the expanded child tax credit, which had been enacted as a temporary program under the American Rescue Plan (ARP), a roughly $2 trillion spending package passed exclusively with Democratic votes in March 2021.
A year after the expansion expired, however, Democrats began looking for ways to bring it back. The cost of doing that would be very high.
The ARP raised the maximum child tax credit from $2,000 to $3,600 per child for families making up to $150,000 a year. The one-year program made the credit fully refundable, meaning that people would qualify for it even if they owed no income taxes. That change expanded the benefit to millions of households that previously had earned too little to qualify.
The ARP also turned what had been an annual lump sum around tax season into a monthly payment that in many cases was directly deposited into parents’ bank accounts. In effect, the law set up a program of monthly checks, sent directly to the bank accounts of most families.
Although the program was initially designed as a one-year expansion, supporters hoped it would become permanent. As The New York Times reported in January 2022, the benefit “was never intended to be temporary,” and “many progressives hoped that the payments, once started, would prove too popular to stop.”
Yet at the end of the program’s first year, after paying out about $80 billion, Congress declined to extend the program. Even with Democrats in control of both the House and the Senate, there simply weren’t enough votes to keep it going. Sen. Joe Manchin, the moderate Democratic senator from West Virginia, was vocally opposed, citing cost concerns and warning that the expanded eligibility would subsidize unemployment. Progressive ambitions were foiled”
“DeSantis. In his 2023–24 budget, announced on Wednesday, the governor requested $12 million to continue his “initiative to protect Floridians against the harms resulting from illegal immigration by facilitating the transport of unauthorized aliens.” The $12 million would be used “to cover all costs associated with facilitating the transport of inspected unauthorized aliens, including, but not limited to the costs of litigation.”
The request mirrors a provision in the 2022–23 budget that funded “a program to facilitate the transport of unauthorized aliens from this state consistent with federal law” (emphasis added). This time, DeSantis wants to transport migrants “from any point of origin in the U.S. to any jurisdiction.” Spending taxpayer money to protect Floridians, in other words, need not involve anything actually taking place in Florida.”
“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.”
…
“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.”