“While controlling discretionary spending is important for fiscal responsibility, for reducing government waste, and for negotiating the proper size and scope of federal activities, the current shutdown debate is largely symbolic. America’s biggest fiscal challenge lies in the unchecked growth of federal health care and old-age entitlement programs. Repeated shutdown fights and a slew of temporary continuing resolutions have gotten us no closer to reforming Social Security and Medicare.”
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“The longer Washington waits to fix autopilot spending, the more damage they’ll do. The Congressional Budget Office’s latest long-term budget outlook projects that U.S government spending will consume nearly 30 percent of the economy by 2053—almost 40 percent higher than the historical average. Congress is expected to rack up more than $100 trillion in additional deficits over those 30 years—more than four times what the U.S. government has borrowed over its entire history. Who will lend the U.S. government such vast sums?
The main drivers of this increase are heightened interest costs and the growth in health care and Social Security spending. With Medicare and Social Security responsible for 95 percent of long-term unfunded obligations, according to the Treasury Financial Report, there’s simply no way any serious fiscal reform effort can leave these programs untouched. Every other part of the budget will either stay steady or decline slightly. Other so-called mandatory programs, including various welfare programs, retirement benefits for federal employees, and some veterans’ benefits, are projected to decline as a share of the economy. Discretionary spending depends on what Congress decides to spend each year; if historical trends hold, this part of the budget will decline by one-sixth. And yet this is the part of the budget that all this shutdown fuss is about.”
“Ron DeSantis had just been sworn in as a member of the House in 2013 when he voted against sending $9.7 billion in disaster relief to New York and New Jersey, two states still reeling from the damage of Hurricane Sandy.
“I sympathize with the victims,” the Florida Republican said at the time, but objected to what he called Congress’ “put it on the credit card mentality” when it came to government spending.
Now, a day after Hurricane Idalia pummeled Florida less than a year since Hurricane Ian’s destruction, DeSantis is not objecting to federal borrowing when it’ll help his disaster-stricken state. As Florida’s governor — and a 2024 White House contender — he is in regular contact with President Joe Biden as the state seeks dollars from Washington to rebuild from the storm wreckage, assist rescue efforts and aid displaced residents.”
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” DeSantis’ vote a decade ago was based on his opposition to the Sandy package’s “additional pork spending,” a spokesperson for his presidential campaign said”
“The hike in bond yields and subsequent rise in mortgage rates caught some people off-guard since there was no comparable reaction after the Standard & Poor’s downgrade. But that took place in different economic times when the U.S. government had more room to maneuver.”
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“”Inflation is the economic equivalent of a partial default. The debt was sold under a 2% inflation target, and people expected that or less inflation. The government borrowed and printed $5 Trillion with no plan to pay it back, devaluing the outstanding debt as a result,” he cautions. “Yes, this is not a formal default. And a formal default would have far reaching financial consequences that inflation does not have. Still, for a bondholder it’s the same thing.”
Having been burned by the U.S. government’s policies, investors perceive it as an increasingly risky borrower, just as Fitch (and S&P in 2011) say. As a result, they demand a greater price to loan the feds money—hence higher bond yields. And since 10-year Treasury yields serve as benchmarks for other borrowing rates, such as mortgages, that means higher cost for average Americans who have little say in D.C.’s financial shenanigans but have to suffer the consequences.”
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“”Such high and rising debt would slow economic growth, push up interest payments to foreign holders of U.S. debt, and pose significant risks to the fiscal and economic outlook,” according to the CBO.
That means unpleasant consequences not just for government officials, but for those of us who live in the economy they hobble. The government will have to pay more to borrow, and so will we. We’ll do so in a country less prosperous than it should have been.”
“the changes are a significant step backward. Biden is effectively undoing a major change made by the Reagan administration—changes that were made, fittingly, to help combat inflation.
That change, made in 1982, repealed the “30 percent rule” that guided the process for determining what wages would be paid on which projects. Under the 30 percent rule, the prevailing wage for any particular area would be based on the highest wages paid to at least 30 percent of workers within the same area.
You don’t need an advanced degree in accounting to see how that mandate could artificially hike wages on federal projects. The government barred itself from even considering bids that might pay average wages, thereby obligating taxpayers to pay more than they might have had to in an open market.”
“House Republicans narrowly passed their version of an annual defense bill 219–210, after stacking it with controversial amendments on social issues that are dead on arrival in the Senate.
The debate on the National Defense Authorization Act, or the NDAA for short, now heads to the Democrat-controlled upper chamber, which is set to consider its own take on the bill later this month. Eventually, the two chambers will work to reconcile their differences between the two in the hope of finding a compromise.
The NDAA, one of Congress’s must-pass bills, effectively lays out what the military’s budget could look like for the next year and which programs will be funded. This year’s House bill authorizes $886 billion in funding, including a 5.2 percent pay raise for service members and the appointment of an inspector general to oversee Ukraine funding.
Much like the debt ceiling legislation and annual spending bills, the NDAA is a prime opportunity for lawmakers to add unrelated amendments making policy changes to pet issues, since it has to pass every year. This week, Republicans capitalized on this opportunity to put forth controversial amendments favored by their right flank, including restrictions on abortion and LGBTQ rights. It’s a move that’s meant to send a message about their position on social issues, and it’s also one that makes what was a bipartisan bill much more contentious.”
“The deal negotiated by the Biden White House and House Republicans cuts some domestic programs in 2024 and limits spending growth to 1 percent in fiscal year 2025. That will still amount to a cut, after accounting for inflation.
Almost two-thirds of the $6 trillion federal budget is mandatory spending on programs like Social Security, Medicare, and Medicaid that will happen without any action by Congress. The rest is determined by Congress, and that is the bucket that will be affected by the debt limit deal.
The cuts are going to land disproportionately on programs that help the poor and on administration, which also affects the people who rely on government programs. Some discretionary spending — on the military and for veterans — is actually going to increase. But the rest, including funding for child care, low-income housing, the national parks, and more, will be subject to a cut for the next two years.
The exact cuts are supposed to be set by legislation that Congress will pass later this year. Should lawmakers fail to pass those spending bills, automatic spending cuts of 1 percent across the board would occur instead. (The incentive for Congress to pass the spending bills is that these automatic cuts would include the military, which all parties involved want to exempt.)”
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“while this cut is shallower than the automatic cuts of the last decade, it applies to programs that already have been feeling the squeeze: According to the Center on Budget and Policy Priorities, spending for discretionary domestic programs (excluding veterans’ health care) is 10 percent below 2010 levels when adjusted for inflation and increases in the US population.
The long-running neglect has led to shortages in the services they provide. Child care assistance has fallen for the better part of two decades. The primary grant program served 373,000 more children in 2006, even though now there are an additional 1 million American children living in poverty. Likewise, 3 out of 4 US families that should be eligible for federal housing assistance don’t actually receive any aid because there is no funding available. Cuts to the Social Security Administration have been going on for years, while wait times for assistance have been increasing. Investments in water infrastructure have been stagnant, even after clean water crises in Flint, Michigan, and Jackson, Mississippi.”
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“TANF, meanwhile, was created by the 1996 welfare reform law, replacing a program that offered guaranteed cash for low-income parents with a block grant giving $16.5 billion annually to states to spend on anti-poverty programs (though in practice the money is used for all manner of things). Because its appropriation has never been adjusted for inflation over its 27 years of existence, the program has effectively been cut in half over time, and now only about 21 percent of poor families with children get help from it.”
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“The biggest surprise of the deal might be its approval of the 300-mile Mountain Valley Pipeline, which will carry natural gas from West Virginia to southern Virginia.
The pipeline, held up for years by federal lawsuits, has long been a top priority for Sen. Joe Manchin. But the pipeline’s role in debt ceiling talks largely flew under the radar. The deal would give a green light to outstanding permits for the pipeline and shields its construction from court intervention, to the frustration of environmentalists worried about the pipeline’s impact on rural and low-income areas and the 1,000 streams and wetlands along its way.
There are a few other modest changes to permitting for energy projects in the deal, mostly affecting the bedrock 1970s-era environmental protection law, the National Environmental Policy Act. It sets a one-year deadline for agencies to complete an environmental assessment, and a two-year deadline for the more thorough environmental impact statement, an expensive review requiring community input. (Progressives argue that, rather than time limits, federal agencies need more staffing to complete reviews quickly.)”
“The US government doesn’t have to work this way.
Congress could pass legislation doing away with the debt ceiling, and the president has options to ignore it as well, though they’d likely prompt legal challenges. As mentioned above, the president could invoke the 14th Amendment and ignore the debt limit, or Congress could approve an increase to the debt cap that’s so high it basically nullifies the ceiling.
Abolishing the debt limit altogether would prevent either party from using this process as political leverage. Doing so would greatly reduce the uncertainty that comes around every time there’s a deadline like this and prevent significant market volatility that results.
“There are zero downsides to getting rid of the debt ceiling,” said Bivens from the Economic Policy Institute.
Other economic experts note that eliminating the debt ceiling could take away an opportunity for Congress to debate fiscal policy. But many feel like that’s a moot point, given debt ceiling standoffs are rarely about any specific spending anymore, but rather about weakening the party in power.”
“A new analysis from the Congressional Budget Office (CBO) shows that Biden’s so-called income-driven repayment plan will cost at least $230 billion over 10 years—with an additional $45 billion in costs likely coming if the Supreme Court invalidates the White House’s student loan forgiveness scheme. That means the final tab could be more than twice the $138 billion price tag attached to the proposal by the Department of Education, which is overseeing the program’s rollout.
Under current law, federal student loan payments are capped at 10 percent of an individual’s “discretionary income,” which the Department of Education defines as income that exceeds 150 percent of the federal poverty guidelines. In practice, that means a single borrower with no children starts making payments on income that exceeds $20,400.
Biden wants to lower that threshold to 5 percent for undergraduate loans and impose a new limit of 10 percent for loans put toward a graduate degree. Biden’s plan would also wipe away outstanding student debt after 10 years of payments for those who borrowed $12,000 or less—and a maximum payment period of 20 years no matter how much was borrowed.
But if you cap monthly payments at a lower level and also shorten the allowable repayment time, there will be a lot of loans that never get paid back in full. That cost ultimately falls on the taxpayers, and that’s what the dueling estimates from the CBO and the Department of Education are all about.”