THE TAX FOUNDATION
Just days before the X date, President Biden and House Speaker McCarthy reached a deal to suspend the debt ceiling until January 2025. In total, the CBO estimates it would reduce deficits by $1.5 trillion over the next decade.
What's included? The debt ceiling deal, among other things, places limits on discretionary spending over the next two years, expands work requirements for food and income assistance programs, rescinds unspent pandemic relief funds, and claws back roughly a quarter of the Inflation Reduction Act's (IRA) $80 billion in additional IRS funding.
Our experts noted a few things about this deal and the larger debt and deficits debate:
Finding a path forward on raising the debt ceiling is an accomplishment, and negotiators deserve credit for searching for compromise and areas of agreement that should receive wide bipartisan support.
The deal rightly focuses on reducing spending, which is where most successful fiscal consolidations have focused.
While the spending reductions are substantial, they pale in comparison to total federal spending of about $6.4 trillion this year and more than $80 trillion over the next decade.
Lawmakers missed an opportunity to reduce costly tax breaks, such as the IRA’s green energy credits which are now estimated to cost at least $570 billion.
To address the more challenging parts of the budget, especially the unsustainable growth in mandatory spending and the downsides of high debt levels, lawmakers should follow up on this debt ceiling agreement with a focus on long-term fiscal sustainability. Read more.