Congress bought itself more time with a weekend deal to avoid a government shutdown, but now a 45-day clock is ticking to reach an agreement on the federal budget – and both parties will need to be involved in achieving it become.
The partisanship is so intense that expectations in Washington are low that Congress will resolve much of anything before the elections in thirteen months.
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There is an element of political theater in the budget showdown that nearly led to a government shutdown in the United States this weekend. But behind the unfinished drama lie difficult debt and deficit challenges.
But the reality is that control of power is closely divided between both sides, and doing nothing is not an option. They will have to find a way to keep the US government running in 2024. And time, math and a record $33 trillion national debt dictate that at some point leaders in Washington will have to step up and take other action. difficult decisions.
Deadlines for tax cuts, Medicare and Social Security will be imposed by Congress over the next decade. Senators on both sides of the aisle have expressed interest in creating a bipartisan commission to address deficits and debt, and House Speaker Kevin McCarthy included the idea in a recent resolution aimed at to keep the government funded.
“That’s an encouraging sign,” said Marc Goldwein, senior policy director at the Committee for a Responsible Federal Budget, an independent deficit reduction organization in Washington. “Is it enough to save Social Security and prevent our debts from rising? No. … But I think it’s a big first step.”
Congress bought itself more time with a weekend deal to avoid a government shutdown, but now a 45-day clock is ticking to reach an agreement on the federal budget – and both parties will need to be involved in achieving it become.
The partisanship is so intense that expectations in Washington are low that Congress will resolve much of anything before the elections in thirteen months. For example, discussions in the coming weeks will focus solely on discretionary spending, and not on entitlement programs.
But the reality is that control of power is closely divided between both parties, and doing nothing is not an option. They will have to find a deal to keep the government running in 2024. And time, math and a record $33 trillion national debt dictate that at some point leaders in Washington will have to step up and make other problems difficult. decisions.
Why we wrote this
A story focused on
There is an element of political theater in the budget showdown that nearly led to a government shutdown in the United States this weekend. But behind the unfinished drama lie difficult debt and deficit challenges.
The problem, economists say, is not that deficits and debt are inherently bad things. Rather, it is a matter of sustainable financing and maintaining public confidence – and the latest trend lines in the United States are not good: as a share of the economy, the deficit in the just-ended fiscal year was larger than ever before. when the country was not facing a recession or other major emergency such as war. The national debt continues to rise, even as interest rates on those loans have also skyrocketed.
“Like it or not, people are going to have to rise up — and both sides, the tax side and the spending side, are going to have to give,” said Glenn Hubbard, an economics professor at Columbia Business School and former chairman of the council of the President’s administration. Council of Economic Advisors. “I can’t imagine a politically viable solution that says it’s all about taxes or all about spending.”
Increasing pressure over taxes and rights
Congress does not have to come up with a dramatic package of solutions all at once. However, deadlines are approaching.
The most immediate deadline – November 17 – is the most expendable. That’s when Congress must pass a dozen spending bills to keep the government funded this year. But lawmakers have pushed things aside before, as they did Saturday, by passing temporary resolutions to keep government funding at current levels. They can do that again.
“We’ve entered a cycle of crisis-driven budget cuts,” said Shai Akabas, executive director of the economic policy program at the Bipartisan Policy Center, a Washington think tank. “And that doesn’t leave room for the bigger picture budget issues, which are actually very important.”
Other deadlines are much less forgiving. For example, the tax cuts implemented early in the Trump administration will expire at the end of 2025. Congress will be forced to craft a new tax package, or most Americans will see their tax rates increase by 1 to 4 percentage points.
Another deadline is 2033, when Social Security’s trust fund reserves are expected to run out. If that happens, the monthly Social Security benefits of the country’s older citizens — a powerful voting bloc — would be cut by about a quarter. Retirees will still receive benefits because the system will fund these benefits from current contributions from working Americans. But as the population ages and the ratio of retirees to workers increases, benefits will continue to decline.
Medicare is in an even worse situation. Medicare Part A, which covers hospital admissions, is expected to see its trust fund depleted by 2031.
Too big to be solved by one party
So far, Congress has avoided making the changes needed to boost funding for these programs or address federal deficits, which continue to rise.
“These are very difficult votes,” said Howard Gleckman, a senior fellow at the Tax Policy Center, a Washington think tank. “You’ll make people mad at you if you cut their spending programs or if you raise their taxes. And the only way to insulate yourself against that is to make it two parties – so that everyone agrees that they are going to make cuts.”
Looming over all of this is the federal debt. Economists have been warning about its dangers for decades. But nothing terrible happened. The money spent paying the interest on the debt has not noticeably displaced private business financing. Foreign confidence in the dollar has not waned, although credit ratings are at risk. Like a ship of state drifting in deeper and deeper waters of red ink, the US has not yet hit an iceberg.
Meanwhile, debt has continued to rise as a result of rising budget deficits. President Donald Trump has pushed deficit spending to record highs, first with tax cuts that reduced federal revenues, and then much more during the pandemic with two stimulus packages aimed at keeping the economy afloat. President Joe Biden followed with more pandemic relief and big spending on Democratic priorities including infrastructure and green energy.
Paying off debts becomes more expensive
Over the past year, the country’s slide into deep red ink has accelerated. To combat rising inflation — driven at least in part by the federal government’s record spending, economists say — the Federal Reserve has had to dramatically raise interest rates. Those high interest rates, in turn, have made servicing federal debt more expensive. The Congressional Budget Office now estimates that the US will spend $10.5 trillion on interest over the next decade. “That’s totally non-productive money,” says Mr. Gleckman of the Tax Policy Center. “I could think of a lot of things the government could do with $10 trillion.”
Congress’s inaction over the years in the face of such rising costs has led to extreme frustration among the far right, so much so that the House Freedom Caucus has tried to force budget showdowns this year. First, the country threatened to block an increase in the debt limit earlier this year, which could have seriously damaged the economy if government debts could not be paid off. Now comes talks over federal budget appropriations, which could shut down the government if no deal is reached by the new Nov. 17 deadline.
Calls for a bipartisan commission
While condemning conservatives’ intransigence and tactics, many conservative economists are also sounding the alarm about Congress’s inability to meaningfully deal with deficits and debt. “Enough is enough,” said Gordon Gray, vice president for economic policy at the American Action Forum. Under President Biden, “we got the American Rescue Plan and since then we’ve gotten more and more” spending.
Amid the current chaos and conflict in Congress, some budget experts point to signs of progress, especially possible moves to create a federal budget commission that would tackle the twin problems of deficits and debt in a bipartisan manner. Senators on both sides of the aisle have expressed interest in creating it, and House Speaker Kevin McCarthy included the idea in a previous resolution to keep the government funded. (The House of Representatives resolution that ultimately passed did not include this.)
“That’s an encouraging sign,” said Marc Goldwein, senior policy director at the Committee for a Responsible Federal Budget, an independent deficit reduction organization in Washington. “Is it enough to save Social Security and prevent our debts from rising? No. … But I think it’s a big first step.”