By Andy Sullivan
WASHINGTON (Reuters) – The bipartisan debt ceiling deal that could be approved by Congress as early as Thursday would avert an imminent U.S. default but could deliver less fiscal savings than Republicans had hoped , according to nonpartisan budget analysts.
The deal ensures President Joe Biden won’t have to wrestle with another debt ceiling showdown before the November 2024 election.
Republican Congressman Kevin McCarthy, for his part, won $1.3 trillion in spending cuts as part of his party’s efforts to shrink government and curb growing US debt.
That’s less than the $4.8 trillion Republicans had originally sought, but it’s still the biggest deficit-cutting package since a 2011 deal that emerged from a similar showdown over the ceiling. the debt.
But many of the savings from this week’s deal could be illusory.
Congress would be free to drop its proposed spending caps after two years, as it did after the 2011 agreement. According to the Penn Wharton Budget Model, a research group, that would put more than $1 trillion at risk. of savings expected under the agreement.
The deal also includes exemptions that could also allow lawmakers to circumvent short-term spending limits.
Still, supporters say it’s a good first step on the road to fiscal stability, reflecting the realities of divided government in Washington.
“The goal is to get as much savings as possible, and I have a strong feeling that’s where they landed,” said Maya MacGuineas, head of the Committee for Responsible Fiscal Budgeting, a group non-partisan defense.
Biden won numerous exemptions that could allow his administration to tap other sources of money, such as unspent COVID-19 aid, to fill spending gaps.
The White House estimates that spending on national discretionary programs like housing and education would be flat next year, rather than the 8% cut specified in the legislation.
“There are a lot of caveats to these caps that could make this all relatively meaningless,” said Véronique de Rugy, a libertarian economist at George Mason University’s Mercatus Center.
And the law leaves untouched Biden’s signature green energy tax breaks, which Penn Wharton says could cost the government up to $1 trillion, more than three times the original estimate.
Republicans, for their part, have let other priorities blunt their efforts to cut budget deficits.
The deal increases spending on defense and veteran care, even as it seeks to clamp down on other discretionary programs.
Cuts to the Internal Revenue Service will actually add $900 million to the national debt, according to the nonpartisan Congressional Budget Office, because they will undermine the agency’s ability to crack down on tax evasion.
And the Republican effort to tighten work requirements for the SNAP food assistance program would also lead to increased spending, the CBO found. The bill would force childless adults under 54 to look for work, up from 50 now.
But veterans, homeless people and youth leaving foster care would be newly exempt from those requirements, causing the program to spend $2.1 billion than it otherwise would.
Any potential for significant savings was lost early in the negotiations, when Biden and McCarthy said they would not consider cuts to Social Security and Medicare, the popular pension and health programs that are expected to grow dramatically as the population ages.
Analysts say it was simply not possible to contemplate changes to these programs in the context of a showdown over the debt ceiling.
“I think there are responsible ways to talk about program improvements,” said Emily Gee, budget expert at the liberal Center for American Progress. “But this way of doing things is not under the gun.”
(Reporting by Andy Sullivan; Editing by Scott Malone and Alistair Bell)