WASHINGTON (AP) — Even with the new spending restrictions under the debt limitation agreement, U.S. government deficits are still on track to continue climbing to record highs over the next few decades. .
The projections are a sign that the two-year truce between President Joe Biden and R-California House Speaker Kevin McCarthy could be just a pause before a series of much more heartbreaking showdowns over the federal budget. Why should the debt continue to rise? That’s due to rising costs for Social Security, Medicare and Medicare, according to the nonpartisan Congressional Budget Office.
Both Biden and McCarthy ruled out any cuts to Social Security and Medicare, two programs that benefit older voters, before their teams even began their budget discussions. The omission reflects politics around two popular platforms as Democrats and Republicans prepare for the presidential election next year.
It also means the deal finalized on Sunday keeps the risk of ever-growing debt on the table, creating the possibility of another deadly battle when the debt ceiling has to be raised again in 2025.
“You should consider this a step,” said Marc Goldwein, senior vice-chairman of the Committee for a Responsible Federal Budget. “The question is, can they take the next step?”
Lawmakers know that there are tough choices to be made and that the only way to get through them likely involves a combination of deep spending cuts, broad tax hikes, and major changes to retirement income programs and health care that consumes an ever-increasing share of federal spending.
Mandatory spending — which includes Social Security, Medicare and Medicaid — already accounts for the majority of government spending. This category is equivalent to 14% of the gross domestic product of the United States, and the CBO expects it to grow to 15.6% by 2023. In contrast, discretionary spending accounted for 6.5% of the product gross domestic last year and are already expected to fall to 6%. % within 10 years.
Goldwein said he’s optimistic leaders on both sides will find ways to curb growth in spending on health care programs. Social Security will also face a reckoning because its trust fund won’t be able to pay full benefits within a decade.
But some budget experts saw the deal as more about optics than sustainability.
“This debt-limiting deal is turning out to be a face-saving political deal without a lot of substance in terms of changing the trajectory of US debt,” said Romina Boccia, director of budget and debt policy. rights at the Libertarian Cato Institute.
The deal, which still needs to be approved by Congress, would keep discretionary spending essentially flat for the coming year, while allowing increases for military and veteran accounts. Spending growth would be capped at 1% for 2025, essentially a reduction given the likely rate of inflation.
Some Democratic allies view the deal as problematic because it cedes ground to Republicans who want to use the fight against the debt limit as an opportunity to advance their policy goals, despite the risk of default.
“Looking forward, we need to find a way to abolish the debt ceiling and end the senseless debt ceiling hostage-taking that Republicans engage in when they can use it as a batons against a Democratic president,” said Sharon Parrott, president of the Center on Budget and Policy Priorities, a liberal think tank.
Other economic analysts disputed GOP suggestions that the United States was already crippled by debt, even as investors continue, for now, to buy Treasuries. While the total federal debt – including money the government owes itself – tops $31 trillion, the U.S. economy has more than $143 trillion in nonfinancial assets, a sign that the current debt is manageable.
“It’s just not true that the United States is broke and on the verge of a debt and deficit crisis,” said Joe Brusuelas, chief economist at consultancy RSM US.
But even if there is no immediate debt calculation, there is a long-term issue that the talks deliberately ignored. The president challenged Republicans to protect Social Security and Medicare from cuts during his State of the Union address in February. GOP lawmakers mocked him for suggesting they would dare to cut programs, leading Biden to declare, “We have unanimity.”
Biden specifically praised the bipartisan agreement for Social Security and Medicare protections on Sunday, while saying the deal that needs to be passed by the House and Senate would prevent a potentially catastrophic default that could occur on Sunday. June 5.
“This is a deal that is good news,” the president said, “for the American people.”
Still, House members received a specific briefing in March that rights programs would increase debt. CBO Director Phillip Swagel gave a presentation showing that public debt would more than double to 195% of gross domestic product by 2053. The main challenge is that an aging population means that programs for the elderly have costs that exceed tax revenues.
Swagel offered 17 policy options for debt reduction, six of which were tax hikes that could raise trillions of dollars over 10 years. Tax increases have been a failure for Republicans, while Democrats have generally avoided benefit cuts.
His slideshow included this warning: “The longer action is delayed, the greater the policy changes need to be.”