Debt Limitation Agreement Gives Washington a Blank Check

A bipartisan deal to raise the country’s borrowing limit has been welcomed by both parties, does little to move the policy of government spending during the pandemic, and does not solve the cause of the runaway federal budget.

Republicans and Democrats agreed to stay out of so-called mandatory spending such as Social Security, Medicare and Medicaid before the negotiations began. These politically popular rights programs account for nearly two-thirds of annual federal spending.

Interest payments on government bonds are also built-in costs, totaling $663 billion this year. This equates to approximately 10% of the federal budget.

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So even before the negotiators came to the table, they limited their discussions to programs that make up less than 15% of the federal budget—non-defense discretionary spending.

The runaway government spending didn’t stop when the government hit the $31.4 trillion debt ceiling in January. Despite the fact that the government is not legally allowed to continue borrowing and the Treasury Department has taken “special measures” to prevent defaults, Washington continued to pile on more debt.

The national debt stood at $31.8 trillion by the time President Biden signed into law on Saturday a bill allowing unlimited borrowing through 2024.

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Related article: Biden hails debt bill as bipartisan achievement in primetime speech

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“Debt is increasing year by year because of rights,” said Republican strategist John Feehery. “This debt restriction agreement is focused on discretionary spending only. If you want to cut Social Security, be my guest. But that’s not what this deal is for.”

Social Security is the largest single federal expenditure, currently at about $1.2 trillion annually. As more baby boomers retired, costs increased.

The recent high inflation has further increased that cost. Social Security’s 66 million beneficiaries are receiving an 8.7% monthly cost-of-living adjustment this year to cope with price increases that surpassed 9% last summer. It was the largest increase in social security benefits in 40 years.

For decades, lawmakers and presidents of both parties have argued for three commonly accepted solutions to strengthening the Social Security trust fund: higher taxes, slower benefit growth, and now at 67, have avoided serious discussion about raising the retirement age. 1960.

But entitlements are not the only factor in rising national debt. Overall government spending has grown 40% over the past four years, from $4.45 trillion in 2019 to $6.21 trillion in 2023, according to the Congressional Budget Office.

The Trump and Biden administrations and Congress have significantly increased spending in response to the COVID-19 pandemic. Spending on food stamps increased 102%. Veterans Program, 50%. Welfare expenses are 50%. Health tax credit, 45%. School feeding program, 42%. Unemployment compensation, 32%.

Opponents of the new debt-restriction pact argue that it essentially defined pandemic-era emergency spending levels as the new normal.

South Carolina Republican Rep. Nancy Mace tweeted, “With this deal, our all-time high spending remains intact and is the benchmark for all spending.”

The Congressional Budget Office said the new law would cut the deficit by $1.53 trillion over the next decade, almost all of it from the discretionary spending cap. But the deal leaves plenty of room to allow for more spending over the next few years.

The agreement includes a pay-go requirement to offset increased spending with cuts elsewhere. But at the same time, President Biden is also given sole power to deny court challenges and waive that requirement whenever necessary.

Republican opponents of the law argue that it renders spending restraint irrelevant.

Unlike other debt ceiling hikes, the deal signed by President Biden and House Speaker Kevin McCarthy won’t cap borrowing until early 2025. The White House can spend even higher interest rates than in the past as long as it gets Congress’ approval. four years.

“Is it in the nation’s best interest to allow an unreliable Joe Biden to have an open checkbook and no credit card restrictions until the end of his term? My answer? No,” South Carolina Republican Senator Tim Scott said at an Axios-sponsored event. “Thus, the fact that the current contract allows him to continue to use it indefinitely is something I cannot support.”

Fiscal watchdogs opposed both sides of the deal.

The conservative grassroots organization, Heritage Action, voted against lawmakers, blaming President Biden for failing to achieve many of the reforms needed to repair the crumbling Washington. I called to cast.

“Instead of capping overall spending at fiscal year 22 levels, the agreement only locks in net discretionary spending savings of $12 billion, with spending likely to increase over the remaining years of the agreement. said Executive Director Jessica Anderson. “Most importantly, by suspending the debt ceiling until January 2025, the agreement relinquishes necessary debt limit pressures and restrictions on administrative action. but many of these provisions can be ignored in practice.”

Maya McGuineas, chairman of the Responsible Federal Budget Committee, said the measures “are likely to be the largest deficit reduction legislation in more than a decade.”

“It will help the Federal Reserve start making progress in combating inflation and addressing the mounting national debt,” she said. “This bill would re-establish some discipline in the spending process, impose constraints on costly administrative activities, curb unnecessary spending, and, importantly, raise debt limits to avoid default. We will cut some spending, set caps, and move towards limiting out-of-control borrowing.”

She said more needs to be done.

“To truly solve the debt, policymakers need to put everything on the table, including revenue, defense and mandatory spending, and work together to save trust funds from looming bankruptcy,” she said. said. “But while it is politically easy to pass outstanding tax cuts or spending increases, the savings are much harder to realize, and the lawmakers who crafted the deal found compromises to achieve deficit reduction. He showed real leadership in finding it.”

He called on lawmakers to create a Finance Committee “to consider all parts of the budget, including revenues, while reducing the deficit and addressing the impending Social Security and Medicare bankruptcies.”