The 2023 Debt Ceiling Deal Needed to Have Gone a Lot Further

Late last month, Speaker of the House Kevin McCarthy (R-CA) and President Biden announced a debt limit deal. At least for the time being, the Fiscal Responsibility Act of 2023 (FRA) has put an end to the debt ceiling debate. How happy should we be with the results of the FRA? By lifting the debt ceiling, we have avoided default, which is nice. Strengthening work requirements for SNAP benefits, also known as food stamps, will be helpful but would have been better if made permanent. Eliminating the federal student loan pause is well overdue. Congress is reinstating the Administrative PAYGO, which means that new regulations need to be paid for. Paperwork for environmental reviews has been reduced. 

What about overall spending? According to the nonpartisan Congressional Budget Office (CBO), the FRA will reduce the deficit by $1.5 trillion over the next decade. As the bipartisan Committee for a Responsible Federal Budget (CRFB) shows in its analysis, that may be slightly more or less depending on whether there are non-binding caps or side agreements. In any case, the FRA will provide a decline in the debt-to-GDP ratio. It is the first major deficit-reducing budget agreement in about a dozen years.

It might sound like a lot to reduce the deficit by $1.5 trillion over a decade. After all, only a government could amass that kind of money [in current dollars]. But keep in mind that we are expected to spend $79.99 trillion over the next decade and rack up an average deficit of about $2 trillion a year over the next decade (CBO). Remember that these CBO projections are based on current law. Given how politics have evolved in recent years, who knows what crazy new spending will be added to the fiscal crisis that we are already headed towards? Continued wars, an unexpected increase in healthcare costs, rising inflation, or higher interest rates could throw off CBO projections, as well. 

The truth is that the bill has not made substantial reforms on what is driving government spending, Social Security is but one large example of not passing necessary reforms to make the programs sustainable. Congress has failed to meaningfully address the debt crisis. Rather than pat themselves on the back, our politicians need to get back to work and focus on long-term fiscal sustainability so we do not continue the seemingly endless cycle of debt ceiling debate in the future.