Potential debt ceiling deal will do little to change federal spending path

as their debt limit While negotiations with President Joe Biden have pushed the country to the brink of a devastating default, House Republicans are sticking to a clear message: They must force a change in what they call the nation’s “unsustainable” spending path.

Yet in talks with Mr Biden, Speaker Kevin McCarthy and his deputies focused almost exclusively on cut a fraction of the budget – known as nondefense discretionary spending – includes money for education, environmental protection, national parks, domestic law enforcement and other areas. That budget line accounts for less than 15 percent of the $6.3 trillion the government expects to spend this year. It’s not huge by historical standards. Its share of the economy is expected to shrink over the next decade.

And it has nothing to do with the main drivers of projected spending growth over the next few years: the safety net programs Social Security and Medicare, which are facing ever-increasing expenses As the U.S. population ages.

Shows that are politically popular are considered off-limits by Republicans in the current negotiations, and they are being criticized Mr Biden’s harsh criticism Even recreational changes that might raise the retirement age for those programs or make other changes to slow down their future payouts.

Republicans are also refusing to accept cuts to military spending that are nearly as big as non-defense discretionary spending. As a result, the talks will almost certainly not yield anything with Mr. Biden that would significantly change the course of federal spending over the next decade.

Instead, they will focus budget cuts on education, environmental protection and a host of other government services that fiscal experts say are far from being the main sources of spending growth in coming years.

For example, if Republicans can somehow convince Mr. Biden to accept inclusion in finance bill passed by the house last month, which will do little to change the country’s overall spending trajectory over the next decade. The cuts would reduce federal spending by about $470 billion in 2033 and could save about $100 billion in borrowing costs that year, according to the Congressional Budget Office.

Total government spending will then be just under 24% of the economy — or almost exactly where it is today.

While these cuts may not have much of an impact on the overall budget, many americans still feel themMany popular government programs would be cut by as much as 30% under such circumstances, as the cuts would be limited to one component, according to calculations by White House officials and independent analysts.

“Republicans are proposing cuts that would have severe impacts on education, public safety, child care, veterans’ health care and more,” White House budget director Saranda Young wrote in a memo last week.

Citing growing federal spending and debt, Republicans have for months resisted raising the state’s borrowing limit — risking a default — unless Mr. Biden agrees to cut spending.

One of McCarthy’s top negotiators, Rep. Garrett Graves of Louisiana, said this week that the biggest disagreement with Biden administration officials is the spending numbers. “My interpretation of their position is that they fail to recognize or fail to see the fact that we are currently on a spending trajectory that is absolutely unsustainable,” he said.

Federal spending has surged during the Covid-19 pandemic, first under President Donald J. Trump and then under Mr. Biden as lawmakers provided tens of thousands of dollars to businesses, people and state and local governments. billion dollars in aid. It remains above historical norms when measured as a share of the economy, the easiest way to track spending patterns as prices rise over time.

The Congressional Budget Office estimates that total spending averaged just under 21% of gross domestic product from 1980 to 2019, before the pandemic hit. It soars to over 30% in 2020 and 2021. This fiscal year, it’s expected to be just over 24%, dipping slightly over the next few years, before starting to grow again towards the end of the decade, climbing to over 25% in 2020. 2033.

Still, discretionary spending as a share of the economy is expected to decline over the next decade. Military spending — which Republicans have so far resisted reducing in negotiations with Biden’s team — should decline slightly from 3% of the economy. Discretionary spending outside the military is currently at 3.6%, but is expected to fall to 3.2% by 2033.

In contrast, Social Security and Medicare are expected to grow rapidly over the next decade as retiring baby boomers become eligible for health and retirement benefits. By then, the Budget Office expects Social Security spending to rise to 6 percent of the economy from 4.8 percent, while Medicare will rise to 5.3 percent from 3.9 percent.

Analysts say the programs are the main reason budget projections have long pointed to increased federal spending in the coming decades — even before Mr. Biden took office.

“Over the long run, the overall increase in federal total spending relative to GDP can be attributed to growth in the major federal health programs (Medicare, Medicaid, and the ACA) and Social Security,” Charles P. . Blahous researchers said. Federal spending and debt at the Mercatus Center at George Mason University, told the Senate Budget Committee in written testimony this month.

Conservative groups have criticized Republicans for not including safety net programs in the debt requirements. “While the current debt ceiling negotiations are largely about how bound discretion part In the budget, any serious proposal to address the emerging debt and deficit crisis must also address our largest mandatory spending programs: Social Security and Medicare,” said Alex Durant, an economist at the Tax Foundation. Durante advocated for lower taxes, write on wednesday.

Liberal groups and the White House have criticized Mr. McCarthy and his team for ignoring the other side of the fiscal books: the nation’s tax system. Tax revenue, which briefly spiked last year, is expected to fall back to historic levels this year, stabilizing at around 18% of the economy, the Budget Office expects. Citing last year’s figures, Mr McCarthy falsely claimed current tax revenues were near record levels.

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