After months of negotiations over raising the debt limit, an agreement, in the form of the Fiscal Responsibility Act (FRA), has become law. And while the deal to raise the debt ceiling is not nearly enough to solve the nation’s budget issues on its own, it’s still good to see legislators beginning to grapple with the hard choices that will only become more necessary as the fiscal crisis worsens.
In terms of positives, first and foremost must be the fact that this deal averts a default. While taxpayers badly need their representatives to start taking the debt more seriously, the debt ceiling is a blunt instrument that should never be allowed to actually cause a default. The consequences of defaulting on our obligations would be enormous for the broader global economy, with American households hit hardest.
But even aside from avoiding a default, the FRA makes some meaningful improvements on the nation’s fiscal situation. The nonpartisan Congressional Budget Office estimates that the bill will save taxpayers $2.1 trillion over the next decade, or nearly $16,000 per household.
That takes care of only about a tenth of the projected deficit increase between now and 2033, but $2 trillion in deficit reduction is nevertheless nothing to scoff at. It’s certainly far more meaningful than the $238 billion in gimmick-ridden deficit reduction that the Inflation Reduction Act was initially scored as providing — even setting aside that it’s now become apparent that that legislation will actually increase deficits due to electric vehicle tax credits in the bill costing far more than initially claimed.
What’s more, the deficit reduction in this bill comes not from piling even more tax burdens on the American people, but rather by starting the process of reining in out-of-control spending. Most of the deficit reduction comes from new caps on discretionary spending, similar to those instituted under the Budget Control Act (BCA) of 2011.
The FRA also gives Congress an incentive to avoid the brinksmanship around the annual appropriations process that taxpayers are growing weary of. The aforementioned caps would drop by 1 percent if Congress fails to enact all the appropriations bills it needs to pass by January. Hopefully, this will provide Congress with the push it needs to stop risking harmful shutdowns by waiting until the last minute to fund the government.
Additionally, the FRA claws back $31 billion in unspent funding for pandemic relief and IRS enforcement, ends the pause on student loan repayments, and imposes new work requirements on the Supplemental Nutrition Assistance Program (SNAP) and Temporary Assistance to Needy Families (TANF). Taken together, it’s a much-needed step on the road to more responsible stewardship of taxpayer dollars.
The one thing that the FRA does not do is begin to reform entitlement programs. That’s not surprising, given the politically-charged nature of these issues, but it is necessary. The soon-to-be insolvent nature of entitlement programs like Social Security and Medicare due to demographic shifts is by far the biggest reason that the country faces a long-term debt crisis.
Even so, the FRA is a good deal for taxpayers, especially considering the deals to raise the debt ceiling that preceded it. Since the passage of the BCA in 2011, Congress has raised the debt ceiling nine other times. Just two of those deals reduced the deficit at all, each time by less than half of a billion dollars. Four other deals made no change to the deficit at all, and three others actually increased the deficit by a combined $532 billion. Compared to those exercises in sticking heads in the sand, the FRA is a major improvement.
Taxpayers should be glad to see Congress beginning the process of taking their fiscal obligations seriously, but there is a lot of work still to be done. Things like rescinding unspent COVID dollars, while good policy, is politically easy. A sustainable solution to our debt crisis will require much harder sacrifices.