The report issued Wednesday by the Congressional Budget Office said the national debt will still grow substantially over the next decade — adding an estimated $18.9 trillion. But before the deal, the CBO had projected the debt would grow by $20.3 trillion by 2033. Last year’s agreement could have saved trillions of dollars more, but higher interest rates that make debt payments more expensive over the next decade offset some of the effects of the spending caps.
The national debt is now $34.15 trillion.
Congress has yet to approve federal spending for the rest of the current fiscal year, which began Oct. 1, even though lawmakers have agreed on broad totals. A partial government shutdown could start March 1 if they don’t act by then. And McCarthy later lost his speakership due to a revolt by House conservatives who, among other complaints, insisted the GOP leader’s deal with Biden did not do enough to rein in federal spending.
“The Fiscal Responsibility Act is the largest deficit-reduction bill in over a decade, and hopefully can be a starting point for further conversation in looking at other parts of the budget and tax code to really change our debt trajectory,” said Marc Goldwein, senior vice president at the Committee for a Responsible Federal Budget, a nonpartisan think tank. “This was the first time in many years we started to rein in any part of the budget and put some limits on appropriators. It puts discipline on both the defense and domestic side.”
The findings from the CBO come as lawmakers wrestle with policy decisions that stand to affect the nation’s fiscal trajectory. Besides setting federal spending for the rest of this year, Congress next year will face the expiration of trillions of dollars’ worth of tax cuts from President Donald Trump’s 2017 tax law. The House of Representatives last month approved a roughly $80 billion deal to expand the child tax credit and tax benefits for businesses. Money for Ukraine and Israel could also add to the nation’s debt this year if lawmakers can agree to send it.
Many policy analysts insist the nation is far from fiscal health, even if the Biden-McCarthy deal helps. The total debt held by the public is still expected to reach $45.7 trillion at the end of 2033, according to the CBO’s report. The federal debt in a decade is expected to amount to roughly 114 percent of the total economy — the measure favored by most economists — compared to the roughly 119 percent projected last year, rivaling levels last seen in the aftermath of World War II. Payments on the federal debt — widely regarded as economically wasteful — are already among the nation’s largest expenditures, after surging to $659 billion for last year as interest rates rose. They’re projected to more than double by 2034, according to the CBO.
It is also unclear whether Congress will stick to the Biden-McCarthy deal. While the deal put two-year spending limits on a portion of federal spending, analysts say Congress will go beyond those amounts in later years — which would not be reflected in the CBO estimates.
“It’s worth noting that Congress has no intention of maintaining these caps, and they’ve already agreed to bust them,” said Brian Riedl, a budget policy analyst at the Manhattan Institute, a center-right think tank. “The caps only last two years, and so CBO is assuming that Congress will permanently keep reduced discretionary spending levels, which history does not support.”