As the national debt has grown to more than $34 trillion and climbing, Washington remains fundamentally divided on how to address it. Last year, Congress suspended the debt ceiling, which restricts how much the Treasury can owe to pay the government’s debts, but only after months of intense partisan warfare between the two chambers over spending.
To protect the government from defaulting on its debt, which was then around $31 trillion, Congress eventually agreed on a proposal to curb yearly federal spending as part of a bigger law that experts indicate could reduce deficits by more than $1 trillion over the next decade.
Despite that agreement, predictions indicate that the national debt will exceed $54 trillion within the next ten years. Here are some proposals presented by politicians to reduce that number, as well as why it is an issue.
Cuts to Annual Funding House conservatives have been pushing for cutbacks to yearly federal funding bills that go beyond the budget restrictions agreed upon as part of last year’s debt ceiling accord, which has sparked strong pushback from Democrats.
Despite the constraints agreed upon by both sides in the fiscal 2024 agreement, Republicans spent much of the year pushing for federal funding at levels considerably below the agreed-upon caps, with a particular emphasis on nondefense budget, which is vital to Democratic aspirations.
After months of partisan squabbling and an internal battle within the House GOP over spending, both parties eventually agreed on a settlement that set fiscal 2024 funding levels closer to the previous budget limitations agreement.
However, there are still doubts regarding the budget levels Republicans would seek when the Republican-controlled House begins drafting its government funding measures for fiscal 2025.
Under the last budget caps agreement, Congress agreed to limit federal spending to around $1.59 trillion in fiscal 2024, ignoring handshake agreements that were not reflected in the bill’s text and allowed for greater money for nondefense programs. The same budget agreement also called for limiting spending growth to one percent in fiscal 2025.
In an interview with The Hill earlier this month, Rep. Tom Cole (R-Okla.), the newly appointed chairman of the House Appropriations Committee, said he does not anticipate the party to “stray too far from” the top-line number established as part of last year’s bipartisan spending restrictions pact.
However, he also hinted that future negotiations with Democrats might be more relaxed. “Speaker Johnson showed he’s able to get actually a few more concessions even than McCarthy got, so there may be some wiggle room,” he said.
Changes to Entitlements
While many Republicans have focused on cuts to the annual funding bills negotiated by Congress as part of the appropriations process, others have emphasized the need for reforms for programs whose funding is not subject to the annual spending fight, particularly Social Security and Medicare.
The two entitlement programs are sometimes viewed as a third rail in Washington, making reforms to either a difficult task in Congress. However, politicians on both sides have shown support for bipartisan adjustments to ensure the programs’ stability as they face funding risks in the coming years.
Some Republicans have advocated for the creation of a bipartisan fiscal commission to address the issue, citing the fact that funds for both programs account for a significant portion of the federal budget.
That includes Cole, whose rise to the top of the important Appropriations Committee has piqued the interest of other supporters of the effort. “I think that’s gonna be helpful to the commission,” House Budget Committee Chair Jodey Arrington (R-Texas) told The Hill earlier this month about Cole’s promotion, noting he’s “not only an advocate for it, but the author of the commission itself.”
Cole also stated earlier this month that he believes there is still a potential for a commission. “So, if you’re not willing to do that, then just please don’t come talk to me about a balanced budget, because we can’t get there that way,” he said.
RAISING TAXES
President Biden’s budget, announced earlier this year, relied heavily on tax increases aimed at the rich to help decrease deficits and fund social program spending.
The idea includes raising the corporate tax rate, imposing a minimum tax on billionaires, and quadrupling the stock buyback tax.
Biden also advocated bolstering Medicare’s hospital insurance trust fund by hiking tax rates on Americans earning more than $400,000, increasing the capital gains tax, and eliminating tax breaks for real estate and cryptocurrency purchases.
While Democrats support the initiatives, Republicans believe Congress should focus on cuts rather than taxes.