Debt ceiling deal

FROM PAGE B4

The deal to suspend the $31.4 trillion debt ceiling until January 2025 holds non-defense discretionary spending largely flat this year, with a 1 per cent increase in fiscal 2024.

The Congressional Budget Office (CBO) estimates this would result in $1.3 trillion in savings over a decade.

Even those savings may prove illusory, as Congress would be free to abandon its self-imposed spending limits within two years. On top of that, tax cuts passed by Republicans in 2017 expire on schedule in 2025, but the party is pushing to extend them.

Making matters worse, higher interest rates are pushing up the government’s debt service costs. CBO projects that these will triple to $1.4 trillion by 2033 -- far exceeding the projected defense budget at that time.

In their debt limit negotiations, both President Joe Biden and House of Representatives Speaker Kevin McCarthy vowed not to touch the main driver of US debt: rising Social Security pension and Medicare health benefit costs. Social Security costs are projected to increase by 67 per cent by 2032, and the Medicare health program for seniors will nearly double in cost during that period, according to CBO, as Americans 65 or older top 46 per cent of the US population, up from 34 per cent this year.

Together, these two programs account for roughly 37 per cent of current federal spending and are both on a path toward insolvency in about a decade. Other programs for veterans and low-income people push such safety-net spending to over half the budget.

Debt-ceiling negotiations spared cuts to mandatory spending like Medicare, Medicaid and Social Security even though these programs cost more than discretionary spending.

Unlike discretionary programs, which are given a fixed amount of money each year, these “mandatory” programs pay benefits to all who qualify for them. CBO projects the government will spend $6 trillion on mandatory spending programs in the 2033 fiscal year, up from $4.1 trillion this year.