The Tax Policy Center has criticized the recently passed bipartisan debt deal for failing to cut down government spending in health care and Social Security programs, warning that the country’s finances could go haywire in the future without reforms in these categories.
“This budget agreement failed to touch the major items of spending growth, health and Social Security. Both remain on an unsustainable path. Instead, it simply cut discretionary spending items, both defense and non-defense, that have already been cut significantly as a share of national income over the past few decades,” the Tax Policy Center said in a June 26 post. Social Security accounted for 19 percent of the U.S. government spending for fiscal year 2022, with health spending accounting for 15 percent, income security 14 percent, Medicare 12 percent, and education, training, employment, and social services 11 percent.
Combined, these five categories took away 71 percent or over two-thirds of the Biden administration’s spending. Medicare and Social Security spending are mandated under law in the United States.
In contrast, National Defense came in at the fourth spot, accounting for 12 percent of the fiscal 2022 government spending, with veterans’ benefits and services making up 4 percent.
The Tax Policy Center pointed out that as long as reforms on mandatory health care and retirement program reforms are put off, the “unsustainable trajectory” of the country’s finances will get harder to fix.
“As spending rises in the near and long term, beneficiaries and providers of services become accustomed to higher payments and more dependent upon these programs,” the center said. “That makes even larger the required future revenue increases or spending cuts needed to attain a sustainable budget.”
The bipartisan deb dealt, called the Fiscal Responsibility Act of 2023, suspended the country’s $31.4 trillion debt limit through Jan. 1, 2025. The bill was signed into effect in early June by President Joe Biden after it passed the House and the Senate.
The spending cuts that Republicans secured as part of the deal includes a $1 billion reduction in non-defense discretionary spending in 2024 by about $1 billion, cutting down Internal Revenue Service funding by $20 billion, and taking back $30 billion in unspent COVID-18 relief funds.
Moving Deeper Into Debt
According to the White House, the debt deal will result in spending roughly $1 trillion less over a decade than earlier projected. However, Kevin Roberts, president of the Heritage Foundation, sees the debt deal as a bad outcome for U.S. citizens.“At a time when Americans are struggling to balance their budgets as the cost of gas, groceries, and childcare continue to rise, Republicans had a real chance to protect families and fight sky-high inflation and interest rates by cutting government spending,” he said in a May 29 statement. “This bill will likely lead to increased overall spending levels next year.”
In a June 28 report, the Congressional Budget Office (CBO) warned that the U.S. federal debt is set to soar even with the GOP’s spending-cut efforts.
The agency calculated that the Fiscal Responsibility Act will reduce the cumulative deficit over the 10-year period until 2033 by roughly $1.5 trillion to $18.8 trillion, down from the earlier cumulative deficit projection of $20.3 trillion.
However, federal debt is expected to surpass its historical high by 2029 when it hits 107 percent of GDP. By 2053, federal debt is projected to reach 181 percent of GDP.
“Such high and rising debt would slow economic growth, push up interest payments to foreign holders of U.S. debt, and pose significant risks to the fiscal and economic outlook,” CBO said.
