The deal suspends the federal government’s borrowing limit to pay its obligations for the next two years. That is, until the beginning of 2025 – shortly after the presidential elections of 2024 – thus kicking the can in a superpower with a debt of about 31.5 trillion dollars.
The main price for avoiding bankruptcy is spending cuts—admittedly much smaller than what Republicans originally wanted.
Based on the agreements, the Congressional Budget Office now projects a $1.5 trillion reduction in the government deficit and $188 billion in interest on the national debt over the next 10 years. But who wins and who loses from this forced agreement is a double story.
“Cutter” in non-defense spending
In contrast to defense spending – which will increase by around 3% in fiscal year 2024 and further in 2025 – it is cutting back on others.
As for example in social benefits. In a time of inflationary pressures, government food stamp support is being tightened, extending to 55 years (up from 49) the work requirement for needy recipients.
The White House touts exempting veterans, the homeless and youth no longer in foster care as a victory. He also pulled the brakes on Republican demands for similarly tight restrictions on other government benefits.
However, many expenditures were capped, such as the Special Supplemental Nutrition Program for Women, Infants and Children (WIC). Overall, many important investments in education, housing, infrastructure, scientific research and disease prevention will be reduced.
Also ending in September – earlier than expected – is the pandemic “freeze” on federal student loan payments. Measure that will affect 43 million borrowers, dramatically reducing the disposable income and consequently the purchasing power of many households, amid precision.
It would also redirect up to $20 of the $80 billion approved last year over 10 years by congressional Democrats for the IRS.
In short, the IRS will have less money to modernize its aging systems, hunt down wealthy tax evaders and improve taxpayer service. Tighter time limits were also placed on energy permits, speeding up construction of the Mountain Valley natural gas pipeline in West Virginia.
The project, which had received the “blessing” of the Trump administration and – like other oil and gas pipeline projects – has sparked legal disputes over environmental concerns.
The “under the rug” of the Agreement
The agreement did not touch the tax cuts approved during the Trump presidency, “adding $1.8 trillion to the deficit by 2029, benefiting businesses and the wealthy,” the American newspaper underlines.
It also left open “the loophole” in terms of participation in the creation of surplus value, which benefits the managers of hedge-funds and private investment funds.
But given the long-term goal of debt reduction,
a much more responsible form of fiscal discipline is collecting taxes due, cutting spending where necessary, and reversing tax cuts that benefit the rich.
That said, the US will again be faced with the question of raising the debt limit shortly after the 2024 presidential election and the new balances that will be formed in Congress then. The “counter” of the US public debt meanwhile continues to count…
