During a recent debate in the U.S. House over a budget bill aimed at reducing the deficit, lawmakers emphasized the importance of considering the future. They pleaded with their colleagues to think about the impact on future generations and the national debt. These concerns echo similar sentiments expressed almost 30 years ago during a debate over President Bill Clinton’s first budget bill.
The new bipartisan debt limit deal, which will cut federal spending by $1.5 trillion over the next 11 years while suspending the debt ceiling through President Joe Biden’s first term, is a clear indication that the battle against the deficit has not been won. In fact, it suggests that the red ink continues to prevail. However, it also reveals a potential shift in Congress’s stance on long-term debt and deficits, indicating that these may not be the hindrances to economic growth that they were once believed to be. This shift marks an unplanned but substantial fiscal experiment.
Despite the deal, Congress is already considering additional spending measures. Defense hawks have expressed the desire to increase military spending, and the House’s tax-writing committee approved three bills to temporarily extend certain tax cuts. If these provisions are made permanent, they could essentially erase the deficit reduction achieved through the debt limit deal.
The fact that Congress is quickly looking to spend more money demonstrates that the battle against the deficit is not a top priority. House Speaker Kevin McCarthy acknowledged that the deal was merely the beginning of a larger effort to address the issue. McCarthy also highlighted the positive aspect of the Congressional Budget Office’s projection of a 4 percentage-point drop in the debt-to-GDP measure, indicating a decrease in the debt burden.
This situation is a far cry from just a decade ago when there was a strong emphasis on deficit reduction. The possibility of a “grand bargain” was raised, which would involve trading Republican-backed tax cuts for cuts to entitlement programs. However, this ambitious deal never materialized, and subsequent budget agreements focused on short-term compromises rather than long-term deficit reduction.
The shift in focus can be attributed to various factors, including changes in Congress’s composition and priorities. Fiscal conservative Democrats have become scarce, and Republicans, led by Donald Trump, prioritize tax cuts over deficit reduction. The passing of President Biden’s American Rescue Plan amid the pandemic further underscores the shift in priorities.
Overall, while the recent debt limit deal may not be a groundbreaking deficit-fighting measure, it reflects a broader lack of urgency in addressing the issue. The absence of discussions about “grand bargains” suggests that serious action has not been considered for quite some time. This shift in focus raises questions about the long-term impact of the national debt and deficits on the economy. Nevertheless, it also signals a potential reevaluation of the belief that these factors pose an imminent crisis.
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