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Debt Ceiling Deal Would Slash Deficits by $1.5T, CBO Says

Tim Shaw  

· 5 minute read

Tim Shaw  

· 5 minute read

In scoring the Fiscal Responsibility Act of 2023 (HR 3746), the Congressional Budget Office estimated that the pending debt ceiling deal between President Biden and congressional Republicans would reduce federal budget deficits by $1.5 trillion over the next decade.

The CBO informed House Speaker Kevin McCarthy, Republican of California, as much in a May 30 letter at the Speaker’s request, reflecting updated projections compared with its May 2023 baseline estimates. “Reductions in projected discretionary outlays would amount to $1.3 trillion over the 2024-2033 period,” the CBO’s letter read. “Interest on the public debt would decline by $188 billion.” Along with the rescission of some unobligated balances, the net decrease comes to $1.5 trillion.

The bill was set for a vote Wednesday and is a last-ditch effort by Congress to agree on a spending and debt ceiling compromise before a potential default next week, as forewarned by U.S. Treasury Secretary Janet Yellen. As currently drafted, the bipartisan agreement would temporarily suspend the debt limit through January 1, 2025.

Discretionary funding would be capped for 2024 at $1.59 trillion and $1.606 trillion for 2025. These caps would be enforced by sequestration procedures, though the CBO notes that some funds, such as those for emergency overseas contingency operations would not be constrained. “With those adjustments, and base funding constrained by amounts specified in section 101(a), CBO projects that total discretionary funding under the bill would amount to $1.795 trillion in 2024 and $1.818 trillion in 2025.” Limits on most discretionary funding would be in place for 2026-2029 and subject to safeguards under the Congressional Budget and Impoundment Control Act of 1974.

$1.4 billion of the $80 billion appropriated to the IRS under the Inflation Reduction Act (PL 117-169) would be rescinded by the Fiscal Responsibility Act. “Most of those amounts are available to the IRS through 2031 for enforcement and related activities,” according to the CBO score, which anticipates fewer enforcement activities would lead to a reduction in tax collections. “In total, CBO estimates, title II would decrease outlays by $1.4 billion and decrease revenues by $2.3 billion over the 2023-2033 period, resulting in a net increase in the deficit of $900 million over that period.”

The CBO did not take into account a reported handshake deal between Biden and Republicans to move another $20 billion from the inflation bill funds elsewhere within the administration—$10 billion each from fiscal 2024 and 2025 appropriations.

“This bill downsizes the outrageous pay raise the IRS was given under one-party Democrat rule – an IRS that with every passing day shows itself less and less deserving of the American people’s trust, never mind more of their tax dollars,” said House Ways and Means Committee Chair Jason Smith, Republican of Missouri, May 30 in his opening remarks at a Rules Committee hearing on the bill.

Earlier in the week, White House officials sought to clarify to reporters that there are possible pathways for the IRS to recoup funding losses later down the line. “We think the IRS will continue to be able to effectuate its plans in the near term, and then there may be a need to come back to Congress and ask for additional funding,” said one official, adding that because the original $80 billion was set for a 10-year period, the IRS “will continue to be able to spend that remaining [$60 billion] … over the course of the next several years.”

 

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