CBO finds Biden-McCarthy debt limit deal could reduce spending by $1.5T over decade

The Congressional Budget Office (CBO) said Tuesday that the debt ceiling deal negotiated by the White House and House Republican leadership could see a deficit of about $1.5 trillion over the next decade.

The nonpartisan budget scorekeeper is letter He told congressional leaders on Tuesday that spending limits for 2024 and 2025 would cut the projected federal deficit from 2023 to 2033 by nearly $1.5 trillion.

House Republican leaders had demanded spending limits in exchange for raising the debt ceiling. The bill is on track to be voted on by the House and Senate ahead of the June 5 deadline set by the Treasury Department. Janet Yellen blocks possible default.

As Democratic and Republican congressional leaders seek to secure votes for this package in Congress, the CBO estimate will be important in future discussions. Some conservatives say the bill doesn’t cut spending enough, while some Democrats say it goes too far.

“Discretionary spending cuts will reach $1.3 trillion from 2024 to 2033,” said Philip Swegel, director of the Congressional Budget Office (CBO), in a letter. “From 2023 to 2033, net mandatory spending will decrease by $10 billion and net revenue will decrease by $2 billion.”

“As a result, public debt interest will decrease by $188 billion,” he added.

As part of a bill called the 2023 Fiscal Responsibility Act, the White House and House Republican leadership agreed to suspend the debt ceiling until next year and also set budget caps for fiscal years 2024 and 2025.

The bill also includes changes to work requirements for the Supplemental Nutrition Assistance Program (SNAP) and Temporary Assistance for Needy Families (TANF), which would recover some of the unused coronavirus funds.

The bill would also tap into some of the money Democrats approved last year to boost the enforcement and operations of the Internal Revenue Service (IRS). But Democrats and budget experts said the green light for the investment as part of the Democrats’ anti-inflation bill should help boost revenue.

In Tuesday’s letter, Swagel said the CBO “expects that canceling these funds will result in fewer enforcement actions and lower revenue collections over the next decade.”

A closer look at the proposed changes to the SNAP and TANF working requirements estimates that the changes will increase federal spending by approximately $2.1 billion over the next decade. This is mainly due to changes in previous programs.

According to the letter, language in legislation that raises the age at which able-bodied adults who are not living with dependents are eligible for SNAP’s employment requirements would cut spending on the program by $6.5 billion over 10 years. But he added that part of the bill includes exemptions for some groups, which “leads to an increase in spending of $6.8 billion over the same period.”

This exemption applies to people who have experienced homelessness, veterans, and people under the age of 24 who were placed in foster care when they turned 18.

The letter also included an estimate of additional direct spending increases due to provisions enacted at the same time.

“The new exemption applies not only to some beneficiaries under the age of 50 who are subject to work requirements under current law, but also to some beneficiaries aged 50 to 54 who are subject to work requirements under the bill. It will also apply to beneficiaries, which the CBO estimates will result in an additional $1.8 billion in direct spending,” he added.

By contrast, the letter also estimates that changes to TANF could lead to cuts in bloc subsidies, cutting federal spending by $5 million over the next decade.

Updated: 8:24 PM

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