Latest news with #FiscalResponsibilityAct
Newsweek
2 days ago
- Business
- Newsweek
Bipartisanship Is Key to Fiscal Responsibility
Fiscal responsibility has never been for the faint of heart. It's easy to talk about the need to fix budget deficits and strengthen the economy for the next generation; it's another thing entirely to get the job done. But Moody's downgrading the U.S. debt provides an immediate reminder that time is running out. We now have all three rating agencies warning about our fiscal situation—no surprises there given that debt as a share of the economy is about to surpass our all-time record, and our nearly $2 trillion annual deficit is larger than spending on defense, Medicaid, and veterans' benefits combined. But our current 10-year plan is nonetheless to add more than another $20 trillion to borrowing and while political leaders may try to ignore these warnings, as seen from whipsawing Treasury markets, our lenders will not. The rising sun turns the sky orange behind the Lincoln Memorial, left, Washington Monument, center, and the U.S. Capitol building, right. The rising sun turns the sky orange behind the Lincoln Memorial, left, Washington Monument, center, and the U.S. Capitol building, right. run-up in the 10-year yield last month from a recent low of 3.9 percent to 4.6 percent in just a few days was a nasty reminder that while we may have grown used to low interest rates, there is no guarantee that they will stay low. And with a $29 trillion debt, one-third of which will turn over in the next 12 months, higher rates quickly lead to higher interest payments on the debt—already the second largest item in the budget. Furthermore, the very fact that rates increased along with a sell-off in U.S. stocks and the dollar is worrying in that normally, signs of economic weakness lead to lower interest rates as investors flee to safety. If we lose that "exorbitant privilege," where investors gravitate toward Treasurys as a safe haven, a fiscal crisis—with a vicious cycle of higher rates, higher debt payments, and more borrowing—might be closer than any of us are prepared for. Changing course will need leadership. It will need bipartisanship. And, ultimately, it will need a concrete plan. We should start by returning to actual budgeting. We haven't passed a real budget in 10 years. We need to budget with comprehensive program priorities, spending levels, a pay-for plan, and a fiscal target—something that would demonstrate fiscal progress, against which policy changes could be evaluated. Treasury Secretary Scott Bessent has laid out the administration's goal of bringing the budget deficit down to 3 percent of GDP, from its current non-emergency record of over 6 percent. We endorse this goal. It will require us to reduce deficits by about $8 trillion over the coming decade, which is about five times more than the Fiscal Responsibility Act, which in itself was the single largest deficit reduction plan in more than a decade. We'll need even more savings if the current reconciliation bill adds to the debt as it is expected to but less if growth is higher—there are credible estimates that growth could cover as much as $700 billion of tax cuts. The best way forward would be to put together a package of pro-growth, pro-work, and pro-efficiency policies that have at least $2 of savings for every $1 of costs. Getting there won't be easy, but it is the price we pay for ignoring the fiscal warnings in years past. We must stop demagoguing Social Security and find a fix so the program doesn't become insolvent. A plan might include things like raising the retirement age for younger workers, means-testing benefits for the well-off, altering how inflation is calculated, and/or lifting the payroll tax cap. Likewise, Medicare needs reforms—everything from reducing wasteful overpayments for Medicare Advantage plans to more structural changes like shifting to a premium-support model should be on the table. To start this conversation, our leaders need to acknowledge that we have to make changes to save these important programs rather than burying their heads in the sand. We will also need to find savings from national defense, including by reforming the procurement process, and we need to reform discretionary spending and welfare programs to root out waste, redundancies, and outdated programs, while extending spending caps that expire at the end of this year. Revenues will have to be higher. One pro-growth way to do this is drastically shrink the number of spending programs that are run through the tax code, many of which have the perverse effects of driving up the costs of things they are claiming to make affordable, as they do in housing, higher education, and health care. All told, there are over $20 trillion of spending-like tax breaks over the budget window, enough that if we are aggressive, we can broaden the base, lower rates, and raise more revenues. The fixes will not come from either party alone; they are too easy to attack, and the effort will need to be bipartisan to provide the necessary political cover. It took both parties to get into this mess—three-quarters of the debt can be attributed to bipartisan legislation over the last 25 years—and it will take both to get out of it. Leon E. Panetta served as secretary of defense and director of the CIA in the Obama administration, as White House chief of staff and director of the Office of Management and Budget in the Clinton administration, and in the House of Representatives from 1977-93. Bill Gradison Jr. served in the House of Representatives from 1975-93. The views expressed in this article are the writers' own.
USA Today
04-06-2025
- Business
- USA Today
What is the debt ceiling? Here's what's at stake as deadline looms.
What is the debt ceiling? Here's what's at stake as deadline looms. Show Caption Hide Caption Bessent says US will 'never default' and will raise debt ceiling Treasury Secretary Scott Bessent said they are unclear still of the looming X date, when the U.S. would breach the debt ceiling. In 2023, a stalemate between then-President Joe Biden and congressional Republicans over the debt ceiling prompted panic among financial analysts and everyday Americans alike. The deal they struck, called the "Fiscal Responsibility Act," capped annual discretionary spending for two years. It also pushed the next action on the federal debt ceiling until after the 2024 presidential election. Now, that deal has expired. Treasury Secretary Scott Bessent warns that the federal government will hit the debt ceiling sometime in August, unless Congress acts to raise it. President Trump favors lifting the cap. Here's what to know about the debt ceiling, why it gets raised, and what happens if we default: What is the debt ceiling? The debt ceiling is the limit placed by Congress on the amount of debt the government can accrue. In order to pay its bills to those it borrowed from and dole out money for everything from Medicare benefits to military salaries, the government needs more money, so the debt ceiling has to be raised. Created in 1917, the legislative cap has to be raised by a majority vote in both the Senate and the House of Representatives. That vote does not pledge any additional spending. It merely raises the limit on the amount of money the government can borrow to pay back commitments already agreed upon by Congress. However, over the years both parties have tied it to government spending and used the debt ceiling as a cudgel to force the hand of the president. Republicans, who have a majority in the House, wanted to cut government spending and refused at first to raise the debt ceiling until Biden and Democrats agreed to spending reductions. Biden and Senate Democrats, however, argued that any debate about government spending should be separate from a vote on raising the debt ceiling. When is the debt ceiling deadline? The last debt limit suspension ended on Jan. 1, 2025. The agreement allowed a few extra months for the Treasury Department to use 'extraordinary measures' to pay the bills, NBC reported. What happens if the debt ceiling is reached? The U.S. did reach the debt ceiling, in late January of 2023. Following that, then-Treasury Secretary Janet Yellen said 'extraordinary measures' were taken so the country could pay its bills and avoid default as the two parties battled it out. A default would occur if the U.S. failed to pay bondholders who have lent money to the government. What happens if the government defaults on the debt? The United States has never defaulted on its debts. That's part of why U.S. Treasury bonds are viewed as a safe investment and used by some banks as a backstop to counteract risky investments. A default would throw both the domestic and global economies into chaos. The U.S. Treasury website warns that a default on the debt 'would precipitate another financial crisis and threaten the jobs and savings of everyday Americans.' In 2013, when the government careened toward default before raising the debt limit at the last minute, the economy lost 1% of GDP. When was the last time the debt ceiling was raised? The ceiling is routinely raised to accommodate repayment of the country's debt. The last time it was raised was in 2021. The debt ceiling was suspended in June 2023 and reinstated in January 2025. Where raising the debt limit sets a specific cap, a suspension declines to set a dollar amount. Days before a looming debt ceiling default in 2023, Biden and then-House Speaker Kevin McCarthy struck a deal to suspend the debt ceiling limit in exchange for caps on future spending and other demands from the GOP. While it has become increasingly politicized, for years it was viewed more as a bureaucratic government business than a mechanism for policy change. In 2011, then-President Barack Obama and Republicans in Congress reached a stalemate, but they agreed on a deal to raise the ceiling just two days before the Treasury would have run out of money. What does the 14th Amendment have to do with the debt ceiling? As fear grew in 2023 over the failure to reach a deal on raising the debt ceiling, the White House was said to be considering an option of last resort: an untested legal theory that involves invoking the 14th Amendment. After a meeting with congressional leaders on May 9, 2023, then-President Biden told reporters he had not ruled it out as an option. The 14th Amendment deals mainly with equal protections granted to citizens under the law. However, the fourth section reads: "The validity of the public debt of the United States, authorized by law, including debts incurred for payment of pensions and bounties for services in suppressing insurrection or rebellion, shall not be questioned." Some legal scholars believed Biden could draw upon this clause to claim that he had the power to authorize the Treasury to repay U.S. debts even if Congress does not raise the ceiling. The move, considered but ruled out by the Obama administration, would likely have gotten caught up in the courts. How many countries have a debt ceiling? Denmark also has a debt ceiling. However, it does not share in the same debate or political brinkmanship. For one, parliament has more principal power in the Danish government, preventing the kind of legislative-executive branch showdown seen in the U.S. Additionally, CNN reports, Denmark is more fiscally conservative than the U.S., so it has less debt and set its original ceiling much higher than its actual debt levels. What does it mean to raise the debt ceiling? Raising the debt ceiling means increasing the amount of debt the country can accrue in order to pay its bills. It is unrelated to future spending and is instead a limit on the amount of money the government can borrow to meet its existing legal obligations like payments to Social Security and Medicare. U.S. government bonds have long been viewed as a safe investment because debts are always paid back on time. However, if the US were to default and for the first time in history fail to pay back those debts the value of government bonds would depreciate and the global market would enter a tailspin. Treasury bonds are used as collateral for loans internationally as well as to cushion bank losses, among other things. Just Curious for more? We've got you covered. USA TODAY is exploring the questions you and others ask every day. From "What is a good credit score?" to "What is food insecurity?" to "What countries border Russia?" – we're striving to find answers to the most common questions you ask every day. Head to our Just Curious section to see what else we can answer for you. Contributing: Clare Mulroy, Paul Davidson, Daniel de Visé
Yahoo
29-03-2025
- Business
- Yahoo
Patty Murray and Republican counterpart Susan Collins object to Trump withholding funds
Mar. 28—WASHINGTON — The top Republican on the Senate Appropriations Committee joined her Democratic counterpart, Sen. Patty Murray of Washington, in accusing President Donald Trump on Thursday of illegally withholding funds approved by Congress. Sen. Susan Collins of Maine and Murray jointly sent a letter to Russ Vought, the director of the Office of Management and Budget, after Trump declared in a memorandum on Monday that he would cut nearly $3 billion in emergency spending included in a bipartisan deal struck in 2023 known as the Fiscal Responsibility Act. "Regardless of our views on the Fiscal Responsibility Act and accompanying implementation agreement," Collins and Murray wrote, "it is incumbent on all of us to follow the law as written — not as we would like it to be." The letter represents a rare rebuke by a congressional Republican of Trump's ongoing effort to assert control over federal spending, which is reserved for Congress under Article I of the U.S. Constitution. If that authority is undermined, it casts doubt on the annual appropriations process through which Murray and Collins, along with their counterparts in the House, craft bipartisan bills to fund the government. In his memo to Congress, Trump indicated that he would spend only part of the $12.4 billion designated as emergency spending in the 2023 bill, because he didn't agree that all of it was in fact needed on an emergency basis. The funding withheld by Trump would go largely to causes his administration already has opposed, such as international disaster assistance and aid to refugees, but also includes money to control the international narcotics trade and for the National Science Foundation and the National Oceanic and Atmospheric Administration. Collins and Murray asserted that federal law makes clear that a president may spend all or none of such funding, but "he does not have the ability to pick and choose which emergency spending to designate." While the letter's tone was relatively restrained, Murray took to the Senate floor on Thursday to voice her frustration with the administration usurping one of the primary powers of Congress. "Right now, we have a couple of billionaires running our country straight into the ground who seem to have skipped American history, because President Trump and Elon Musk don't seem to care much about our Constitution," the Washington Democrat said, referring to the billionaire adviser the president has empowered to carry out his agenda. When they announced their plans on Monday, Trump and Vought asserted that a president can withhold funds approved by Congress and the law cited by Collins and Murray is unconstitutional. That claim is likely to be tested in court. "The basic fact that Congress has the power of the purse is something Republicans and Democrats agree on," Murray said on the floor. "And it won't change no matter what Trump or Russ Vought or Elon Musk claim. Their legal theories are plain outlandish, and so are their facts." Rep. Rosa DeLauro of Connecticut, the top Democrat on the House Appropriations Committee, sent her own letter to Vought on Thursday. But that panel's chair, Rep. Tom Cole of Oklahoma, didn't sign DeLauro's letter, suggesting that House Republicans are less willing to assert their authority than Collins and her Senate colleagues. Orion Donovan Smith's work is funded in part by members of the Spokane community via the Community Journalism and Civic Engagement Fund. This story can be republished by other organizations for free under a Creative Commons license. For more information on this, please contact our newspaper's managing editor.
Yahoo
24-03-2025
- Business
- Yahoo
Trump cuts $3B from congressional deal he hated
President Donald Trump is cutting nearly $3 billion in spending, much of it reserved for foreign aid, by unwinding part of a 2023 fiscal deal loathed by conservatives, three senior White House officials told Semafor. Trump is slashing from a pot of money deemed emergency spending by the 2023 Fiscal Responsibility Act, which capped federal spending but also included a side deal criticized by Trump and his allies. One element of the 2023 law's side deal allowed for more than $12 billion in emergency spending for this year, but Trump is effectively deeming about a quarter of that as outside the scope of any emergency. One of the White House officials said Trump was acting 'unilaterally' by exercising his discretion over whether spending does indeed constitute an emergency. His decision will be communicated to Congress officially in the form of a presidential memo. Roughly $2.5 billion of the $2.9 billion in cancelled spending would have gone to foreign aid, including migration and refugee assistance for nongovernmental organizations as well as economic development money slated for Moldova and Georgia. The move does not affect military assistance to nations like Ukraine. The cuts will also target diversity, equity, and inclusion projects. It's clear that the White House has been waiting to unravel leftover spending from the 2023 debt ceiling fight. The Office of Management and Budget is now run by Russ Vought, who opposed the Fiscal Responsibility Act forged by former Rep. Kevin McCarthy. McCarthy's speakership eventually imploded, in part thanks to angst over his handling of spending issues. Vought is soon to be joined by deputy budget director nominee Dan Bishop, a former congressman who criticized McCarthy over the 2023 law. Bishop is expected to be confirmed by the Senate later this month. Their office made the case to Trump to ax the spending, though the president had always hated the 2023 law. A second of the three White House officials called the Fiscal Responsibility Act's side deals the 'worst aspect' of the law, describing them as a 'shell game' designed to avoid spending caps. 'It's not the way to proceed,' added the second White House official, who said some of the foreign aid money is 'not well-vetted, is not well considered. In fact, not only is it not an emergency, but it's probably some of the lowest-priority spending that you could identify.' The remaining roughly $9.4 billion in designated emergency spending that the 2023 law allotted will remain in place. Trump's move comes after Congress earlier this month passed a government funding plan that runs through Sept. 30, a law that continued some of the side deals from two years ago. The 2023 law raised the debt ceiling and tried to cap spending while also allowing some spending outside the caps. Beyond Vought's ascension, Trump's attack on the 2023 law was foreseeable for another reason: He's maximizing his presidential authority to reshape government on multiple fronts and scuttle what remains of the Biden presidency. Democrats who vocally opposed last week's spending plan, in fact, are still worried that it will give him even more sway to reorganize government spending. And Hill Republicans are hopeful the Trump administration will send its spending cuts to the Capitol for Congress to vote on later this year. The separate question of whether Trump can unilaterally cancel spending that Congress didn't give him leeway over, otherwise known as impoundment, is at the heart of broader legal battles over his funding decisions, as E&E News reported. The White House and conservatives have discussed having that impoundment fight, according to Fox News.
Yahoo
06-03-2025
- Politics
- Yahoo
Jeffries says GOP on its own to come up with votes to pass clean spending bill
House Minority Leader Hakeem Jeffries (D-N.Y.) warned Thursday that Democrats are ready to oppose a long-term extension of government funding at current 2024 levels. The Democratic opposition in the House could be critical, because it is not clear that House Republicans, who hold a razor-thin majority, have the votes on their own to pass a 'clean' funding bill. The government will shut down next weekend without a new funding measure. Jeffries has been pushing for a deal that would provide more funding for the government than the measure that the GOP is pursuing. Specifically, he wants a 2025 spending deal at the levels approved by both parties under the Fiscal Responsibility Act (FRA), which was enacted in 2023. Speaker Mike Johnson (R-La.) is pushing ahead instead with an extension of current funding, known as a continuing resolution (CR), through the remainder of the fiscal year. Jeffries emphasized that Republicans had 'negotiated and supported' the 2023 deal, and suggested that if Johnson abandons it in favor of a CR, he'll have to find the Republican votes to pass it. 'A yearlong continuing resolution is inconsistent with the bipartisan Fiscal Responsibility Act,' Jeffries said during a press briefing in the Capitol. 'And so if Republicans decide to take this approach, as Speaker Johnson indicated, it's his expectation that Republicans are going it alone.' It's unclear if Democrats would oppose a CR unanimously — some moderates might cross the aisle to avoid appearances that they supported a government shutdown. And Jeffries stopped short of committing his opposition, saying Democrats would huddle next week to discuss their strategy after the details of the GOP bill are released. Still, Republicans control the House by just a few seats. And if an overwhelming majority of Democrats oppose the CR, it would force Johnson to unite virtually the entirety of his divided conference to pass the bill. The Speaker said Thursday that he's up for the task. Asked if he will need Democrats to approve the bill, he said, 'I believe we'll pass it along party lines, but I think every Democrat should vote for the CR.' The bill is expected to be released as early as Sunday. Emily Brooks contributed. Copyright 2025 Nexstar Media, Inc. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.
