Debt deal would cut deficits by $1.5 trillion over next decade: CBO:NPR

Speaker of the House Kevin McCarthy speaks to members of the media at the United States Capitol in Washington, DC May 24, 2023. The House is due to vote on a debt deal on Wednesday.

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Speaker of the House Kevin McCarthy speaks to members of the media at the United States Capitol in Washington, DC May 24, 2023. The House is due to vote on a debt deal on Wednesday.

Kevin Dietsch/Getty Images

Congressional bean counters estimate that an agreement to limit government spending in exchange for an increase in the federal borrowing limit would reduce federal deficits by about $1.5 trillion over the next decade.

The forecast comes as House lawmakers prepare to vote on the measure on Wednesday after President Biden and House Speaker Kevin McCarthy agreed to the deal over the weekend.

Without congressional action to lift the debt ceiling, the government could run out of cash in less than a week, with devastating consequences for global markets and the global economy.

Most of the estimated deficit reduction resulting from the deal would come from caps on discretionary non-defense spending – a relatively small slice of the overall federal budget

Limiting that spending for the next two years would save about $1.3 trillion over the next decade, with an additional $188 billion in savings from lower interest charges, according to Congressional projections. Budget Office published Tuesday evening.

The IRS is expected to lose some of its funding, which will lead to lower tax collection

However, other parts of the deal would worsen the federal deficit.

A plan to cut $1.4 billion in spending for the Internal Revenue Service, for example, would cut tax revenue by about $2.3 billion — for a net loss to the government of $900 million. .

The actual loss of tax revenue could be much greater, as the Biden administration plans to “redirect” an additional $20 billion of the $80 billion that had been set aside for the IRS under the Tax Act. reducing inflation.

Additionally, changes to the food stamp program would cost the government an estimated $2.1 billion over the next decade.

The agreement adds new work requirements for seniors receiving food stamps, but also adds new work requirement exemptions for veterans, homeless people and young people recently released from foster care.

The CBO predicts that the number of people made eligible for food stamps by the new exemptions would outweigh the number of people likely to be removed from the lists.