The good news is that Congress has reached agreement on a bipartisan budget that, if passed, could avert a government shutdown later this month.
The bad news is that this is a fragile agreement that can easily fall apart as politicians make the perfect the enemy of the good.
Compromise requires give and take from all sides. Holding a country’s budget hostage, even for important matters such as border security or funding for Ukraine and Israel, accomplishes little. These things need to be addressed intentionally and individually.
The $1.66 trillion deal reached by party leaders is roughly the same as the compromise that Republican leaders and President Joe Biden agreed to last spring as part of the debt ceiling increase deal. Simply put, that’s probably the best thing to do under the current political climate.
The deal enabled hardline Republicans to oust former House Speaker Kevin McCarthy, but paralyzed Congress for more than three weeks as Republicans searched for a leader who could muster the votes needed to become the new speaker. It led to
New speaker Mike Johnson faces similar challenges. Adding special provisions on border security, abortion restrictions and other issues to the final deal risks losing the Democratic support needed to overcome opposition from far-right Republicans. If he doesn’t include these things, he risks a revolt like the one that cost the former speaker his job.
Meanwhile, Congress is approaching two deadlines for a government shutdown, one on January 19th and the other on February 2nd.
The far right simply lacks the votes to enact its agenda. Threats to shut down government agencies are, frankly, becoming a well-worn and ineffective tactic. NBC News says the actual number of closures over the past 40 years is 20.
All of this is a distraction from the worst news. That means neither party is yet serious about addressing the looming fiscal nightmare unless the country finds a way to halt the rapidly increasing national debt, which just surpassed $34. Less than four months after it surpassed $33 trillion,
To achieve this, a budget is needed to eliminate the current deficit within the country’s resources. The nation needs a serious bipartisan process aimed at reducing debt to avoid catastrophe. That process will likely include both cuts and targeted tax increases. That won’t happen with threats. It requires hard and difficult work and enough good faith to agree to compromises.
The day of reckoning is near. Last November, the University of Pennsylvania’s Penn Wharton Budget Model released a report estimating that a country reaches crisis stage when total debt reaches about 200% of gross economic product (GDP). At current spending levels, this will happen within about 20 years, the company said.
The report said investors will likely begin to doubt the U.S.’s ability to pay its debts at this point. If that happens, “no matter how much tax increases or spending cuts are made in the future, whether explicitly or implicitly, the government will inevitably default on its debts,” says the preliminary document attached to the report.
Today’s lawmakers need to focus on avoiding this and spend every waking moment trying to match spending. Such a day of reckoning would hamper a nation’s actions in everything from border security to supporting allies that might be attacked by adversaries. We have little choice but to inflate the dollar to pay interest on our debts, but doing so destroys wealth and creates unemployment.
The $1.66 trillion budget deal includes some compromises. Among other things, Democrats agreed to cut $20 billion from the $80 billion that was slated to go to the IRS in additional funding for tax audits. The non-defense budget will decrease by just under 1%, while military programs will increase by about 3%.
With deadlines looming, there is simply no time to include solutions for border funding or funding for Ukraine and Israel. These must be handled separately.
Congress should pass the 12 spending bills that make up the budget and begin efforts to restore the nation’s finances as soon as possible.
