Congress Should Avoid a Costly End-of-Year Package

With debt nearing record levels, interest payments surging, and major trust funds approaching insolvency, Congress should avoid worsening our already unsustainable fiscal situation during the Congressional lame duck session. Instead, lawmakers should begin making progress on the debt either by enacting savings or implementing process reforms.

The September continuing resolution set a December 20 deadline for passing annual appropriations. But in addition to reaching agreement on funding levels and passing appropriations, Congress faces the potential for several other fiscal-policy-related decisions that could be considered separately or as part of a large budget-busting, end-of-year agreement. These include:

• Providing disaster relief for Hurricanes Helene and Milton.
• Addressing year-end deadlines related to telehealth coverage, Medicaid Disproportionate Hospital Share cuts, Medicare physician payments, and other health extenders.
• Repealing the Windfall Elimination Provision and Government Pension Offset (WEP/GPO) in Social Security (which passed the House on November 12, 2024).
• Passing other proposed or speculated legislation, such as a new Farm Bill, additional aid to Ukraine, extending expiring enhanced Affordable Care Act (ACA) subsidies, the Wyden-Smith tax deal, the expanded Radiation Exposure Compensation Act (RECA) reauthorization, and Medicare coverage of anti-obesity drugs.
• Addressing statutory PAYGO required cuts due to $1.7 trillion on the scorecard for 2025.

Cost of Potential Lame Duck Policies

Disaster Relief

Earlier this week, the Biden Administration submitted a request to Congress for nearly $100 billion in emergency supplemental funding for recovery efforts related to Hurricanes Helene and Milton, as well as various other major disasters that took place in 2023 and 2024. Congressional leadership has discussed including this in end-of-year legislative efforts

Health Policies

There are several health-related policies that Congress could decide to include in an end-of-year bill. The most likely actions would be to cancel the scheduled $8 billion reduction in Disproportionate Share Hospital (DSH) payments scheduled for 2025, extend Medicare’s expiring telehealth flexibilities for another two years at a cost of $4 to $5 billion, include a temporary Medicare physician bonus payment as in previous years at a cost of up to $3 billion, and/or $8 billion of other health-care-related extensions for community health centers, payments for Graduate Medical Education, and payments for the National Health Services Corps. Less likely but on the potential agenda, Congress could extend expanded Affordable Care Act subsidies for another year at a cost of $23 billion or eliminate Medicare’s prohibition on covering weight loss drugs – including glucagon-like peptide-1s (GLP-1s) class drugs such as Wegovy and Saxenda – which would add between $2 and $36 billion to deficits over ten years depending on how it is implemented.

Repeal of WEP/GPO

In November, the House passed the Social Security Fairness Act (H.R. 82), which would eliminate Social Security’s Windfall Elimination Provision (WEP) and Government Pension Offset (GPO). The Congressional Budget Office (CBO) estimates that eliminating these provisions without offsets would add $196 billion to deficits over ten years and advance the projected insolvency date of Social Security’s theoretically-combined trust funds by six months.

Farm Bill

The 2018 Farm Bill expired in September 2023, and lawmakers have extended it through December 31. In May, the House Committee on Agriculture voted to approve the Farm, Food, and National Security Act of 2024 (H.R. 8467). CBO estimates that enacting this bill would increase deficits by $28 billion over ten years compared to the most recent baseline. House and Senate Agriculture Committee leaders have expressed hope to pass a five-year Farm Bill before the current Congress ends.

Other Policy Priorities

Several policy priorities that Congress has pursued or shown interest in pursuing over the past year could also be included in an end-of-year package. For instance, the expansion of the Child Tax Credit and extension of various business tax breaks included in the House-passed Tax Relief for American Families and Workers Act (Wyden-Smith), which we estimate would reduce revenues by approximately $79 billion in 2025 and by $725 billion over a decade if not offset. Congress could also include Senator Josh Hawley’s (R-MO) expansion of the Radiation Exposure Compensation Act, which we estimate would add $50 to $60 billion to deficits over ten years, even in its more slimmed-down form. Additionally, Congress may decide to include an additional round of funding for Ukraine to support its war effort against Russia.

Avoid Statutory PAYGO Required Cuts

The statutory Pay-As-You-Go (PAYGO) scorecard for 2025 currently shows a massive $1.7 trillion balance, which should technically trigger an equally massive $1.7 trillion sequester in January. However, the total amount of spending that would be subject to this sequester is much smaller, roughly $200 billion. If enforced, this would mean zeroing out most spending accounts subject to the sequester. While Congress will ultimately have to prevent this cut from taking place, it should do so while also implementing fiscal reforms and committing to adhering to PAYGO in the future.

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In our current fiscal situation, it is crucial for lawmakers to offset the costs of any new policies and avoid borrowing that adds to the debt. Congress should prioritize deficit reduction by achieving savings and implementing improvements to the budget process.