Lawmakers Are Mulling Up to $2.3 Trillion in Borrowing

So far, this year, lawmakers have enacted $1.3 trillion of ten-year debt reduction (see our debt thermometer) – the most since 2011. But policies under consideration for passage in the coming months could erase these savings. We estimate these policies could add up to $675 billion to the debt if enacted on a temporary basis and up to $2.3 trillion if made permanent.

While it’s unlikely that all of these policies would make it into a package, if the past is prologue, some combination could find itself alongside must-pass legislation.

Summary of Possible Policy Costs

Sources: Congressional Budget Office, Joint Committee on Taxation, and Committee for a Responsible Federal Budget. Notes: Cost estimates over ten years, from FY 2024 to 2033. Numbers may not sum due to rounding. *Include lower spending and lower revenue from IRS funding rescissions.

Last month, Congress passed a “laddered” continuing resolution for Fiscal Year (FY) 2024 that funds four of the 12 appropriations bills through January 19, 2024 and the others through February 2, 2024. To prevent a government shutdown, both chambers will need to come to a compromise on funding levels for the federal government. Several other issues will also need to be addressed soon, including passage of a National Defense Authorization Act, extension of the Foreign Intelligence Surveillance Act, and reauthorization of the Federal Aviation Administration.

Unfortunately, policymakers often use these types of deadlines and must-pass bills as opportunities to cut taxes or increase spending without offsets. And they are currently considering a number of policy changes and adjustments that would worsen the nation’s fiscal outlook.

As part of the appropriations process itself, Congress is likely to implement several side agreements to the Fiscal Responsibility Act (FRA), which would use emergency designations, CHIMPS, IRS rescissions, and a Department of Commerce slush fund to boost discretionary levels above what was scored under the FRA. We estimate these deals would add about $50 billion to the deficit in one year, relative to current law, and $450 billion over a decade if they are continued and the spending levels made permanent.

The Senate has proposed going further by spending an additional $13.7 billion above the ‘side deals’ and designating the spending as ‘emergency funding’ to avoid the FRA caps. This would cost about $135 billion over ten years if done permanently.

In the coming weeks and months, Congress is also likely to consider actual one-time emergency funding related to Ukraine, Israel, Gaza, and Taiwan, as well as border security. The Senate recently considered a $113 billion emergency supplemental funding request, though the bill failed on a motion to proceed.

The White House also submitted a $56 billion domestic emergency supplemental funding request that would include funding for disaster relief as well as child care, energy, food and nutrition assistance, access to high-speed internet, combating the opioid crisis, and wildland firefighter pay. Some of these measures represent extensions of current policy – such as an additional year of child care stabilization funding, which began under the American Rescue Plan – and making that funding permanent would boost the cost of this supplemental to roughly $200 billion over a decade.

Lawmakers are also considering extending three business tax breaks that were in effect as recently as 2021 but have adjusted or begun phasing out under the Tax Cuts and Jobs Act (TCJA). Specifically, under the TCJA a limit on business interest deductions tightened at the beginning of 2022, businesses were required to write off research and experimental expenses over time (instead of immediately) starting in 2022, and 100 percent bonus depreciation (full expensing) for business equipment purchases started phasing out this year. Reviving the pre-2022 law through 2025 would cost nearly $50 billion over a decade – a figure that is artificially low due to the time-specific nature of the policies. We estimate that making these provisions permanent would cost about $650 billion over a decade.

Lawmakers are reportedly planning to couple these business tax breaks with a temporary expansion of the Child Tax Credit with a similar temporary cost. Although few specifics have been released (see options with our Build Your Own Child Tax Credit tool), our understanding is that this expansion would include three tax years (retroactive from 2023 to 2025) at a cost of nearly $50 billion, suggesting a permanent cost of up to $180 billion through the end of the decade.

There are also several health-related provisions under consideration, including extensions of funding for Community Health Centers and the health care workforce, a delay in scheduled funding cuts to the Disproportionate Share Hospital (DSH) Program, a boost in physician payment rates, and other factors. Net of important savings from site-neutral payments for physician-administered drugs, this would cost about $7 billion on a temporary basis and $60 billion over a decade if made permanent.

Finally, several lawmakers have pushed for a repeal of Social Security’s Government Pension Offset (GPO) and Windfall Elimination Provision (WEP). By allowing many seniors to effectively “double dip” from Social Security and state and local retirement benefits, repealing these policies would significantly worsen Social Security solvency and cost about $185 billion over a decade.

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As the national debt continues to climb toward unprecedented levels, policymakers should be doing everything they can to ensure that any new policies are fully paid for. Attempting to resolve a legislative impasse by trading more debt for more debt is an unwise use of precious resources.

Detailed List of Possible Policy Costs

Sources: Congressional Budget Office, Joint Committee on Taxation, and Committee for a Responsible Federal Budget. Notes: Cost estimates over ten years, from FY 2024 to 2033. Numbers may not sum due to rounding. *Include lower spending and lower revenue from IRS funding rescissions.