House Reconciliation Bill Would Increase the National Debt by More Than Any Other Recent Legislation
The House recently passed the largest reconciliation bill ever, and it is now under consideration in the Senate. The Congressional Budget Office estimates that the bill would add $2.4 trillion (excluding interest) to the national debt over 10 years. That total would far exceed the cost of several other significant pieces of legislation enacted over the past several years, including the 2017 Tax Cuts and Jobs Act, 2020 Coronavirus Aid, Relief, and Economic Security (CARES) Act, 2021 American Rescue Plan, and 2021 Bipartisan Infrastructure Law.
The rapidly growing national debt threatens America’s economic prosperity. A recent analysis from EY’s Quantitative Economics and Statistics practice shows the significant negative effect that rising debt will have on key economic indicators, such as gross domestic product, jobs, investment, and wages. Increasing national debt also puts upward pressure on inflation and interest rates, weakening the economy and increasing the chance of a fiscal crisis.
Michael A. Peterson, CEO of the Peter G. Peterson Foundation, noted that “budget reconciliation should be a tool for improving our fiscal health, but this bill takes America in the opposite direction. Lawmakers still have an opportunity to improve it by finding credible offsets and eliminating gimmicks.” As Congress continues to work on the reconciliation bill, lawmakers should prioritize fiscal responsibility by incorporating reforms that offset costs so that the legislation, at the very least, does not worsen the fiscal path of the United States.
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Further Reading
With $37 Trillion in Debt, Is the U.S. Headed for More Credit Downgrades?
Three successive downgrades of the U.S. credit rating should alarm elected leaders, but our national debt remains on an unsustainable trajectory.
The Federal Government Has Borrowed Trillions. Who Owns All that Debt?
Most federal debt is owed to domestic holders, but foreign ownership is much higher now than it was about 50 years ago.
The Fed Reduced the Short-Term Rate, but Interest Costs Remain High
High interest rates on U.S. Treasury securities increase the federal government’s borrowing costs.