- The federal budget is on an unsustainable fiscal path, and Congress must address the long-term viability of the current fiscal situation.
- Congress must raise the debt ceiling. Default cannot occur and a balanced budget this year is not feasible.
- For every dollar of debt ceiling increase, three dollars of near-term deficit reduction is appropriate. Given the current political environment, a principle of one dollar of deficit reduction for each dollar of debt ceiling extension should be realizable.
- Options include a freeze on non-defense discretionary spending, cancelling the administration’s student loan forgiveness, opening more federal land to mineral leases, and reimposing work requirements on social benefits.
On Thursday, Jan. 19, 2023, the U.S. Department of Treasury reached the statutory debt limit and has engaged in its now ordinary set of “extraordinary measures,” likely extending its ability to fully fund the government until the beginning of June. Many Americans hear this news but don’t quite understand what the debt ceiling is or why Congress needs to act. In fact, this is a rare moment when Congress is forced to confront the unsustainable fiscal path our country is currently on. History shows us that Congress has often paired debt ceiling extensions with spending reforms that improved fiscal discipline. Given that the amount of federal debt outstanding now exceeds total U.S. economic output per year (gross domestic product, or GDP), it is more important than ever to rein in excess federal spending and enact strict budget rules that will avoid a fiscal crisis.